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Financial Planning

5 Reasons Financial Planners Should Lead With Philanthropy

Advisers can help clients both feel good and be more successful—a powerful combination.

Americans donated an estimated $358 billion to charities in 2014, a 7.1% uptick from the previous year, according to National Philanthropic Trust. Statistics also show 98.4% of high-net-worth households are giving to charity, and I would argue those numbers will only continue to rise.

While many advisers highlight charitable giving as a service offering, most of us aren’t leading the discussion with this hot topic. Instead, charitable giving usually pops up after investments, retirement, estate planning and the like. At this time in our society, when philanthropy is reportedly at an all-time high, I think we can do better—for our clients and our industry.

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Let’s face it—a large percentage of donors don’t actually have a strategy around philanthropy. They feel compelled to support a charity and understand there is a tax benefit of sorts. But as our clients create strategies around financial goals and life, in general, I think it is imperative we always include and, at times, lead with philanthropy. Not only is it a great conversation starter for generating new business, expertise in the space can further differentiate an adviser, and enable him or her to appear more well-rounded and capable. Here are five reasons to lead with philanthropy:

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It's a great ice-breaker. Regardless of the size of the firm or AUM, we are all in the business of garnering new clients. Whether you’re at an event with potential customers, on the golf course or speaking in front of your target demo, there’s always an opportunity to meet and prospect clients.

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Starting the conversation with a philanthropic angle is a great way to connect and get people thinking not only about their financial situation, but how they can better serve their community and society—all while optimizing their financial well-being. If I am in front of a potential client at an event, I may ask if they are using a donor-advised fund. That usually results in a blank stare, which provides a great opportunity for me to discuss a topic outside of next quarter’s stock market performance.

You offer tools to help clients make a difference. Clients hire us to manage and fulfill their financial goals. Giving money back to an organization or relief effort helps clients achieve some of those goals, while making a lasting impact on the world. Regardless of net worth, being in the position to give back and use money for the greater good can empower a client and create a rewarding experience. And that positive experience will only enhance your client/adviser relationship.

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You can better connect with the Giving Generation. While high-net-worth households statistically showcase the highest participation, charitable giving impacts every client. With continued reports on millennials being the "giving generation," we are seeing this "financially strapped" demographic be highly philanthropic. I believe millennials prefer we lead with the philanthropy conversation. It can help build trust and connect with clients who are passionate about making a difference.

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It works to your clients’ financial advantage. Outside of the "feel-good" sentiment, we all know charitable giving can reduce a client’s tax liability. In fact, putting together a philanthropic strategy often shows clients that the process is less expensive and more flexible than originally expected. For example, a donor-advised fund allows clients to receive an immediate tax deduction in the year they make their irrevocable contribution, but does not force them to make any grants. They can then work with our firm to invest the assets and recommend grants to their favorite non-profit, 501(c)(3) organizations over a period of time that fits their philanthropic goals.

It establishes expertise and differentiation for your firm.. Those who seek out a financial adviser expect him or her to have investment and retirement planning expertise. Leading with charitable giving can help an adviser come off as a broader financial expert, and stand out from the competition. A financial planner that understands the intricacies of charitable giving offers tools to help a client feel good and be more successful—a powerful combination.

If you aren’t already doing so, try leading with charitable giving. For new and prospective clients, take the time to understand their philanthropic views and goals, and design a strategy that empowers the client and optimizes their financial well-being.

Taylor Schulte, CFP® is founder and CEO of Define Financial, a San Diego-based fee-only firm. He is passionate about helping clients accumulate wealth and plan for retirement.

About the Author

Taylor Schulte, CFP

Founder and CEO, Define Financial

Taylor Schulte, CFP®, is founder and CEO of Define Financial, a fee-only wealth management firm in San Diego. In addition, Schulte hosts The Stay Wealthy Retirement Podcast, teaching people how to reduce taxes, invest smarter, and make work optional. He has been recognized as a top 40 Under 40 adviser by InvestmentNews and one of the top 100 most influential advisers by Investopedia.

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