Advisers are not currently in the habit of talking about philanthropy with their clients and most advisers are reluctant to bring up the topic of charitable giving, according to a report from private wealth firm Elston.
According to the group’s Philanthropic Research Report, only 37 per cent of advisers reported that it was part of their practice to ask clients about their interest in charitable giving.
An even smaller proportion of respondents of 15 per cent discussed it with all their clients. This results in many clients being “in the dark about their clients’ giving practices”.
The majority of advisers – 67 per cent – reported this was because they did not have an “adequate understanding of structured giving” through avenues such as ancillary funds and charitable trusts.
Other reasons included not having a working relationship with a specialist in philanthropy that they could refer clients to.
Client not having previously expressed interest in philanthropy is another key reason why advisers are reluctant to bring it up. The report found 71 per cent of adviser respondents said they will not start a discussion about structured giving.
However, the report revealed this is a missed opportunity for advisers for high-net-worth clients as 100 per cent of client respondents that had an adviser wanted to discuss tax benefits of structured giving.
The report explained advisers to the wealthy have a unique opportunity to help leverage their clients’ philanthropic potential.
“They can provide the tools that will help their clients meet their personal, financial and tax-planning needs, and potentially help clients convert personal wealth into social capital,” the report said.
Yet advisers are not making the most of their access and opportunity. A lack of knowledge and understanding around the area means advisers feel unqualified to provide advice about structured giving.
As a result, advisers avoid the topic to prevent giving low quality advice about philanthropic strategies to their clients.
Those who do provide advice often involve a specialist. The report found 75 per cent of advisers who “develop strategies for clients to engage in structured giving” refer the client to a knowledgeable professional for assistance.
The Elston report revealed that advisers have said they want to “upskill and improve knowledge” to help them work with clients interested in philanthropy.
Advisers that did have clients with ancillary funds referenced a positive impact on the relationship with their client.
These advisers reported they “knew their clients better” and “understood more about their clients values”.
The report found advisers and clients have differing notions of the purpose of charitable giving. 61 per cent of advisers said they will usually bring up the topic if there is either a high level of tax that could be offset or their client has far more assets than they need.
On the contrary, clients are often motivated by causes that they care about in addition to the tax benefits.