June 13, 2012 / 6:57 PM / 6 years ago

YOUR PRACTICE: Don't ignore clients' giving ways

* Advisers underestimate how much clients donate

* Clients are hungry for smart giving strategies

* The biggest mistake is not asking the question

By Jennifer Hoyt Cummings

June 13 (Reuters) - Financial advisers have been underestimating their clients’ generosity - and that is been bad for both parties’ bottom lines.

That is the conclusion of a survey released Wednesday by Fidelity Charitable, an independent charity that runs the nation’s largest donor-advised fund.

The survey found that advisers significantly underestimated how often and how much their clients give to charity. And those misperceptions appear to be hurting clients: 70 percent of them said they donate to charities solely in cash, which is the least tax-advantaged way to give. That points to a missed opportunity for advisers, too.

The survey also found that advisers are not usually proactive about bringing up the subject of charitable giving with clients.

So what is holding advisers back? Cynics say that the more that goes to charity, the less there is for the advisers to manage. But other experts interviewed by Reuters said the problem is likely much more benign: advisers don’t feel they have the expertise to do so.

That fear might be overblown, say the study authors.

“You don’t need to be the expert, you just need to know enough to be able to bring it up,” said Sarah Libbey, president of Fidelity Charitable, which runs its donor-advised fund with the help of Fidelity Investments.


The first step: figuring out which causes your client is passionate about.

Matt Halloran, director of national development of GIVE, a Washington, D.C.-based organization that helps advisers direct their clients’ funds to charity, suggests these conversations starters: If you had all the money you ever needed, what charity would you support? Or, do you volunteer anywhere?

Clients are usually looking for answers to two basic questions, Libbey said: What’s the right charitable giving vehicle to use, and what are the best assets to donate?

Advisers can answer, partly, by showing clients how they can avoid capital gains taxes and still get a tax write-off by donating stock instead of cash. The tax-exempt charity getting the donation isn’t stuck with the capital gains tax either.

“It is surprising how many clients don’t have that as their first instinct, or they think it’s too much of a hassle,” said Wistar Morris, a principal at Signature, a Norfolk, Virginia-based wealth management firm that frequently helps clients with their giving strategies.

Many charities can accept stock donations, so an adviser usually only need get the transfer instructions and a signature from their client to make the donation happen, Morris said.

Advisers can also set up a donor-advised fund for clients. These individual accounts give donors a current-year tax deduction on contributions, typically made in cash or appreciated securities. But the accounts release funds on the donor’s timetable. Essentially, they’re simplified versions of private foundations.

Morris said such vehicles streamline the accounting process for his clients and the fees are generally less than 1 percent. Donor advised funds can be established through providers like Schwab Charitable, Vanguard Charitable and Fidelity Charitable.


If a client has more complex charitable giving needs - say, a desire to set up a private foundation or to gift an unusual asset - there are plenty of experts you can reach out to.

Fidelity Charitable and Schwab Charitable each have teams of consultants that advisers can call with charitable giving questions at no cost, even if they are not affiliated with the organizations.

Of course, these organizations offer the services as a way to connect with prospective clients for their donor-advised funds. So keep that in mind when calling.

Another option is to join a national association like the Partnership for Philanthropic Planning, a group that connects and educates wealth managers and representatives from non-profits. A membership costs about $150 to $300, and includes access to education on sophisticated charitable giving techniques, said president Tanya Howe Johnson.

The group, which has about 9,000 members, has in the last few years seen an increase in interest from financial planners, who report that more of their clients are asking them about tax efficient charitable giving strategies, Johnson said.

Other places to network and find information: local community foundations and Advisors in Philanthropy, an association of 350 advisers that focuses on philanthropic planning.

Johnson said advisers who want to take a deep dive into charitable giving strategies can pursue a Chartered Advisor in Philanthropy designation offered by The American College. It costs about $3,500 and a year to complete the three online, graduate-level courses required for the designation, the college said. Nearly 700 people have completed the program since 2003.

No matter what your level of knowledge, Fidelity Charitable’s survey indicated that advisers who have charity-oriented conversations with clients have seen an increase in referrals and better retention of assets under management.

“The biggest mistake is not asking the question,” said Johnson, of the Partnership for Philanthropic Planning. (Reporting By Jennifer Hoyt Cummings; Editing by Jennifer Merritt and Steve Orlofsky)

Our Standards:The Thomson Reuters Trust Principles.
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