Advisors Develop Charitable-Giving Expertise As A Differentiator – Investor’s Business Daily

Donating to charity seems like a slam-dunk of positivity. You support a worthwhile cause, feel good about it and perhaps gain a tax deduction and expressions of gratitude from those who sought your gift.

XAutoplay: On | OffBut for high-net-worth individuals, philanthropy and anxiety often go hand-in-hand. Deciding how much to give and where to give it can prove vexing.

“Many of our clients are looking for guidance in their charitable giving,” said Steven Wittenberg, director of legacy planning at SEI Private Wealth Management in Oaks, Pa. “They may be anxious about whether their money is being wasted or if it’s making an impact.”

Developing expertise in charitable giving can separate advisors from their competitors by helping them become holistic financial advisors. By treating philanthropy as a central part of financial planning, advisors can suggest ways to enhance a client’s retirement or estate plan.

It’s often a win-win proposal. Clients who lack a deep grounding in giving away money may appreciate their advisor’s input and understanding of the charitable landscape. And advisors wind up attracting and retaining more clients thanks to their specialized knowledge of the nonprofit world and how to make the most of donated funds.

“Advisors should recognize that it’s an issue that many clients are worried about and position themselves as a go-to source for philanthropic advice,” Wittenberg said. “Some clients may not verbalize this need until we educate them.”

A Deeper Bond

For advisors who view charitable giving as a core part of their service, they raise the topic early and often with clients. When onboarding newcomers, they routinely ask about their charitable priorities.

Even for those individuals inclined to donate generously, they may not make the most tax-efficient moves or conduct proper due diligence in allocating their gifts. Advisors can provide tools and resources to identify worthy causes while maximizing the tax benefits of giving.

For clients with more ambitious plans to donate funds, financial advisors may partner with attorneys, accountants and philanthropic consultants to map out a detailed strategy. Through this team approach, the advisor-client relationship grows stronger and more lasting.

“Getting specialized third-party providers involved can help identify options beyond checkbook philanthropy,” Wittenberg said. He cites examples such as donor-advised funds and family foundations.

Donor-advised funds offer a simple way for individuals to direct their giving by making a tax-deductible gift to the fund. The investment firm or community foundation that manages the fund aims to generate positive returns on the assets while distributing some of the money to charities per the donor’s instructions.

Of course, it’s up to advisors to embrace charitable giving as part of their practice. Clients may not necessarily realize all the benefits — from tax savings to emotional gratification — unless their financial planner educates them and offers practical guidance.

As more financial advisors provide comprehensive financial planning and seek ways to differentiate themselves, advice on charitable contributions has gained popularity as a value-added service.

“Philanthropy was a side topic 20 years ago,” said Kim Laughton, president of Schwab Charitable, a San Francisco-based donor-advised fund provider established with the support of Charles Schwab (SCHW). “Over the last 10 years, we’ve found that the more advisors bring it up, the more clients appreciate it and want help with it.”

Educate Clients

From a business perspective, financial advisors who provide guidance on charitable giving can boost their client retention rates. It’s harder for clients to leave when they’ve opened up about their desire to give back to their community  — or the larger society — and their advisor paves the way for them to follow through.

“When an advisor is supportive of a client’s philanthropy, you can forge an emotional tie with the client as a passionate helper,” Laughton said.

Providing tools and information to clients can reinforce your role as an expert on giving. For example, Schwab Charitable offers white papers to individuals who want to learn more about charitable-giving strategies.

“Our most popular white paper is on donating more complex, appreciated assets to charity, such as privately traded securities, real estate and collectibles,” Laughton said.

The trickiest challenge for many financial advisors is raising the issue of charitable giving in the first place. If clients don’t initiate the conversation, what’s the best way to broach the subject without sounding preachy or pushy?

“There’s a real fear among some advisors of how to bring it up if a client isn’t very philanthropic,” Laughton said. “It may feel like you’re prying or the topic may seem out of bounds.”

Mentioning charitable-giving options as part of a larger discussion of tax strategy can make sense. If you’re searching for possible tax deductions, you can ask clients if they support any charities on a regular basis.


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