ELITE ADVISOR BEST PRACTICES

Advisors Still Fumbling the (Charitable) Ball

Research shows that more than half of all clients are dissatisfied with their advisor’s ability to understand their personal and philanthropic goals.

By Randy Fox and Gary Shunk

Key Takeaways:

  • Research shows that advisors have made little progress in understanding the tools of charitable giving and the deeper conversations that lead to philanthropic engagement.
  • While 89 percent of advisors claim they are discussing philanthropy with clients, only 55 percent of clients say they are having that discussion with advisors.
  • Philanthropic planning requires tactical, analytical skills, but advisors must use deep conversations to uncover a client’s values as well as religious and legacy concerns.


The Philanthropic Initiative, a Boston based charitable consultancy, recently completed and published a study of 300 advisors and 120 high net worth individuals (defined as having more than $3 million of investable assets). The study—The U.S. Trust Study of the Philanthropic Conversation: Understanding advisor approaches and client expectations— revisits a similar research effort that was conducted in 2000. Interestingly, the study produced almost exactly the same conclusions as 13 years ago: Advisors, as a profession, have made little progress in their proficiency in the understanding of either the tools of charitable giving or the deeper conversations that lead to philanthropic engagements. Further, the gap between what clients want and what advisors think clients want is remarkably large. The disconnect is huge and no progress in closing the gap has been made in 13 years, even though the information has been put right in front of our faces. Let’s explore some of the gaps, some of the reasons for the gaps and some of the possible ways to begin to close those gaps.

The PTI/U.S. Trust study indicates that 89 percent of advisors report that they discuss philanthropy with their clients while only 55 percent of clients report that they are having that discussion. Our speculation: Perhaps this disparity derives from the fact that no self-respecting advisor would admit to failing to bring up the subject. More importantly, though, less than half (47%) of the clients in the study think their advisors are good at discussing personal or charitable goals. The clients feel unsatisfied with these conversations. Unfortunately, researchers found that advisors tend to be too tactical—more interested in discussing techniques and tax savings—while the clients desire to talk about charitable leanings and goals. All of this points to the fact that the gap is more of a chasm—and an opportunity.

Why hasn’t the advisor-client disconnect improved?

There are a number of reasons why this disconnect between advisors’ direction and client desires has continued for 13 years. First, philanthropic planning as a discipline is extremely complex. There is a seemingly endless number of planned giving structures, all of which function somewhat differently; have different income, gift and estate tax implications; and work best with various different assets and for donors of particular ages. There are nuances upon nuances with respect to the various “giving” vehicles, that often take years to learn. To gain a working knowledge of all or most of these tools requires a commitment of time, energy and expense. Additionally, there is no single source of expertise and best practices to help you learn everything necessary to become tactically proficient in the philanthropic process. So even the most dedicated advisor will be challenged. Oddly enough, most clients already trust their advisors to be tactically adept. Five out of six (84%) believe their advisor understands the planned giving tools that they discuss. It is incumbent upon the advisor community to find a way to gain the additional knowledge required or to partner with those who have.

Importance of right-brain thinking in a left-brain profession

Most financial professionals, whether from the legal, accounting or investment profession, tend to focus on the logical, “left brain” analytical elements of advising. While philanthropic planning has a serious tactical component that is heavily analytical, the conversations that uncover and develop the desire and need for philanthropic planning are quite different. These conversations are based on individual and family values as well as religious and legacy concerns. They are open-ended, often ambiguous, require deep personal exploration and are far out of the comfort zone of most advisors. Yet an overwhelming number of clients believe these conversations to be important—important not only for the achievement of their personal goals and dreams, but also in how they feel about their relationship with their advisor.

Conversations about a client’s philanthropic intentions hold the potential for a deeper relationship with the client as well as the client’s heirs. By inviting clients and their family members to talk about what matters to them, as well as about how they would like their charitable dollars to work, an advisor opens up many avenues. These conversations not only help charitable planning, but provide insight into what drives the client’s decision-making on EVERYTHING. Values-based conversations contain the core truth of the client. When advisors are fully aware of their clients’ value system, they can provide the client with better planning across the board.

Conclusion

Only a small number of advisors understand the advantage and opportunity of integrating philanthropic planning into a regular part of their practice. They will need to become tactically proficient as well as adept at values-based, open-ended questioning that enables them to understand their clients at a deeper, more intimate level. Those who choose this path will be rewarded financially and with client relationships that are fulfilling at a deeper, more meaningful level.


About the Authors

Randy Fox is a principal of Two Hawks Consulting, LLC, a national consulting firm dealing in estate and philanthropic planning. Fox also serves as associate editor of The Planned Giving Design Center and he is launching a new training program located at learnplannedgiving.com.

Gary Shunk, principal of Family Wealth Dynamics, consults with families in business, families of wealth and the advisors who serve them on the nonfinancial issues of intergenerational relationship dynamics, communication and trust building.He can be reached at www.familywealthdynamics.com or by emailing gary@familywealthdynamics.com.