November 4, 2013

How to Channel Bill Gross and Maximize Clients’ Charity

As PIMCO's bond king upstages Gates and Buffett, here's how you can help clients respond to inequality

PIMCO's Bill Gross is mad as hell about money and ain’t gonna keep his no more. He wants the wealthy to pay more taxes and support other efforts to improve our country’s future.

Plus, he’s putting his money where his mouth is and has one-upped fellow billionaires Bill Gates, Warren Buffett and Carl Icahn by committing to give away not half but all of his fortune to charity.

Rising income inequality clearly has become an issue that policymakers, politicians and the wealthy are trying to come to grips with — along with, of course, those at the other end of the economic spectrum, as well as the shrinking middle class.

How can advisors respond?

On the practical side, a shrinking level of income for the 99% means that social programs are likely to expand and not shrink in the future. This, naturally, could lead to rising taxes and perhaps cutbacks in Social Security or other programs for the wealthiest Americans.

Some clients who may have assumed they’d have enough for retirement could benefit from a careful review of their nest eggs. In particular, an examination of what assumptions regarding taxes and social benefits went into their financial plans should be in order.

And what about the philanthropic side of your clients' plans?

This is an area where advisors can prove very helpful and resourceful.

Some clients might want to visit with you to discuss how much of their wealth they can leave to their favorite charity. This entails looking at estate and inheritance taxes (which could be bumped up in the future) and minimizing taxes with estate planning and gifting (which could be tinkered with by lawmakers or regulators).

In addition, it might be valuable to meet with clients or host a seminar or workshop for both clients and prospects about giving plans. These plans, which are designed to make charitable giving easy, can also help advisors turn inherited assets into long-term legacy assets, experts at MFS Funds and other groups say.

Giving plans help clients take a strategic approach to their philanthropic goals. For instance, you could ask them to break down the organizations and donation amounts they would like to give annually by funding area: culture and arts, education, environment, pets/animals, religious affiliations, scientific research, social programs and so on.

You could follow up on such plans and their associated legacy wishes by meeting with clients and their children. You also may want to host an educational event on this aspect of multigenerational wealth planning. Events that highlight charitable volunteer opportunities for clients might be popular as well.

Nobel Prize-winning economist Robert Shiller of Yale University said last month, "The most important problem that we are facing now today, I think, is rising inequality in the United States and elsewhere in the world."

The issue is incredibly complex and could prove highly disruptive. Yet there are ways advisors can work with their high-net-worth clients to make a difference.

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