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US Trust survey finds positive trends in philanthropic conversations between advisers and clients

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Discussions between advisers and high net worth (HNW) clients about philanthropy are on the rise, according to the US Trust Study of the Philanthropic Conversation, as clients report advisers to be a valuable source of information, second only to their spouse or partner.

However, the study reveals several disconnects between advisers and their clients. For instance, many advisers underestimate their clients’ desire to discuss philanthropy early in their advisory relationship and overestimate the importance of tax benefits as a motivation for giving.
 
“Clients rely heavily on their advisers for guidance with their giving. It is encouraging, therefore, to see more advisers recognising the importance of philanthropy to their clients and a corresponding uptick in the number of philanthropic conversations taking place between clients and their advisers”
 
To better understand advisers’ approach to and HNW individuals’ expectations of these discussions, US Trust, Bank of America Private Wealth Management, partnered with The Philanthropic Initiative (TPI) on a nationwide survey of more than 300 advisers – including wealth advisers, trust and estate attorneys, accountants and other tax professionals – and a random sample of more than 100 HNW individuals with USD3 million or more in investable assets who are actively engaged in charitable giving and who engage at least one of these adviser types.
 
“Charitable giving is an important dimension of an individual’s or family’s wealth experience, and the role of the adviser is correspondingly so,” says Ann Limberg, head of philanthropic solutions and family office at US Trust. “Therefore, the better advisers are at addressing their clients’ philanthropic needs, the more likely they are to enhance their client relationships and grow their business.”
 
The 2018 survey responses were compared to results from the groups’ initial 2013 survey, and the study findings demonstrate improvement in the philanthropic conversation between advisers and clients, with the vast majority of advisers (91 per cent) believing that discussing philanthropy with their client is important, and 53 per cent perceiving it to be very important.
 
In addition, a higher proportion of advisers make it their practice to ask their clients about philanthropy (80 per cent today versus 71 per cent in 2013), while the vast majority (94 per cent) of advisers discuss philanthropy with some of their clients, including 44 per cent who discuss it with a majority of their clients.
 
Advisers are also taking a more balanced approach to initiating philanthropic conversations with a mix of technical topics (tax benefits, estate planning) and personal topics (passions, goals) which align to clients’ reported preferences.
 
The majority (76 per cent) of clients meanwhile, who discuss philanthropy with their adviser rate their adviser’s ability to discuss their personal values and charitable goals as strong, up from 63 per cent in 2013.
 
“Clients rely heavily on their advisers for guidance with their giving. It is encouraging, therefore, to see more advisers recognising the importance of philanthropy to their clients and a corresponding uptick in the number of philanthropic conversations taking place between clients and their advisers,” says Claire Costello, national philanthropic practice executive for US Trust. “Advisers 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.”
 
Advisers correctly gauge HNW clients’ top motivations for giving, namely: passion for a cause, impact on the community, and a desire to give back. However, they misperceive the importance of reducing taxes and enhancing the family name or business as motivations. In light of recent changes, the study explored the potential impact of the 2017 Tax Cuts and Jobs Act on giving levels and found that advisers overestimate its impact: only 7 per cent of donors plan to decrease their giving, compared to 16 per cent of advisers who anticipate a reduction from clients.
 
With respect to clients’ hesitations about giving, advisers miss the mark. Clients report barriers, such as lack of connection to nonprofit organisations and fear of gifts not being used wisely, while advisers perceive clients’ primary reasons for hesitating to be centred on issues of wealth preservation, including not having enough money for themselves or their heirs.
 
“The research results indicate that advisers’ understanding of their clients’ philanthropic needs is increasing. However, adviser misperceptions about clients’ motivations and barriers to giving persist. This may result in missed opportunities – for clients who may not be receiving the support they seek and for advisers who may be less able to deepen and retain client relationships,” said Ellen Remmer, a senior partner with TPI.
 
The survey found that HNW individuals who consult their advisers about their philanthropy are more structured in their giving. Adviser-client discussions about philanthropy can enhance the perceived value of the adviser. Two in five HNW individuals would be more likely to select an adviser who is knowledgeable about charitable giving, and 53 per cent place more value on information from advisers who are philanthropic themselves. In addition, 59 per cent of clients report wanting their adviser to refer them to another professional for complex philanthropic needs beyond their adviser’s capabilities.
 
Seventy-eight per cent of advisers are experiencing the impact of philanthropic discussions with their clients on their bottom line. More specifically, having philanthropic conversations has helped advisers to establish new clients (60 per cent); deepen existing relationships (74 per cent); and build relationships with clients’ extended family (63 per cent).
 
While 54 per cent of HNW individuals are somewhat satisfied with the philanthropic discussions with their advisers, only 45 per cent are fully satisfied. The study identified several opportunities to improve the conversation.
 
Most advisers wait to raise the subject of philanthropy until they have detailed knowledge about their client’s financial picture (87 per cent) or personal life (85 per cent). However, the majority of clients expressed a desire to have philanthropic conversations earlier – specifically 29 per cent at their first meeting and another 29 per cent within the first few meetings.
 
While initial conversations are more balanced than what the survey found in 2013, clients report that ongoing philanthropic conversations tend to skew toward technical (63 per cent) versus personal (32 per cent) topics.
 
Adviser knowledge and use of structured giving vehicles is increasing, but there is still room for growth. Only a portion of advisers rate themselves as very familiar with charitable trusts (53 per cent), private foundations (38 per cent) and donor-advised funds (42 per cent).
 
Regarding nonprofit organisations, there is a gap in advisers’ self-rated knowledge of nonprofits versus client perceptions of their knowledge. Most advisers plan to increase their knowledge of philanthropy, including becoming more familiar with nonprofit organisations.
 

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