Financial advisors have a unique perspective on philanthropy. We see both sides: Working with ultra-high net worth clients, we have a strong understanding of the wealthy and their motivations to give.
At the same time, we work closely with nonprofit organizations and therefore understand the populations they serve. Both groups have one big thing in common: They want charitable gifts to make a difference.
We're fortunate to play a critical role in clients' giving decisions. By providing guidance, advice, perspective, and resources, we can help clients ensure their gifts have a meaningful impact.
It can be a daunting task for financial advisors and clients alike: The abundance of ongoing crises and social movements can make it difficult to know where to begin, as can an array of online resources which often leads to analysis paralysis.
For financial advisors seeking to help their clients make impactful gifts, one factor is key: give proactively. While reactive giving toward disaster relief is critical and must continue, proactive giving is more effective in the long term.
It's intuitive: The best way to prevent a shark attack is to stay out of the water. The best time to discover cancer is early. The best time to give is always now.
Below are four strategies financial advisors can use to guide their clients toward proactive giving, which can help ensure more effective gifts overall.
1. Make the task at hand explicit.
People like to see their donations have an immediate impact. However, it is the financial advisor's job to help the clients understand that they are better off thinking of themselves as a gardener, planting and watering solutions that grow over time. It's best to address proactive giving with clients, well, proactively.
Proactive giving will likely mean shifting a client's historical approach to giving, and may mean reallocating money away from some organizations and toward others. Pitching proactive giving using data and anecdotes on why it works (just as a financial advisor would with any investment recommendation) is the best way to convince clients to change their approach
2. Outline the benefits of sustained, long-term giving.
Charitable giving soars toward the end of the calendar year. According to Network for Good, a fundraising software, about one-third of all charitable giving occurs in December. Giving Tuesday broke records in 2021, raising an estimated $2.7 billion, a nine percent rise from 2020, according to GivingTuesday Data Commons and Philanthropy.com.
It's great that "giving season" draws attention to the importance of philanthropy and serves as a nudge for people to get involved, but giving must be a year's long pursuit in order to be impactful. Sustained giving enables organizations to plan ongoing programming, with the knowledge that they have a secure source of income throughout the year. It also enables them to use dollars for preventative measures, instead of reactive aid.
Ongoing, proactive giving offers tax benefits for clients, too. Since philanthropy and charitable giving can be used as a way to offset tax liabilities, these strategies are sometimes tax-motivated, which require a high level of planning far before holiday season kicks in.
The most savvy clients plan their giving strategies and tax strategies together, in order to get the most out of their charitable dollars. To continue a year-round giving approach, explain this strategy to clients, outline the benefits to both the organizations they donate to and to their own tax strategy, and help them set giving goals annually, that you review together at least quarterly.
3. Offer clients a variety of ways to give.
Not every client is going to be ready to start their own family foundation or organization right off the bat. In fact, many families never will and that's ok–running your own organization is a lot of work (and added expense) and there are myriad other ways for families to give.
Lighter, less labor intensive giving vehicles can be exactly what families need to shift toward a more proactive giving strategy. This can be effective even for ultra high net worth families–the ones who could or already have started their own organizations–who are looking for stronger, more sustainable ways to make an ongoing impact.
Consider Donor Advised Funds (DAFs) to manage charitable donations on behalf of individuals, families, and organizations. Contributions to a DAF are invested in line with donor preferences and have the potential to grow tax-free, thus enabling the client to reinvest more money into the DAF over time.
DAFs have also made great strides in creating alternative ways for clients to give, including recoverable grant opportunities, which are now available on the Morgan Stanley Global Impact Funding Trust (MS GIFT) platform.
4. Commit to continued education (for your clients, and for you).
Some clients will already have passion projects or know what areas of philanthropy they want to focus on, while others will need more guidance. The best way to get clients to engage in proactive giving — or any giving — is to help them discover and lean into their passion areas.
