Bringing Philanthropy into the Wealth Management Conversation

Wealth advisors who work with clients from around the world have to grapple with the cultural differences that surround talking about money and charitable giving. Americans are known to speak openly about money and are often public about their philanthropy. In Britain, money is a topic best left out of any polite conversation and most people believe that how you spend your wealth on philanthropy should be done out of the spotlight. Religious tenets and family traditions can also affect how clients view money and philanthropy. These cultural differences can pose a real challenge for wealth managers who work with clients from a wide range of backgrounds. Most wealth advisors simply avoid the philanthropy conversation rather than risk treading on their clients’ personal territory.

Talking to your clients about their charitable giving is easier – and more useful – than you may think. Clients value your expertise and want you to bring the best and latest ideas to their attention, including innovative ways to manage their charitable giving. The philanthropy conversation can be as easy as asking these three questions:

1. Do you give? Bringing up philanthropy with your clients does not mean you have to have all the answers to their questions. Yes, they may ask about taxes or which assets to give, but clients are really looking to you – their trusted advisor – to help them find the vehicles, support, and experts to help them achieve their charitable goals. Clients who are not charitably inclined are not offended if you share a solution that they do not need. If anything, it shows you are staying abreast of the full range of solutions in the market.

2. What do you hope to achieve? Clients often approach their giving from a personal perspective. The advisor might start with what clients hope to achieve through their giving rather than with a technical presentation. Client motivations may include uniting their family through shared philanthropy, giving back to their community, giving back to their ancestral homeland, addressing a medical issue or tragedy that has touched their family, or creating a permanent legacy. If your firm does not have in-house philanthropy advisors, you could broker an introduction to an external expert to help.

3. Have you considered a formal giving vehicle? At a certain level of wealth, clients often want to move from giving directly to charity (“chequebook philanthropy”) to a more formal structure that provides an organised platform for giving as well as important tax-planning benefits. The basic choice is between establishing a separate charity (e.g. charitable trust in the UK or private foundation in the US) or using a donor-advised fund (DAF). A DAF is a philanthropic fund established under an umbrella charity that administers the fund on behalf of the donor. A DAF allows donors to make charitable contributions, receive immediate tax benefits, and then recommend grants from the fund over time. There are many DAF providers, and some may be more suitable for your clients than others. Also, some DAF providers will allow you to manage clients’ DAF assets, which means that talking about philanthropy with your clients need not result in an outflow of assets. In fact, some of your clients’ other assets held outside of your firm (e.g. property, shares) may turn into managed assets for you if contributed to the DAF.

As a wealth advisor, you are in a unique position to help your clients meet their philanthropic goals. And discussing philanthropy is good for your business too. Having a conversation around giving will help you learn about your clients’ values, goals and passions. You’ll likely hear stories you’ve never heard before. It strengthens your relationship with your clients and helps you build relationships with your clients’ extended families.

Integrating philanthropy into wealth management is a trend that is only growing around the world. Wealth advisors who learn to do it well will reap the benefits of deeper client relationships and long-term client retention, all while helping their clients achieve positive impact in the world.

National Philanthropic Trust has a long history of working with wealth advisors. In the US, we administer DAFs for some of the leading private banks and family offices. From London, NPT UK serves families and wealth advisors around the world. We invite you to contact us to discuss how we can support you as you advise your clients about their philanthropy.