However, research indicates that philanthropy is often the most under-examined portion of a wealth-holder’s financial portfolio. According to a 2010 Fidelity Charitable Gift Fund survey of private client advisors, only 52 per cent provide philanthropy-related advice, and when they do, it is usually limited to guidance on giving vehicles, rather than on helping clients to maximize the impact of their donations.

There are several common reasons why wealth advisors are apprehensive about broaching the topic of philanthropy with clients. They may believe the subject is too personal, or that it is outside the scope of their business relationship (i.e. “not my job”), or that they don’t have the necessary expertise.

But many of your clients are likely in need of philanthropy advice. After all, roughly 98 per cent of high net worth households donate to charity, either as a way to give back to society or to memorialize a loved one. 

Furthermore, donor surveys conducted in 2010 by PNC Wealth Management and Bank of America show that due to the recession, donors are moving away from writing checks in favor of strategically addressing a few charitable priorities. The surveys also indicate that HNW individuals increasingly view philanthropic choices as inextricably linked to broader financial-planning initiatives. As such, donors are turning to their legal and financial advisors - from accountants to attorneys, to wealth advisors - to assist them in adjusting their charitable giving strategies.

This rising demand means that private client advisors have an opportunity to enrich their practices and to develop a more holistic approach to wealth management by broaching the topic of charitable giving with their clients. Indeed, those advisors that go above and beyond to meet their clients’ philanthropic needs will seize a competitive edge.

Discussing philanthropy with your clients can be done unobtrusively, in a way that respects their privacy, values and autonomy. To help guide you through the steps of this process, consider working with a philanthropic advisor. As part of a client-centered team, professional philanthropic advisors work with legal and wealth advisors to ensure that there is a strategic and professionally supported approach to managing clients’ philanthropic investment portfolios.

The process

First, ensure that clients fully understand their net worth and liquidity, the source(s) of their funds and the amount that could be available for annual giving. Initiating the conversation can begin with discussions you’re already having, such as discovering or re-examining how much they would like to designate for charitable giving during their lifetime and how much they prefer to leave to their children and to charity once they pass.  These conversations can also be part of an annual review or prompted by a wealth creation or liquidity event.

Once the topic has been broached, it is important to learn more about the motivations behind your clients’ philanthropy. This step helps to determine which charitable giving vehicles (e.g. charitable lead or remainder trust, private foundation, donor advised fund and so on) will best accomplish clients’ goals in terms of both tax efficiency and personal values. Asking the following questions can help to guide the conversation:

What charitable giving activities are you currently involved in (either with money or time)?

How did you arrive at your current giving plan? What is significant to you about the organizations you choose to support?

What do you want to do for people, causes, and institutions that have been important for you in your lifetime?

How would you like to be remembered? What kind of legacy do you want to leave?

Do you prefer to give anonymously or publicly?

Do you want to make an impact or facilitate change within your community?

In addition, find out whom else, if anyone, clients would like to involve in managing their philanthropic activities. Often, clients choose to involve family members, but also close friends and business associates, as well as their attorney, financial advisor, accountant, or philanthropic advisor. The issue of trustee selection is critical, as they will be the ones charged with preserving donor intent throughout the life of the giving vehicle.  Advise clients to designate trustees with expertise in their giving priority areas (e.g. education, the environment, etc.) and who share your clients’ passion and vision for their philanthropic activities.

Perhaps most importantly, find out if your clients intend to give the majority of their charitable dollars away during their lifetime or at death. This question of timing is key. If clients intend to give away their charitable assets during life, you can help them to implement a strategic spend-down plan. If they prefer for their philanthropic activities to continue after death, then you have the opportunity to work with them to draft succession plans that outline the process for transitioning leadership of the family’s formal giving vehicle.

When possible, these conversations should involve the client’s entire family. Not only does involving multiple generations make good business sense for advisors looking to keep a family’s assets under management for years to come, but it also prevents complications down the road.

As you help to manage the ongoing implementation of client’s philanthropic plans, you can add rich value to their charitable giving experiences by helping them to understand philanthropic best practices: from conducting proper due diligence on gift-recipient organizations to measuring the impact of charitable gifts to networking with peer funders. 

As with any area of your clients’ financial affairs, you know the limits of your expertise. By introducing clients to external resources such as regional grantmaker associations, funder affinity groups and philanthropic advisors, you’ll benefit from deeper client relationships.

With sufficient encouragement, continuing professional education around philanthropy and the proper tools and resources, advisors can initiate meaningful philanthropic planning with their clients. This will only happen, however, when more legal and financial advisors recognize that addressing their clients’ philanthropic interests can be good business. And remember, when you do initiate this important discussion, consider inviting a philanthropic advisor to be a part of your client-centered team.

Meg Lassar is an analyst at Strategic Philanthropy, a philanthropic advisory practice based in Chicago.