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Successful Charitable Planning Starts With An Understanding Of Client Motivations


Charitable planning represents a tremendous opportunity for financial services professionals, but few have successfully incorporated client giving into their practices. Many advisors dont feel comfortable broaching philanthropy with clients.

If only you knew what your clients were thinking, how they felt about charitable giving and the support they needed from you, wouldnt that make things easier? What follows is a brief look inside the philanthropic mind, what motivates people to give and what characteristics todays donors embody.

Uncovering Motivations

You might be surprised to find that many individuals are waiting eagerly for you to ignite their philanthropic passion and help them develop effective giving strategiesstrategies that are beneficial to charities, the donors and you.

First, lets look at the state of giving today. Despite the sluggish economy, charitable giving in the U.S. increased 2.8% from 2002 to 2003, reaching $241 billion, according to “Giving USA 2004,” a study released by Giving USA Foundation. Three-quarters of that came from individual giving.

Experts predict giving will continue to rise as baby boomers inherit at least $40 trillion over the next 50 years and as Americans continue the quest for deeper meaning in their lives.

As part of this cultural shift, fund-raisers across the country describe the emergence of a “new donor” with new ideals and expectations. Many of todays donors are young and newly wealthy, having profited handsomely from the stock market run-up of the 1990s or their own business ventures.

They are goal-driven, want to see results and want to be engaged actively in the causes they support. They have an entrepreneurial spirit and many have chosen to create new charities and foundations rather than support existing ones.

They want to support a cause, not an institution. A significant number of donors are women and minorities. Although most donors are still engaged in “checkbook philanthropy,” they are showing a growing interest in becoming more strategic and proactive in their giving.

Complementing these new donors are a large number of traditional donors, many of whom have received generous inheritances, bonuses or severance packages. This adds up to a population ready and able to give; all thats needed is the right reason to do so.

So, what drives people to donate? Contrary to what you might think, tax advantages consistently rank low on the list of reasons donors gave for giving. First and foremost, they give because they desire to support worthy causes. Among the more affluent donors, many also say they feel a sense of responsibility to give back and share their good fortune with others.

Additional insights into the philanthropic mind can be gained by listening to reasons cited by major donors for making a deep commitment to a particular cause. According to a report by The Philanthropic Initiative, these may include:

? Feeling frustration or anger over the state of a particular issue;

? Learning facts that bring to light the extent of a problem or injustice;

? Witnessing or hearing about a tragic event, such as a natural disaster;

? Feeling grateful for opportunities or services that were provided, such as a college education or medical care;

? Undergoing a profoundly moving experience, such as the death of a loved one or a difficult childhood; or

? Wanting to honor a family member or friend.

The common thread here is that donors give because of a personal experience that makes them identify with a cause, a certain segment of the population or an institution. In many cases, donors personally have benefited from the organization they support. This explains why churches, schools and health care facilities consistently attract the most donor dollars.

More on this topic

However, I believe there is more to what drives donor behavior, especially at the higher levels of giving and particularly among the new breed of donors. The same brash confidence and egotism that drove an individuals business success also drives his or her giving. Wealthy individuals give because they believe they can make a difference in the world, and that is a powerful motivator.

What does this mean to financial services professionals who want to build up their charitable planning business? First, its important to realize that many individuals desire to give more and to give more strategically but lack the knowledge and time to make that happen. You can help.

Whether you realize it or not, surveys have shown that for many individuals it was their financial advisor who first got them thinking about developing philanthropic activities. In other words, your clients not only wont be offended if you bring up the subject of charitable giving, theyll probably be glad you did.

However, its important to plan your conversation opener carefully. A common mistake financial professionals make is jumping too soon into a technical discussion of the charitable giving vehicles available to them. Instead, its important first to engage your clients in a discussion of their values, charitable interests and motivations. Individuals want help in clarifying their giving mission, identifying worthy charities and selecting the most appropriate giving strategy.

Knowing what you now do about donor motivations, ask questions that will hit home. Examples: “Beyond your family and professional accomplishments, is there a legacy youd like to leave behind? What organizations have made a difference in your life or the lives of your loved ones? If you could make one major change in the world, what would it be?”

Ignite your clients philanthropic spirit with the empowering belief that they can make a difference. When presented with an affordable, tax-efficient way to do so, who wouldnt seize the opportunity to change the world for the better?

When designing your clients giving strategy, remember that a giving plan doesnt have to be complicated to be effective. Too many forms can scare off clients. Plain vanilla life insurance can add leverage and tax benefits to a donors giving strategy without adding complexity. Consider the following scenarios.

Scenario 1: The Affluent Donor

Surprisingly perhaps, the vast majority of affluent donors do their giving through direct donations. A large number also say they are afraid to give too much for fear they will not have enough left for themselves or their heirs.

However, an affluent donor could make a large gift directly to the charity of her choice and then use the tax savings from the charitable donation to fund a life insurance policy to replenish the value of her estate for her heirs.

Scenario 2: The Average Donor

Assuming annual donations total between $1,600 and $3,400 for the typical American donor, over a 30-year period those contributions add up to approximately $50,000 to $100,000. Similarly, for a relatively low outlay, your client could fund a $250,000 to $500,000 life insurance policy, naming his favorite charity as the beneficiary. Now theres a way to make a differenceand a powerful way to get your clients attention.

Using life insurance as part of your clients giving strategies can yield many benefits. It can:

? Strengthen the impact of their current giving by multiplying its value;

? Convert random checkbook philanthropy into a strategic giving plan with magnified impact;

? Establish a legacy upon their death;

? Involve their family in the decision of what that legacy should be;

? Provide tax deductions now and/or a reduction of their taxable estate upon their death; and,

? Preserve the value of their heirs inheritance.

Where You Fit In

Financial services professionals can play an important role in facilitating and enhancing donors giving activities while also boosting their business. The key is to take the time to understand their clients: what they value, what motivates them, and what they want from their philanthropy.

This understanding will help you develop effective giving strategies while also enjoying deeper, stronger client relationships that can result in increased business and referral opportunities.

is assistant vice president of individual and small business markets at Sun Life Financial, Wellesley Hills, Mass. He can be reached at [email protected]

Reproduced from National Underwriter Edition, December 10, 2004. Copyright 2004 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.