Valas of Fidelity Charitable, the nation’s largest donor-advised fund sponsor, says having charitable-giving conversations with millennials (or anyone) can lead to more enriching conversations and be a differentiator for advisors.
Many advisors may not be having these talks with their millennial clients, perhaps because they think the clients are too young, not ready or not mature enough, says Valas. She disagrees. She also notes that those millennials who work for public companies and receive some compensation in equities would benefit from tax-advantaged strategies.
The percentage of millennials serving as primary account owners in Fidelity Charitable’s donor-advised group rose to 14% in 2018 from 6% in 2014. Valas attributes this to the heightened awareness about strategic giving after the U.S. tax reform, and also to strong markets, to the addition of impact investing pools and to millennials’ maturation. The minimum initial investment for a giving account at Fidelity is $5,000.
A Family Affair
Ann Gill, chief philanthropic officer at Vanguard Charitable, another leading donor-advised fund sponsor, agrees it’s time for financial advisors to get the charitable-giving conversation going—even though she points out that most millennials won’t enter their peak giving period for 20 or more years. She sees these conversations as a great way for advisors to start talking to the next generation. The discussions allow advisors to educate and deepen relationships with both clients and their children, go beyond financial planning and attract new prospects, she says.
Advisors can make a deeper, more emotional connection with a client by asking, “How do you pass along values to your children?” she says.
Vanguard Charitable’s millennial account owners focus their grants on human services, religion and the environment, says Gill. But even if they share values with family members, she says, “millennials have much more of a global focus and are interested in having a more tangible impact beyond their immediate community.”
For example, parents and grandparents who value education may traditionally grant to their alma maters, she says, but millennials may be more interested in giving to underprivileged communities and primary schools overseas. Millennials are also looking for outcomes and measurements, says Gill. To make it easier for donors to search for and learn about specific nonprofits, Vanguard Charitable includes on its website a research tool from GuideStar, a leading data source on nonprofits.
“Studies show that 70% to 90% of inheritors of wealth switch financial advisors rather quickly,” adds Ken Nopar, senior philanthropic officer for the American Endowment Foundation, an independent donor-advised fund provider. He suggests asking clients’ adult children about their interests and if they’re involved in any nonprofits. Some “may not be as astute or interested in performance of funds,” he says, “but nearly all millennials have volunteered in some capacity.”
Nopar sees a lot of parents enabling their children to make grants out of a family donor-advised fund. On the flip side, some millennials are “going upstream to get parents involved,” he says.