Create a rewarding charity experience for senior clients

You’ve spent your career helping clients build and protect their wealth, but are you prepared to help them give it away?

Canada’s cohort of millionaires is aging, and those who want to spread their wealth are turning to their advisors for help. Many don’t feel ready to answer the call.

“A lot of advisors say, ‘I don’t know enough about it; it’s tax-driven and that’s not my area,’ or ‘I don’t get involved with personal value issues with my clients,’” says Keith Sjögren, managing director of consulting at Strategic Insights. “There are a number of excuses.”

But wealthy clients increasingly expect their advisors to do such work. “You really want to be prepared,” says Karen Hudson, a consultant for Strategic Insights, “because if they’re not talking to you about it, maybe they’re talking to someone else.”

Nearly half of Canada’s millionaires will be over the age of 65 by the year 2026, Sjögren says. They will control $2.4 trillion in wealth and, as they age, their focus will shift to philanthropy.

Paul Nazareth, vice-president of education and development at the Canadian Association of Gift Planners, says that as the largest amount of capital in Canadian history changes hands, clients will increasingly look beyond family heirs due to younger generations having fewer children.

In-house expertise or a network of experts?

The decision to provide philanthropic expertise in-house or to work with a network of professionals can depend on whether an advisor works in a financial team or is a sole practitioner, says Hudson.

Sole practitioners can team up with a community foundation offering donor-advised funds, Sjögren says. The foundation can serve as an advisor’s charity back office, advising where to give and managing donations for years to come.

Ask the foundation’s philanthropy team how to integrate your practice with their work. “You’ll find they’re very open to those sorts of discussions,” Sjögren says.

Advisors at financial institutions can also turn to in-house donor-advised fund programs, says Sjögren, noting that the number of advisors with access to such funds has doubled in recent years.

In-house donor-advised funds are generally suitable for clients who want to donate to charities they already have in mind but aren’t interested in ongoing decision-making, says Aneil Gokhale, director of philanthropy at the Toronto Foundation, while more engaged donors might want to interact directly with the foundation.

Starting the conversation

There is a disconnect between advisors and clients: a 2014 study found that while 90% of advisors reported discussing charity with their clients, only 13% of clients say they’ve had that talk. Of those clients, fewer than half said it was a good conversation.

Advisors can review clients’ tax returns and wills to determine the level of interest in charitable giving, Sjögren says. Perhaps a client has been donating small yearly amounts but can now give more. If there are charitable bequests in a will, ask if they’re interested in giving to those causes now.

Mark Halpern, CEO of WealthInsurance.com, says he treats the charitable conversation as a sandwich: two emotional appeals with a technical conversation in the middle.

He opens the conversation by telling clients their estate can go to family, the government or charity. “Each of us can only pick two; which two would you pick?”

When clients typically choose family and charity, Halpern explains the tax benefits of donations and provides options, such as naming a charity as an insurance policy beneficiary. He then closes with another emotional appeal, talking about the value of charity as a way to pass family values to future generations.

Choosing a cause

It’s difficult for advisors to provide specific advice about which of the more than 86,000 charities in Canada clients should support, Gokhale says, and few will. How can an advisor help a client choose?

When a client is unsure, Gokhale says a community foundation is useful because “it’s a charity, not a cause.” The client gets an immediate tax benefit but has time to choose exactly where to give, with the foundation’s help.

Advisors don’t have to work with a community foundation to use its resources. The more than 50 organizations across the country produce reports on local issues organized by themes such as health, employment, transportation and culture.

The Toronto Foundation produces a report profiling dozens of charities the foundation has researched. Advisors can go through these with their clients to identify ones they like, Gokhale says.

If a client already has a cause, advisors can help them review charities’ financial reports to see how they’re managed. Lauren Albert, founder of ImpACT Giving, suggests looking at public CRA filings, or sites like Charity Intelligence. CRA filings are full of hard facts on the charity, compared to what’s in a brochure. The financial information can show clients how a donation would be used. Data include how much money a charity has received in past years and how it was spent, including how much it paid senior staff. Charity Intelligence rates charities by their impact, efficiency, transparency, need for funds and accountability to donors.

When a client has a cause, Albert has another task for advisors: review their portfolio to make sure giving and investing are aligned.

“It’s often disjointed,” she says. Consider a client who is passionate about eradicating juvenile diabetes but is invested in fast-food companies. It could be time to sell those shares.

Making charity meaningful

How wealthy donors view charity is shifting, Gokhale says. Previously, clients’ interest tended to stop once the donation was made. Increasingly, donors want to interact meaningfully with their causes. His foundation organizes donor events that advisors to wealthy clients could replicate.

Events include visits to organizations where donors “get to touch and feel and see what’s going on, and meet local residents who are being supported,” he says. The foundation is also organizing a “speed-dating” event, where 30 to 40 donors will briefly meet charity representatives to learn about their organizations.

Gokhale also connects donors who have similar charitable interests so they can collaborate.

Halpern hosts a quarterly breakfast for advisors and donors, where he talks about philanthropic options. Talking about philanthropy “really changes the relationship with the client. It’s so much more sticky,” he says.

Like other philanthropic specialists, Albert has a vetted portfolio of causes, and takes referrals from generalist financial advisors. She helped a client sponsor a Tanzanian doctor training to be a children’s heart specialist, which allowed the client to know exactly who he was supporting.

Donation education

The Canadian Association of Gift Planners, in partnership with the Knowledge Bureau, recently established a new designation: Master Financial Advisor—Philanthropy. It teaches advisors how to choose between charitable giving structures and coaches them through philanthropic discussions.

With chapters all over the country, CAGP is also a tool for advisors to strengthen their network of charity experts, says Halpern. “It brings together people from non-profits, from foundations, professional advisors, lawyers, accountants, investment insurance people, bankers,” he says.

Even advisors who don’t want to become philanthropic experts should know the fundamentals, says Hudson: tax, gifting structures and the types of questions to ask.

Regardless, advisors shouldn’t overlook philanthropy’s role in financial planning, says Halpern.

“If you ignore it, you’re not providing your clients what they really need as part of their tax and estate planning,” he says.