Advisors, Clients Talking More About Charitable Giving

Professional advisors and their high-net-worth (HNW) clients are in agreement that sitting down to talk about charitable giving is important. When it comes to what extent it is important, why it is important, and barriers to giving, the two sides might be sitting across the same table — but they’re speaking different languages.

A survey of 314 professional advisors showed that 78 percent believe that speaking with clients about philanthropy is good for business and 71 percent think that such conversations are important to building relationships with clients’ extended families. More than half of advisors (53 percent) believe that discussing philanthropy is “very important,” up from 46 percent in 2013, according to “U.S. Trust Study of the Philanthropic Conversation,” a new study published by U.S. Trust in partnership with The Philanthropic Initiative.

Greater than nine out of 10 advisors (91 percent) believe that discussing charitable giving is at least somewhat important, including 96 percent of wealth advisors, 90 percent of trust advisors, and 87 percent of tax advisors, per the study.

When it comes to starting those conversations, 80 percent of surveyed advisors reported that they ask their clients about charitable giving, up from 71 percent in 2013. Two-thirds (67 percent) of the 103 HNW individuals surveyed reported that they have discussed charitable giving with their advisors, up from 55 percent in 2013.

Despite the fact that these conversations are taking place, gaps remain in terms of knowledge of charitable vehicles, why clients donate, and what prevents them from donating. Charitable trusts remain the most familiar vehicle among advisors, with 53 percent reporting familiarity — up from 46 percent in 2013. Knowledge about donor-advised funds is on the rise, 42 percent in 2018 as opposed to 27 percent in 2013, while familiarity with charitable foundations has remained flat — 38 percent in 2018 as compared to 37 percent in 2013.

Professional advisors might overestimate the financial drivers leading clients to be philanthropic, according to the survey. Passion about a particular cause (60 percent of advisors, 62 percent of clients) and a desire to give back (48 percent of advisors, 54 percent of clients) were the two most popular drivers of philanthropic activity among both groups. Advisors’ assumptions that reducing tax liability is a primary driver of charitable giving is overstated, however, with 46 percent of advisors, but just 16 percent of HNW clients feeling that way.

Advisors also tend to overestimate clients’ desire to use philanthropy to build a family legacy (29 percent of advisors, 12 percent of clients) and enhance the family name or business (20 percent of advisors, 6 percent of clients).

The same financial-focused assumptions create a disparity in why clients hesitate in their philanthropy versus why advisors think that they do. Concerns about preserving wealth for themselves (38 percent), preserving money for heirs (33 percent), and perceived lack of wealth (23 percent) are the top three reasons why advisors believe clients hesitate.

In actuality, clients are hungrier for information. Not enough knowledge or relationship with a charity (22 percent), concerns about how dollars will be spent (22 percent), and worries about increased donation solicitations (15 percent) are the primary reasons why clients say they are trigger shy in making a gift.

Recent trends in initiating advisor-client conversations have taken some less tangible aspects of giving to heart. Initiating conversations with personal focuses has increased among advisors from 35 percent in 2013 to 40 percent in 2018. Emphases on more technical aspects of giving have declined during that time, from 71 percent of advisors in 2013 to 58 percent in 2018.

The study also endeavors to look at the road ahead as tax reform influences donors’ giving decisions. Among tax incentives, clients pointed to itemized deductions as a stronger motivator than the estate tax. If the estate tax were to be eliminated, 35 percent of HNW clients reported that they would increase giving, while just 5 percent would reduce. Conversely, 42 percent of clients would reduce giving if itemized deductions were eliminated, just 9 percent would increase donations.

Nearly three-quarters of advisors (72 percent) reported speaking with clients about tax reform’s impact on charitable giving, including 91 percent of tax advisors. A little more than a third of advisors (35 percent) believe that tax reform will not impact clients’ charitable giving while 20 percent believe that clients will give more, 16 percent believe that they will give less, and 29 percent are unsure.

Clients themselves paint a slightly rosier picture, 58 percent believing that their charitable giving will not change, 18 percent believing they will give more, and 7 percent believing that they will give less. One in six (17 percent) remain unsure.