The Informed Philanthropic Advisor: Missing Out on These Conversations with Your Clients? It Could Cost You!
Between forming a giving strategy to maximize impact, knowing how and where to give, and the complex tax stipulations that naturally come with charity work, navigating the philanthropic space can be challenging for donors even at the best of times.
A philanthropic advisor is a vital resource for clients of all backgrounds—from those lacking detailed knowledge in the space, to those who have the experience and understanding, but may not have the time required to carry out the legwork on their own.
But giving isn’t always so easy—even for advisors. Bloom Investment Counsel understands that the intricate complexities of philanthropic endeavours from the advisor’s perspective are not discussed or acknowledged. Amid instigating that difficult initial philanthropic discussion and executing personalized client plans, we know the world of charitable giving is anything but easy.
But did you know that negating to engage in important discussions with your clients could actually cost you your clients? In this article, we cover important discussions you may wish to have with your clients.
Good Intentions, Complex Executions—Bloom Has You Covered
We are pleased to engage in the conversation with the release of a series of guides to aid you, the professional advisor, during every step of the philanthropic process.
In this initial installment of The Informed Philanthropic Advisor, we will dive in deep to uncover the philanthropic fundamentals you need to know to best aid your client. Grab your favourite hot beverage and settle in to be well on your way to becoming the best possible partner to your clients in their philanthropic journey! And don’t miss the next article in this series, focusing on signs your clients may need help with philanthropic planning, the top questions to ask your clients, and more!
Ready to Help Your Clients Make the World a Better Place?
Let’s begin with defining some of the basics principles for professional advisors in the philanthropic space.
Philanthropy Versus Charitable Giving—What’s the Difference?
For an in-depth refresher of the intricate differences between charity, philanthropy, as well as volunteerism, be sure to check out our informative guide, Altruistic Actions: Your Guide to All Things Philanthropy.
What is Charitable Giving?
- Charitable giving is commonly thought of as a short-term effort. Charitable activities are usually concentrated on delivering imminent relief to individuals or causes in need to help.
What is Philanthropy?
- Philanthropy, on the other hand, is a long-term strategy and usually includes making multiple gifts of time or capital to aid foundations or charities over many years. This type of endeavour is rooted in helping people and solving issues at hand over a period of time, and is generally ongoing.
The Elephant in the Room
According to a study by CAGP, while a staggering 91% of advisors report having the philanthropic conversation with their wealthy clients, a mere 13% of affluent clients report they have deep, important conversations with their advisors.
Kindness Trumps Tax Advantages
Further to this confounding statistic, studies show that a large proportion of wealthy Canadians approach charity work from an emotional standpoint rather than a strategic one—many are less concentrated with attaining a tax advantage, and are more focused on the intrinsic benefits that come with giving.
Addressing the Conversational Gap
We sat down with Toronto-based Strategic Growth Partner and Charitable Advisor Joanna Bacchus to gain some insight into how to best breach the subject of philanthropy with your clients.
“We know that the philanthropic inclination is rooted in human experience, yet too often, these deep conversations between clients and advisors are not occurring, with many advisors hesitant to go there,” Joanna says.
“Philanthropic giving not only allows donors to give back to their community, but it’s also a means of control. The process allows them to dictate what happened to a portion of their assets that otherwise would have gone to Revenue Canada upon passing—so if you aren’t having the conversation, you’re actually at risk of losing the client, as more and more clients are looking to have the discussion with their advisor”.
Common Philanthropic Misconceptions
There are many misconceptions when it comes to charitable giving, on both the client and advisor side. Here are some of the most common fallacies!
- The Client Doesn’t Have Enough to Give Away
Many clients feel they may not have enough capital to gift, and that they need that money for their family, even if they’re affluent.
If this is the viewpoint your client has, try putting it in perspective by honing in on how much money they pay in taxes each year, and ask them what they would do with that money if they could redirect it—because that’s precisely what philanthropy allows them to do!
- The Only Way to Give to Charity is to ‘Steal’ from Their Child’s Inheritance
There is often confusion around this point—many clients do not entirely understand how a charitable giving plan can fit into their comprehensive strategy, and that the effects of their kindness are far greater than the gift being given away.
