Sunday, November 24, 2013

Advisors, HNWs Don't See Eye to Eye on Philanthropy: Survey

Philanthropy is an important component of many wealth planning conversations, but advisors and their affluent clients often have different perceptions centering on the initiation and substance of those discussions, according to a new study.

U.S. Trust and The Philanthropic Initiative conducted a nationwide survey in August of some 300 advisors — including wealth advisors, trust and estate attorneys, accountants and other tax professionals — and a random sample of 120 individuals with $3 million or more in investable assets who were actively engaged in charitable giving.

The study found that 89% of advisors said they discussed philanthropy with at least some of their clients, and 71% regularly asked clients about their interest in charitable giving. Meanwhile, only 55% of wealthy individuals said they had discussed philanthropy with a professional advisor.

Advisors and individual respondents also differed on who initiated the philanthropic discussion (33% of advisors said they did, while 51% of individuals said they had initiated it), and on how early in the client relationship the discussion should begin (most of the individuals said it should happen within the first several meetings, while many advisors preferred to wait until they knew more about their clients personal, financial and philanthropic goals).

“The vast majority of wealthy individuals give to charity, and many cite charitable giving as one of the greatest freedoms of wealth,” Claire Costello, national philanthropic practice executive for U.S. Trust, Bank of America Private Wealth Management, said in a statement, referring to an earlier study.

“Philanthropy today is no longer simply what one does with ‘what’s left,’ but rather a pivotal consideration at the front end of the wealth structuring process. For this reason, we are seeing individuals and families rely increasingly on advisors to help them integrate their philanthropic pursuits into their overarching wealth plan.”

The study also found that only 41% of affluent respondents were fully satisfied with the philanthropic conversations they had with their advisors.

The study pointed to one possible reason: 71% of advisors said they raised the philanthropic discussion from a technical perspective — focusing on tax considerations or wealth structuring, for example — compared with 35% who did so beginning with their clients’ philanthropic goals or passions.

Once initiated, 41% of advisors said further philanthropic discussions also centered on technical issues, compared with 38% who talked more about clients’ charitable goals.

Individual respondents reported otherwise, with 63% finding that ensuing discussions with their advisor about charitable giving tended to center on more technical issues, while just 27% said these discussions centered on their charitable goals, values and interests.

Despite these disconnects, 73% of wealthy individuals who discussed philanthropy with an advisor believed such conversations were important, and 82% felt their advisor played an important role in their charitable giving.

Both advisors and HNW respondents agreed that the chief motivations for the latter’s philanthropy were being passionate about a cause, having a strong desire to give back and having a positive effect on society and the world.

After that, however, reasons provided by HNW individuals and advisors differed significantly.

Individuals said their next three most for giving were to encourage charitable giving by the next generation (30%), religious or spiritual motivations (23%) and because they believe giving back is an obligation of wealth (22%).

Advisors believed their clients’ next most popular motivations would include reducing their tax burden (46%), religious or spiritual reasons (41%) and creating a family legacy (30%).

In fact, just 10% of individual respondents cited reducing taxes among their motivations for giving.

The disconnect on the topic of taxes went deeper, with advisors believing that 40% of HNW individuals would reduce their giving if the estate tax were eliminated, and that 78% would do so if income tax deductions for donations were eliminated, whereas just 6% and 45% of individuals, respectively, said they would reduce their charitable giving if these tax policy changes occurred.

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