For many financial advisors, a client’s wealth management needs go beyond strategies to save and invest. For a growing number, it includes supporting a client’s desire for strategic philanthropic planning.
As more generational wealth gets created and transferred in Australia, many advisors are helping Australians give back in ways that are both impactful in their communities and tax-efficient in their portfolios.
Donors are increasingly wanting their philanthropic dollars to be used effectively and to find both joy and satisfaction from their giving. However, navigating the world of philanthropy can be a challenge. Knowing how to maximize their impact requires experience and expertise that many individuals and families don’t have, especially when first getting started.
Advisors can add value by helping clients navigate this often-complex charity landscape, which includes hundreds of deserving organizations. They can help ensure proper stewardship of capital on behalf of high-net-worth donors to help position their giving as part of a broader, holistic wealth plan.
By working closely with donors, advisors can help to ensure their donations align with their values and that the capital goes to the right place, in the right amount, utilizing the best means (cash, stocks, mutual funds) and at the right time. It’s not only more effective financially but can be critical to the growing number of Australians who rely on donations from those more privileged.
Effective philanthropic planning
Many professional advisors today are serving as a conduit for charitable giving. To be most effective, advisors need to have meaningful and continuous conversations with clients about their philanthropic goals.
They also need to find the appropriate giving structures that fit with a client’s broader wealth and estate plans.
Just as advisors regularly ask clients about their investment goals, they too should be asking about philanthropic pursuits. A client’s desire to donate capital could shift depending on personal or financial circumstances. For instance, they may have received a large bonus at work, or an inheritance from a family member, or sold a business and are looking to donate some of the proceeds. A personal matter may also change their giving goals; for instance, if a family member has been diagnosed with a disease such as cancer or Alzheimer’s, or is affected by mental illness, they may want to give to causes that directly support those causes.
Advisors should be prepared to have these very personal discussions, and to ask strategic questions to help the client determine how much they want to donate, when or over what timeframe. Donors may also have questions of their own, such as how much of their money will go directly to the charity, and whether their contribution can be made anonymously or publicly. These discussions will help donors figure out their giving priorities; while also ensuring the advisor provides the proper resources to meet the donor’s desires.
Efficient giving options
How to give is also a big question that advisors will need to address with philanthropically minded clients. The answer largely depends on the amount of the donation, and how involved a donor wants to get in the charitable organization they’re supporting. Wealthy families are no longer content simply to donate funds for worthy causes. Instead, they crave a more holistic approach, implementing a strategy that will target their chosen cause(s) at many levels and often choosing to contribute their personal time as well.
For smaller sums, the traditional way of donating cash online or writing a cheque and receiving a tax donation slip may be enough. However, many high-net-worth individuals and families often turn to non-direct methods such as foundations when giving larger sums of money.
The two main types of charitable structures for larger gifts are public and private foundations. Each structure can be fulfilling and tax-effective, but there are differences depending on the donor’s philanthropic goals.
Private foundations are controlled and run by a single donor or family. It’s a good structure for wealthy families who wish to directly oversee their charitable giving, including the governance and administration.
