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Take A Values-Based Selling Approach To Charitable Giving

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The desire to leave a lasting legacy is an emotional issue and a powerful motivator. It can get to the heart of whats truly important in each individuals life, especially after were gone. If youre looking for a hot button with a prospect or a client, this could be it.

So why havent your clients rushed to your door begging you to add charitable giving to their personal estate planning? Statistics show that it might simply come down to the fact that they havent been asked the right questions yet.

Study after study has shown that individuals with a net worth of at least $5 million not only want to learn more about charitable giving opportunities, they also want to give more.

These studies magnify the opportunity factor in the charitable giving market. And one of the best ways to tap into this opportunity is to ask the right questions by returning to values-based selling. This article will review a values-based selling approach to the charitable giving market, the changing face of the market, questions to ask, and charitable giving tools to consider.

When discussing charitable giving, as with other delicate matters in estate planning, your best bet may be to focus less on product solutions and more of your efforts on values-based selling. This is a shift from talking about what youre selling to instead concentrating on what the product accomplishes for the client. For example, providing funds for research of childrens cancer, heart disease or other causes that theyve grown close to over their lifetimes.

This type of selling is based on identifying the clients values. Its about discovering whats important in their lives–how they think, what they feel, what they want to accomplish. By taking this approach, youre going beyond just providing financial advice. Youre helping your client focus on their values and the role those values should play in their financial decisions.

This selling approach lends itself perfectly to the charitable giving market. As mentioned, sometimes clients havent been asked all of the right questions yet. When it comes to leaving a legacy, it all boils down to the question: “How do you want to be remembered?”

This is a question that your affluent clients might not think to ask themselves. But when you ask these questions, you might find that you are really getting to the heart of what they hold dear.

In his book, “The Seven Habits of Highly Effective People,” Stephen Covey offers as Habit 2 that you “begin with the end in mind.” This is based on the principle that all things are created twice; first, theres a mental creation, and secondly, a physical creation.

To accentuate his point, he describes a scene at a funeral. After standing in line to pay his last respects, the visitor realizes that its his funeral. The visitor then sees that there are to be four speakers: a family member, a friend, a co-worker, and someone from a church or community organization. The suggestion is: What do you want them to say about you?

For some people, this type of exercise may make it easier to bring a focus to their desired legacy. More importantly, you can be the guide to helping your client mold that legacy. See Figure 1 for a list a potential conversation starters.

The discussion that will follow from these types of questions in Figure 1 may be very passionate. It gets to the heart of what the clients life is about. This reflection on ones life can create a gut level reaction to want to give beyond ones lifetime. Oftentimes the overwhelming response from a client is, “Show me how I can do this.”

Now that you know the types of questions to ask, whom do you ask?

The first step is to target existing clients for this values-based selling approach to charitable giving. As they get older and the need for estate planning gets more prevalent, the annual review is a good time to broach the subject.

The next step is to identify new prospects. Studies show that the stereotype of people looking for this kind of financial advice has changed over the years. The market no longer consists exclusively of older clients with inherited money. Todays givers are young entrepreneurs. Many of them are successful women or minorities. Theyre goal-driven, engaged and want to work together with an advisor on venture philanthropy. Theyre looking to give money to an organization from a business point of view.

There seems to be a misconception that because the stock market has been so volatile lately, clients will not want to participate in charitable giving.

First of all, affluent clients, especially those in the truly high-net-worth category, dont seem to have lost enough to detract from charitable giving. In addition, any charitable giving which might have been pushed to the back burner pre-September 11, is now at the forefront again. In fact, weve seen a burst of activity in the past year.

Ive read that time and time again affluent individuals point to charitable giving as one of their key areas of interest. Many are seeking advice on the best way to get involved in charitable giving. In my experience, Ive seen that there are three major reasons the affluent are not donating more.

1. They dont want to do the research;

2. They are concerned about how it will affect their lifestyle and their beneficiaries future; and,

3. They dont know how it will fit into their financial picture.

This information tells us that affluent clients want someone to advise them on how to make charitable donations that will not hurt them financially. Thats where life insurance comes in.

Life insurance easily lends itself as a tool for charitable giving. Not only is it economically efficient, contributions can be deductible. Used properly, it can reduce estate taxes, the death benefits can be income tax-free, and because there is a named beneficiary it can provide immediate funds upon death to the designated charity.

Three planning concepts for the charitable giving market are the charitable lead trust, the charitable remainder trust and the direct gift using a charitable giving rider.

?Charitable Lead Trust (CLT). The client transfers assets to the CLT and uses the CLT to provide a charity with an immediate benefit. The remainder, after the charitable giving period, goes to the non-charitable beneficiaries.

Charitable Remainder Trust (CRT). Assets are transferred to a CRT. The client gets an income stream and avoids current capital gains tax. The asset is replaced in value to the beneficiaries by using some of the income stream to buy a life insurance policy in an irrevocable trust.

?Direct Gift Using Charitable Giving Rider. If available, you may find some companies offer a flexible policy rider designed to provide a means to make charitable giving easy for your clients. These riders typically offer an additional death benefit over and above the base policy face amount payable to a bona fide 501(c) charity equal to a certain percentage of the policys face amount.

The market is hot for charitable giving. Of all the potential donors, your clients may well be inclined to become one of them. But you may never know until you ask. And if someone is going to get the business, it might as well be you.

As advisors, perhaps you might ask yourselves, “How do you want to be remembered?” Clients who might not have considered charitable giving, just might do something wonderful and significant for a great cause they truly value simply because you asked the right questions. Dont wait, opportunity is knocking.

is assistant vice president universal products at Sun Life Financial, Wellesley Hills, Mass. He can be reached at [email protected]

Reproduced from National Underwriter Life & Health/Financial Services Edition, December 2, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.