Why Financial Advisors Cannot Ignore Clients’ Philanthropic Goals - Part One

The state of charitable giving today, and how to incorporate it into your practice

By Elite Advisor Report staff

Key Takeaways:

  • As record numbers of boomers approach retirement age, their focus shifts to distribution of assets rather than accumulating wealth. Are your clients’ heirs prepared to receive it?
  • Affluent millennials look for ways to have impact rather than just give away dollars.
  • If you try to profit from the generosity of others, you are likely to fail. However, if you want to leverage your talents as an advisor by working with those who are generous, then you can become a magnet for some of the best, wealthiest and best-connected people in your community.
  • The most effective philanthropy needs to be driven not by balance but by three things: head, heart and mind.

READER NOTE: Many of the contributors to this discussion will be presenting at the Purposeful Planning Institute’s Annual Rendezvous, August 5-7, 2015, in Broomfield, Colorado.

The latest Giving USA data shows that charitable giving rose for the fifth consecutive year to nearly $360 billion—passing its prerecession peak. Is this trend likely to continue in the near term?

RANDY FOX (Planned Giving Design Center): Giving is closely tied to the economy. Another recession would hurt giving, even though the aging boomers coming into liquidity events should offset a downturn to some extent.

TIM BELBER (Alchemia Group): I agree. This trend should continue as more and more boomers turn 65 every day. This shifts the focus to distribution of assets rather than to thinking solely about accumulation of wealth. The economy is very much a factor. Giving is a function of individual capacity, which too often is a perception rather than an actual quantified ability. Both of these factors point to the importance of financial planners and other advisors becoming better thinking partners with their clients.

More and more wealthy younger people are giving generously earlier in their lives. Are millennials really more charitably inclined than boomers and Gen Xers, or are we just hearing more about the good deeds of extremely wealthy tech entrepreneurs?

Belber: My conversations and interactions do point to the millennials’ having a more overt concern about the world around them. The problems of the world are very much “front and center” for them because of the Internet and its social media outlets. That said, in my experience, millennials look for ways to have impact rather than just give away dollars.

Fox: I don’t think millennials are more charitable, per se. I do believe that the Silicon Valley billionaires (Mark Zuckerberg, Sean Parker, etc.) have done a great job of setting an example, and others are following. It’s true for every generation.

So, is charitable giving really tied to the economy and financial markets?

JOHN A. WARNICK (Purposeful Planning Institute): There is a tremendous linkage between levels of giving and the types of giving and investment and economic cycles. Charitable giving rises in good times, and, sadly, falls when times are tough. A study of charitable giving during recessions since 1967 found that giving during recessions dropped by slightly more than 1 percent on average, while, as the study you are citing illustrates, it rises significantly during the good years. This poses a serious dilemma for charities that don’t have endowments to help cushion the drying up of charitable giving during the lean years. It also creates strategic challenges for family foundations and individual philanthropists who during the lean times see greater need in the human services arena.

PHIL CUBETA (The American College): I would concur with John A. The analysis has to start with the donor’s goals. Clients feel underserved in their philanthropy. That dissatisfaction has been documented for over a decade. Why has the need not been addressed? In my work, I tell advisors that if you want to make a profit out of someone else’s generosity, you are likely to fail. At least you can make easier money some other way. If, on the other hand, you want to leverage your own giving, and your talents, by working with those who are generous, then you may well become a magnet for some of the best people and some of the wealthiest people in your community.

Can you share an example?

Warnick: Sure. I know of one family that was faced with having to reduce their commitment to environmental causes during the economic blizzard of 2008-09 in order to alleviate human suffering. As the economy has recovered in the past five or six years, giving to human services has dropped significantly. As their family wealth and foundation capital recovered dramatically with the financial markets, they are giving even more today to the environmental projects they want to support than they did prior to 2008.

Cubeta: As for good and bad years in the economy, a DAF is a perfect tool. Sock away money in the good years, and give from it in the lean years. Now would be a good time for advisors to mention a DAF. For donors approaching retirement, the same logic applies. Fund the DAF during the highly taxed working years, get the deduction then, and in retirement make gifts from the DAF. For those who are more technically minded, and who have closely held business owner clients, or clients with commercial real estate, a gift to a DAF of such property can indeed increase assets under management. Such transfers can be part of a business exit plan for clients who have philanthropic goals and who want to become more involved in the community post-exit.

Researchers from Indiana University’s Lilly Family School of Philanthropy said the increase in giving to art, culture and humanities is partially a reflection of donors’ “reallocating gifts away from human services, where needs now seem less dire as the economy recovers.” How can we encourage all people of means to have a more “balanced portfolio” of giving?

STEVEN MEYERS (American Committee for the Weizmann Institute of Science): That is really a great question, but it is a trick question. It asks and strongly implies that the best way to do philanthropy is to achieve a harmonious balanced portfolio, for example, across a spectrum of different missions. But it is NOT! Instead, the most effective philanthropy needs to be driven not by balance but by three things: head, heart and mind. And not necessarily in that order.

