Meg Lassar of Chicago, IL-based Strategic Philanthropy talks about the opportunity for advisors to provide charitable planning services to their affluent clients.

Here, Meg Lassar of Chicago, IL-based Strategic Philanthropy talks about the opportunity for advisors to provide charitable planning services to their affluent clients. Family Wealth Report is pleased to share these insights and welcomes any reader responses.

Just 20 per cent of the 700+ high net worth adults surveyed for US Trust’s 2013 Insights on Wealth and Worth survey said they felt well-prepared to use their wealth for social good. While these findings are not particularly reassuring, they do pose a valuable opportunity for advisors to provide charitable planning services to their affluent clients. Additional results of the US Trust survey suggest several entry points for legal and wealth advisors.

Many advisors assume their clients’ giving is triggered by tax considerations, and as a result, their engagement with clients around philanthropy is often limited to tax planning. However, only 38 per cent of the respondents in the US Trust survey identified taxes as a leading motivator. Most respondents (80 per cent) cited “creating a positive impact on issues or causes while still alive” as the chief driver of their philanthropy, and more than half (54 per cent) said it was “setting an example for family members.”

Given these findings, in order to connect with clients - and their families - in a meaningful way, advisors must recognize the myriad reasons people give to charity. Research consistently indicates that clients who feel that their wealth and legal advisors understand their personal values are more likely to express satisfaction with the financial and legal services they receive.

One way to gauge clients’ willingness to discuss philanthropy is to broach the subject of personal values in the context of the services you already provide. Investment advisors, for example, can ensure that families’ investments are aligned with their personal beliefs. Nearly half (45 per cent) of the US Trust survey respondents said they consider their investment decisions as a way to express their values.

Not surprisingly, the younger the investor, the more likely they are to consider the impact of their investment decisions, and the more willing they are to accept higher risk or lower return on companies with superior environmental, social and governance records.

Exploring this “softer side” of an investment strategy not only provides a foray into a larger discussion about using assets for social good, but also provides an opportunity to connect with your clients’ children and grandchildren.

Tapping the next generation of potential clients 

This next generation of potential clients is in need of professional support and guidance around wealth and philanthropic planning. Those born between 1981 and 1995 (“Gen Y”) are the most likely to have grown up with wealth and to have inherited wealth, yet less than half of the parents surveyed feel confident that their children could handle a financial inheritance. This could be because most (53 per cent) parents have not fully disclosed their wealth to their children.

Trusted wealth and legal advisors can be instrumental in working with parents to help ensure a successful transfer of wealth and values to their heirs. Boomer generation parents often fear that their wealth will be a debilitating and destabilizing force for their children who have grown up surrounded by the trappings of an affluent lifestyle.

However, philanthropy can play a significant role in helping younger generations see their wealth not as an identity but rather as a tool they can use to make the world a better place.

As Sharna Goldseker, director of 21/64 - a program that specializes in engaging the next generation of wealth inheritors and creators in charitable giving - recently remarked, philanthropy can help Gen Y-ers to overcome a “paralysis of prosperity and possibility.”  In fact, the US Trust survey results indicate that when children are introduced to philanthropic concepts, they tend to develop a more positive wealth identity as adults. Half of survey respondents reflected that their families’ charitable traditions and values played a significant role in their personal accomplishments. 

Further, Generation Y survey respondents cited philanthropy as the best part of wealth, with nearly 7 in 10 indicating philanthropy as their top source of enjoyment. And 65 per cent said they would prefer for their children to grow up to be charitable than wealthy.

According to the US Trust survey, 40 per cent of wealthy parents believe their children would benefit from discussions with a financial professional, yet only 25 per cent of parents’ financial advisors have proactively formed relationships with their children.

This means that advisors who take the initiative to involve the next generation family members in discussions of wealth and philanthropy stand to gain a competitive edge. Not only does involving multiple generations of clients’ families in discussions about philanthropy make good business sense for advisors looking to keep families’ assets under management for years to come, but it also prevents complications down the road.

Clients’ demand for philanthropic support services will likely only increase in the years to come. Researchers with Edge Research have estimated that the baby boomer generation gives more money to charity than any other generation, about $47 billion a year - a number that is likely to increase as boomers receive the greatest intergenerational wealth transfer in US history.

And though their children have not yet amassed as much wealth, research indicates that they are equally charitably inclined. Helping clients to feel confident in their ability to use their largesse for social good will engender loyalty and result in a deeply and mutually satisfying client-advisor relationship.