Here, it’s important for you, the advisor, to break down how charitable giving can actually help them reach their objectives, as opposed to the misperception that they’ll be exhausting capital for them and their family.
David Rubin, Toronto-based Estate & Insurance Advisor, weighs in.
“By properly structuring your estate, you can actually leave your children with more than they otherwise would have had. Let’s illustrate this with a real-world example: John and Mary Smith decide to donate $1,000,000 to a private foundation they had set up. This provides a tax refund of $500,000, which they use to make annual deposits of $50,000 for 10 years into a permanent insurance contract. The foundation is able to direct donations to a number of causes that John and Mary could select each year, while the policy could provide an even larger inheritance to their children than they would have otherwise received.”
- Charitable Giving Only Encompasses the Gifting of Cash and Public Shares
Not quite! In addition to these gifts, many donors opt to gift shares of privately held companies (the donor’s business for example) upon their passing.
While the process is a bit different, the tax benefits still apply—the corporation will collect some share proceeds on the life of the recently deceased, and utilizes those insurance proceeds to redeem the shares back from the charity. Then, the client can obtain a tax receipt.
What are the Best Practices For Starting the Philanthropic Discussion?
It’s no secret that charitable giving is deeply entrenched in emotion.
As humans, we are natural givers, and many of us can relate to the desire to want to make the world a better place. Thus, the philanthropic conversation should be approached with genuineness and empathy.
Bite the Bullet!
“With the nature of charitable giving being so individual, it’s vital that the advisor not be afraid to engage in a deep and meaningful conversation with their clients,” says Joanna Bacchus.
“When advisors do finally present the subject, many are pleasantly surprised at their clients’ receptiveness to discussing their personal values and objectives, and their passion for wanting to make a difference. Intently listening to their vision and aspirations, and being able to connect with them on that personal level offers an opportunity to further fortify your working relationship.”
Keep it Open Ended
Oftentimes, the best way to breach the subject is to start with a straightforward, open-ended question. Try something like, ‘Are there any charitable considerations you would like to discuss?’ Keeping it open-ended allows you to proceed based on how the client responds.
Fostering Honest, Meaningful Conversations
If the client is open to continuing the conversation, try proceeding with some of the following idea starters to get the ball rolling. Your client may end up surprising you with the depth and openness of their responses.
- Which volunteer experiences in the past have you found the most fulfilling?
- Do you have a cause that you’re passionate about?
- Do you have any personal values that you feel would be rewarding to express through charitable giving?
- Are any of your family and friends engaged in philanthropy? Do you feel it would be meaningful to give back together?
Identify Their Motivations
Honing in on a client’s primary drivers for wanting to give is an important step in building a comprehensive charitable giving plan.
How Can a Philanthropic Advisor Support the Client’s Philanthropic Efforts?
- Facilitating a Strategic Giving Plan
Advisors can be pivotal in their clients’ charitable giving efforts through aiding them in bringing their concentrated values and objectives to light.
Philanthropic advisors build a customized plan for how the client can achieve their personal goals through attentively listening to their experiences and interests. This personalized approach molds the donor’s plan and is a vital step in ensuring the client’s vision can be converted into meaningful action.
- Bringing Family into the Mix
Giving alone is highly rewarding, but giving together with ones you love is all the more meaningful.
Advisors can provide support to the client’s entire family, ensuring children, siblings, parents, and grandchildren can experience the joys of what it means to give. Through meeting with the entire family, the advisor can help to shape how each member can contribute to the effort on an individual basis.
On a macro level, the advisor is there to support and shape how the family can utilize their combined resources to make the desired impact.
How Bloom Can Help in the Giving Journey
Creating stable, consistent cash flow with your investments is hard. Bloom Investment Counsel, Inc. makes it easier. We are your partners in wealth building providing stable, consistent income solutions for your financial peace of mind. Our committed goal is to help ensure your money is working for you, and not the other way around.
Bloom is delighted to work directly with our clients’ attorneys and advisors, including family office and multifamily clients, providing custom, personalized solutions to help each client reach their unique diversification goals in a manner that best suits them.
Continue making an impact in your community, and leave the legwork to us!
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Our methodology has worked for countless clients—we proudly have over 36 years of experience under our belts, and have managed over $2.5 billion in assets.
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This content is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this content should consult with his or her financial partner or advisor.