Financial advisors should always be looking for opportunities to help their clients in terms of saving them money. You not only deepen your relationship with your clients you provide another reason for them to see your value and referability. This time of year many individuals and families are in a philanthropic mode. How do wealthy households decide where and how to give? The 2010 Bank of American Merrill Lynch Study of High Net Worth found high net worth households in 2009 consulted accountants (67.5 percent), attorneys (40.8 percent) and financial/wealth advisors (38.8 percent) when making charitable decisions.
Our belief is the percent that consult financial/wealth advisors would be much higher if the advisors were more proactive in this area. In fact the study found that of the high net worth households who consulted an advisor when making charitable giving decisions, 90 percent initiated the discussion, while the advisor initiated the discussion in 10 percent of the consultations. In most cases when high net worth households received advice or services from advisors they satisfied with the advice given (84.6 percent).
How do you start the conversation about charitable giving? Here are some questions you can ask to get started:
1. Do you volunteer?
2. What are your favorite causes or charities?
3. Of all the gifts of time and money you have given over the years, which was the most meaningful to you?
4. What would you like to have happen as a result of your giving?
5. What core value would you like your giving to reflect?
6. Who has made a difference in your life? Would you like to help others in a way you have been helped?
An important factor to consider when raising this topic with clients is who is making decisions. This study found consultation and collaboration drive philanthropic decision-making by high net worth donor couples. More than two-thirds of the couples surveyed confer with each other before giving money to charities. Two out of five (41 percent) made their decisions together and a quarter (25.9 percent) discussed their decisions before one person made the final choice. More than 30 percent of respondents made decisions separately – 16.4 percent made their household’s charitable contributions without conferring with their partner and 15.2 percent of couples reported they each made independent decisions about the couple’s giving.
“This research gives us unprecedented insights into how high net worth couples decide where their philanthropic dollars go,” said Una Osili, the Center of Philanthropy’s director of research. “Some nonprofits may assume men are the primary philanthropic decision makers, rather than women deciding or the couple choosing together.” In an article in ONWALLSTREET, Ruthie Ackerman, reports “With 51.3 percent of wealth in the United States now in the hands of women this is an important moment for financial advisors and planners to take note of as more high net worth women look for advice around how to give, whom to give to and how best to create legacies they can be proud of.” Lauren Embrey, one of the leaders of Women Moving Millions and president of The Embrey Family Foundation, said women philanthropists want ‘our dollars tied up with values and mission’.
The Bank of America Merrill Lynch study also examined the risk tolerance with personal and philanthropic assets and found high net worth households reported various levels of risk tolerance in both their personal investments and their philanthropic investments (e.g., foundation, donor-advised fund(s), or trust). While 35.2 percent of households reported a willingness to tolerate above-average or substantial levels of risk in their personal investing in the hopes of garnering significant returns, less showed willingness to accept that level of risk in their philanthropic investments with 22.9 percent of the households reporting an above-average or substantial risk tolerance in that area. Only 10.4 percent of high net worth households reported they were not willing to take any risks in their personal investing. In contrast 25.7 percent of high net worth households claimed to be completely risk averse with respect to their philanthropic investments.
This landmark biennial study conducted for Bank of America Merrill Lynch by the Center on Philanthropy at Indiana University began in 2005 and has proved to be a leading resource on the giving amounts, behaviors and motivations of people with a household income greater than $200,000 and/or net worth of at least $1 million, excluding their primary residence. They found that not only do wealthy families give from their own personal income or assets; many also establish charitable giving vehicles and give through private foundations, donor-advised funds and/or charitable trusts. While the economy slowly improves, we see wealthy families continue to give generously of their time and money. High net worth households continued to support charitable organizations at levels that were remarkably consistent with those seen in 2005 and 2007 and more than three-quarters of high net worth households consider themselves experienced with charitable giving and the majority has high levels of trust in nonprofit organizations to solve domestic global problems.