Wealthy Americans are increasingly turning to financial advisers to plan their charitable giving. But when talking philanthropy, the two sides appear to be speaking different languages, a new national study finds.
A survey of 300 advisers and 120 wealthy people found that financial experts do not broach philanthropic planning as quickly as their clients would like. And when the topic does arise, advisers mistakenly talk taxes and other technical aspects rather than focusing on a client’s charitable passions, which turn out to be what wealthy people say is a far more important motivator.
“Even when they’re having the conversation, they’re getting off on the wrong foot,” said Claire Costello, national philanthropic practice executive at U.S. Trust, which conducted the survey in August with the Philanthropic Initiative, a group that advises affluent donors.
Nearly three-quarters of advisers said they initiate charitable-giving planning discussions from a technical perspective while only 35 percent approach it by focusing on their “clients’ philanthropic goals or passions,” the study found.
As a result, fewer than half of the wealthy said their advisers are “good at discussing personal or charitable goals with them,” the survey found. And just 41 percent “are fully satisfied with these conversations.”
Why the Rich Don’t Give
Advisers are also under the misimpression that wealthy people may be reluctant to give because they fear not having enough money for their heirs and themselves, says Ms. Costello.
But wealthy people say they hesitate mostly out of fear that nonprofits will misspend their money, their lack of connection to a charity, and their concern that they will face a deluge of donation requests from other groups once they give to one organization.
Advisers and clients did agree on what the top three motivations were for giving: passion for a cause, desire to give back, and interest in making a positive impact on the world.
But advisers tend to stick to what they know best: financial planning.
Advisers believe the next most important reason for clients to give is to reduce their tax burden. Yet the study found that only 10 percent of wealthy people cited “reducing taxes among their motivations for giving.”
The study also found that 40 percent of advisers believed that their wealthy clients would reduce their giving if the estate tax were eliminated and that 78 percent predicted a decline if income-tax deductions for donations were eliminated.
Yet the wealthy individuals in the study, who had $3-million or more in investable assets and were active givers, overwhelmingly said they would not reduce their giving if those tax policies changed.