Discussions between high-net-worth clients and advisors about philanthropy are becoming more common but disconnects remain, a report from U.S. Trust Bank of America Private Wealth Management and the Philanthropic Initiative finds.
Based on a survey of more than three hundred wealth advisors and a random sample of more than a hundred HNW individuals with $3 million or more in investable assets who are actively engaged in charitable giving, The U.S. Trust Study of the Philanthropic Conversation (72 pages, PDF) found that while an increasing number of clients report advisors to be a valuable source of information — second only to their spouse or partners — many advisors underestimate their clients' desire to discuss philanthropy early in their advisory relationship. And while advisors correctly gauge HNW clients' top motivations for giving — passion for a cause, impact on the community, a desire to give back — they often overestimate the importance to the client of lowering his or her tax bill and burnishing the family name.
The study also explored the potential impact of the 2017 Tax Cuts and Jobs Act on giving levels and found that advisors seem to be overestimating its impact: while only 7 percent of donors said they plan to reduce their giving because of changes to the tax code, 16 percent of advisors said they anticipate lower giving by their clients. Advisors also miss the mark with respect to clients' hesitations about giving. Whereas clients report barriers to giving such as a lack of connection to nonprofit organizations and a fear that their gifts won't be used well, advisors perceive clients' primary hesitations to be more focused on issues of wealth preservation.
In addition, the survey found that HNW individuals who consult their advisors about their philanthropy are more structured in their giving. In addition, approximately 40 percent of HNW individuals are more likely to select an advisor who is knowledgeable about charitable giving, while 53 percent place more value on information from advisors who are philanthropic themselves. A majority (59 percent) of clients also report wanting their advisors to refer them to other professionals for complex philanthropic needs beyond their advisor's capabilities.
"Clients rely heavily on their advisors for guidance with their giving. It is encouraging, therefore, to see more advisors recognizing the importance of philanthropy to their clients and a corresponding uptick in the number of philanthropic conversations taking place between clients and their advisors," said Claire Costello, national philanthropic practice executive for U.S. Trust. "Advisors who approach these conversations in a meaningful way — focusing on personal goals and passions as well as the more technical aspects of giving — are more likely to satisfy their clients' philanthropic needs while also growing their business."