The 2017 tax overhaul changed the way advisors think about philanthropy and its place in conversations with clients, according to a report released Wednesday by Fidelity Charitable.
Forty-seven percent of advisors surveyed reported that many or most of their clients had adjusted their charitable giving strategy in response to tax reform and following the more than decade-long bull market. Specifically, they had taken these actions:
- Increased giving overall because of loss of other deductions — 47%
- Made a qualified charitable distribution from an IRA — 47%
- Established a donor-advised fund — 46%
- Donated appreciated securities to maximize deductions — 46%
- Employed a bunching strategy to maximize charitable deductions — 44%
- Established a private or family foundation — 42%
“Giving to charity is a decision that clients make from the heart, but most would be delighted to be able to give more if they had guidance on how to give more strategically,” Karla Valas, senior vice president, fundraising and distribution at Fidelity Charitable, said in a statement.
“Tax reform raised awareness on the part of advisors of the need to help clients be more thoughtful about the timing, assets and methods used for giving as a part of a holistic financial plan.”
The independent research firm W5 polled 250 financial advisors, certified public accountants and attorneys in the U.S. earlier this year. The analysis reported here focuses on data collected from 175 financial advisors that had $25 million or more in assets under management.
The survey found that in the wake of the tax overhaul, advisors adapted their recommendations and increased their conversations with clients about charitable planning. Thirty-six percent said they had recommended that the majority of their clients adjust their giving strategy post-tax reform.
Moreover, the findings suggest that advisors have recognized that charitable giving has become a more prominent part of providing holistic financial and wealth management services. As a result, they are having more philanthropic conversations with their clients.
Since 2015, the number of clients with whom advisors discuss giving has risen from 46% to 58%, the survey found.
Fidelity Charitable said these points suggested that advisors may not be discussing charitable giving broadly enough with their client base and that additional opportunities exist to expand their charitable conversations to help clients maximize their giving and minimize their tax burdens.
The survey found that more and more advisors also understand that charitable giving vehicles are not restricted to use only by their ultra-wealthy clients.
Advisors surveyed said they believed that 51% of their clients could benefit from a charitable giving vehicle, such as a DAF or a private foundation, up from 41% in 2015.
Many advisors appear comfortable discussing charitable topics with clients, but most want to learn more about philanthropic planning and are seeking advanced education so they can engage even more deeply, Fidelity Charitable noted.
It said the firm has observed this trend through its complimentary charitable planning practice management program, which provides advisors with the educational resources and training needed to incorporate charitable planning and sophisticated philanthropic strategies into their practice.
“Advisors who are knowledgeable and confident about charitable planning can help their clients make the most of their generosity — in ways that can benefit them and the charities they care about,” Valas said.
— Check out Tax Overhaul Could Mean $19 Billion Less in Donations Each Year: Study on ThinkAdvisor.