Why philanthropy is an important conversation advisers should have with clients

Financial advisers are in the box seat to assist clients with their philanthropy, yet a lot still don't raise the topic with clients.

Possibly, that comes from the mistaken belief that only the extremely wealthy (read 'billionaires') engage with structured giving and that the majority of clients just need to let their tax accountant know about a few deductible donations made each year and the area is covered.

Good advisers know that philanthropy is an important conversation to have with clients for a whole host of reasons.

The intergenerational wealth transfer of $3.5 trillion dollars, according to the Productivity Commission, will gather pace over the next decade and industry research indicates the majority of the next generation does not intend to remain with their parents' financial adviser.

If advisers are to change that intention, they need to establish a meaningful relationship with the next generation and philanthropy is a good place to start.

Connection

Philanthropy is an excellent connection point for even the most complicated of families.

In some families where wealth is not discussed it can allow parents to start conversations around giving and social responsibility as well as providing the opportunity to expose young adults to meetings with advisers, investments, and understanding financial statements, without them needing to be across the details of the bulk of the family's arrangements.

It also connects advisers with their clients in a deeper way as you work together on something that provides benefit to the community. Whatever else is happening for the family, whatever is happening to asset values and markets, philanthropy is a positive connection.

Planning short and long term

Some advisers only talk about philanthropy in relation to estate planning and the client misses out on enjoying the many benefits of giving while living such as strategic tax savings and deeper connections to family and community.

Philanthropy, like all areas of advice for clients, needs to be considered in the immediate and in the long term.  A structure such as a private ancillary fund or a giving (sub) fund within a public ancillary fund like the Australian Philanthropic Services Foundation can assist with an immediate tax need, it can be an ongoing tax planning tool and the funds sit in a tax-exempt entity boosting investment returns.

With investment expertise funds can grow over time significantly amplifying the impact of the initial donation as funds are given away to charities over years. It provides clients with the joy of giving now and the ability to plan their giving in a tax effective way over the long term and even past death.

More and more charitable gifts in wills are being contested so establishing a pattern of giving while living and having the funds safely donated into a structure while still alive protects clients' wishes.

It feels good

It is accepted wisdom that being connected to something bigger than oneself is a key contributor to mental health and wellbeing.

Giving connects people to community and put simply, it feels good. The emotional return for donors is significant but frequently underrated. We have a client who often says as he makes another donation into his PAF, "I've just given away more money, but I feel richer!"

Assisting clients with their giving makes them feel good and some of that feeling rubs off on the adviser.

If you don't, someone else will

Philanthropy is everywhere at the moment.  The government has a goal to double giving by 2030 and that goal is shared by the sector's peak body, Philanthropy Australia, and by sector leaders such as Australian Philanthropic Services.

The Productivity Commission has recently published its Future foundations for giving report and the government will respond in the near future.  Importantly, philanthropy is a focus for many clients.  They will seek advice from their trusted advisers and it's important advisers know how to respond.

That does not mean advisers need to be experts in structured giving. Like other areas of specialist advice, such as estate planning or tax advice, advisers need to know enough to assist clients and bring in specialists to do the work.