Fox: Giving to arts and culture has always been strong. People [strongly support] whatever they’re passionate about, and there is some status arbitrarily assigned to the arts. Giving to human services is a challenge with program effectiveness and real change. While arts received larger portions of giving, a balanced portfolio is generally not advised. Much of the giving research indicates that depth, not width, is advisable for donors. More impact can be achieved, more data evaluated by narrowing focus.

Warnick: I think deeper consideration of sustainability as well as helping our clients move from being check writers toward becoming purposeful givers is part of the answer. We know from the world of business how critical sustainability is to long-term success. Why should it be any different within the realm of charity? It’s imperative that philanthropists and foundations look critically at the sustainability of the organizations and projects they are funding. Failure to think “sustainably” creates a great risk charitable dollars won’t have as much impact or as lasting an impact as the giver might hope.

Purposeful philanthropy is the art of thoughtfully, intentionally and purposefully integrating the passion, spirit and commitment of philanthropy into the fabric of our family system. When a family seeks to encourage each member of the family to actively participate in its giving by honoring the individual values and interests of the family members, there is an almost inevitable balancing [that] will occur [in] the grant-making and giving.

Cubeta: Influencing where people give is really a job for the fundraiser. The best the advisor can do is open a conversation and see how much thought the client has given to it, and how much thought the client is prepared to give it. A good next step for a donor hoping to be more strategic and impactful in giving would be an introduction to a Community Foundation. Or the advisor can recommend a book, like Inspired Legacies. by Tracy Gary or Give Smart by Tierney and Fleishman. For the high-wealth client with a large foundation, or who can give big from the balance sheet, a consultant in strategic grant-making might be in order. Bridgespan, Arabella, The Philanthropic Initiative and Rockefeller Philanthropy Advisors are cases in point. There are many donor networks, locally and nationally, [that] can share experiences and best practices. These can often be accessed through a community foundation.

Belber: I believe we need a new vocabulary to move the needle. Philanthropy is not about giving away to charities. It is about having impact. It is about the sustainability for your children and grandchildren of the world you live in. It is about the recognition that every dollar you invest is impact investing (thank you, Bruce DeBoskey) because it is impacting something. If more advisors focused on helping clients have impact, then I think we would see more balanced portfolios.

Despite an improving economy, Giving USA predicts that contributions to religious organizations will continue to decline over time as fewer Americans identify with religion, attend worship services or give to houses of worship. Younger generations are perceived as nonjoiners in general, not necessarily nonreligious. How can religious institutions re-engage the younger generations?

Fox: Religious affiliations are transitory. More and more Americans identify as “spiritual,” not religious. Maybe it’s time for that change and for traditional religions to adapt or be forced to reduce size.

Belber: Another interesting question. This comment may get me some flak, but the heart of the problem is the top-down structure that most traditional organized religions utilize. For a long time they have reminded us what we owe them versus putting a true focus on the spiritual life of the individuals (who follow their faith). They promise eternal life in paradise versus living a flourishing life today. So-called alternative religions are providing this and are easily accessible. If you search on Amazon for Buddhism, you get 132,000 results. Millennials do like community, as evidenced by the collaborative work centers, etc., so if religion created a collaborative and supportive community, it might find more interested millennials.


In Part Two of this series, we will discuss charitable tools, techniques and philosophies that you can use today to add value to your client relationships.

About the Author

Tim Belber, founder and principal of The Alchemia Group in Denver, focuses his practice on helping self-made families align the power of their financial assets with their long-term goals for flourishing as individuals and families across generations. Tim has degrees from the Wharton School and Seton Hall University School of Law and is an Accredited Estate Planner (AEP®). He is the author of the forthcoming book, The Middle Way: Using Balance to Create Successful Family Wealth Transition Plans.

Phil Cubeta, CLU, ChFC, MSFS, CAP is the Wallace Chair in Philanthropy at The American College and is responsible for the Chartered Advisor in Philanthropy (CAP®) designation. Prior to joining the American College, Phil was Chief of Staff for The Nautilus Group, a service of New York Life, providing estate, business, and philanthropic strategies to affluent clients of its member agents.

Randy Fox is Editor in Chief of Planned Giving Design Center and is the regional representative of Charitable Giving Resource Center.

Steven L. Meyers, Ph.D., is Vice President of the Center for Personalized Philanthropy at the American Committee for the Weizmann Institute of Science. Steve is a primary developer of personalized philanthropy, based on his mantra of “the right gift, for the right purpose, for the right donor.” Steve’s innovative donor-focused gift designs, especially a series of arrangements he calls “killer apps,” combine the full spectrum of current and future gifts so that donors can create a lasting legacy where impact and recognition are able to start up right away.

John (“John A”) Warnick, JD, is the founder of the Purposeful Planning Institute and Family Wealth Transitions & Solutions.