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Giving Back, Smartly

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The advisor’s frustration was palpable. We had begun the conversation during lunch at the annual Financial Planning Association conference with a simple question about his practice, the kind of clients he had, the challenges he faced. Rather quickly, this Kentucky planner got to the point: “I can’t get my clients to spend any money.” That’s his biggest challenge, he continued. Many of his clients have large enough portfolios, certainly sufficient to fund a comfortable retirement, in his professional opinion, but for some reason they couldn’t let go of their cash, they couldn’t relax. In my mind I combined this advisor’s lament with what I heard from another advisor at lunch the day before. His clients were pretty happy with what he and his partners at his suburban Atlanta firm were providing, especially considering the firm’s focus on providing cost-effective, tax-efficient investments. Life was good and the practice was healthy. There were only two problems. At age 58, he was the youngest of the firm’s partners, and all too often when one of the firm’s older clients died, the heirs took the money and ran away to someplace else.

I modestly suggested to both that perhaps a greater emphasis on charitable giving was in order, an emphasis that is reflected in our cover story and three other articles in this month’s issue: the charitable giving story staring on page 50; Olivia Mellan’s column on ethical wills on page 81; and Susan Hirshman’s Wealth Advisor on page 87, which focuses on the most efficient way to gift.

The greatest fear of many people who lived through the Great Depression is that they’d face that same fate as an old person, without the funds to live a secure life, and so they hold on to the fortune that can never grow large enough to ease that fear. Others, far too young to have that experience, nevertheless fear running out of money. Some of these are women who have, as Mellan calls it, “bag lady” nightmares in which they have no money and nobody to care for them.

Holding onto a second- or third-generation client is a well-documented challenge for advisors, too. But fostering and funneling clients’ charitable intentions could solve both problems. Those who balk at spending money on themselves or even their own offspring might look more kindly on sprinkling their hard-earned riches on those much less fortunate than themselves who will more keenly feel the effects of their largesse. The oft-cited concern of many high-net-worth people concerning their children–that they not be tainted by having too much money too soon–can be ameliorated through the use of all sorts of trusts, but setting up a charitable foundation that gives second- and third-generation family members a meaningful job while keeping them grounded among their less well-heeled brethren may be a better solution.

Then there’s the leading-by-example approach. LPL Financial, the big independent broker/dealer, began a program this year that combines its representatives’ community-minded activities with a marketing program. Far from a cynical approach, it may be that sharing your own charitable activities with clients and prospects might lead some of them to find their own ways to give back. That would be a good thing for all of us.

James J. Green



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