How to have the philanthropic conversation

What’s the best way to do good in the world?

For some, it’s reducing the effects of global warming on future generations. For others, it’s relieving hunger and illness in the present.

Some philanthropists are motivated by specific religious or spiritual convictions. Others want to transform society as a whole.

Bottom line: Charity is personal. The causes we support and the ways we want to change the world are tied to our core beliefs as individuals.

It’s heavy stuff. So, when it’s time to discuss your client’s charitable assets, how do you break the ice?

Here’s the secret.

Your clients want to talk about charity.

Nine out of ten high net-worth individuals (HNWI) already support philanthropic causes. Which means they care about giving. And, if you take the initiative and start a conversation, they’re probably willing to work with you, their financial advisor, to manage the assets they donate.

So, it’s time for The Talk.

Or the Philanthropic Conversation, as I like to call it. I’m going to break down, in brief, how you benefit by managing your client’s philanthropy. Then we’ll walk through the conversation you need to have with them—which questions to ask, and why.

Why Should You Have the Philanthropic Conversation?

I’ve written an article on why financial advisors should care about philanthropy. You should check it out if you’re looking for a detailed breakdown of how managing charitable assets can benefit you and your client.

But let me try to summarize the benefits in three points.

1. When you manage your client’s charitable assets, you grow your AUM.

It doesn’t get much simpler. There’s a 90% likelihood your client is already giving to charity. Problem is, they may not be talking to you about it. Bring their giving under your management, and you’ll get a bigger share of wallet.

2.  When you manage your client’s charitable assets, they’re more likely to stay with you.

I like to call it “building a fence around your client,” but maybe you can think of a better metaphor.

It means that, when your client comes to you for all of their wealth management services—including philanthropy—they depend on you completely, and your connection grows deeper.

3. When you manage your client’s charitable assets, you stand out.

According to a report by Sanjiv Mirchandadi of Fidelity Clearing & Custody Solutions, wealth management is changing. If you want to offer prospective clients something valuable, you don’t just deliver good numbers. Successful advisors need to be able to offer expertise focused on specific niches. Charitable asset management is one of these.

Talking to your Clients about Philanthropy

Time for a fact-finding mission. I’ve separated the questions you need to ask your client into three separate steps for you to follow.

Step 1: Qualify Your Client

This may seem obvious, but the first question you should ask your client is:

Do you support any causes or charitable organizations?

If the answer is “No,” that’s fine. You’ve learned something useful about your client, and can move on to supporting them in other ways.

If the answer is “Yes,” more questions naturally follow.

Step 2: Find Out Why They Give

Financial advisors tend to believe tax savings are a major motivation for their clients’ philanthropy. In fact, only 10% of HNWI philanthropists report tax savings as a primary motive.

Learning more about what motivates your client to support philanthropy—on the level of empathy and personal values—can help you better connect with them, and should guide your conversation.

Some smart questions to ask:

How do you decide who to give to?

This could be determined by broad moral values, or by the nitty-gritty of how a charity actually gets work done.

In terms of causes, a client who believes in a moral imperative to redistribute their wealth to the needy might support a charity that relieves poverty.

Or a client who spends their free time hiking, camping, and doing other outdoor activities might support charities preserving natural landscapes.

In terms of the “nitty-gritty,” your client may not have a specific “pet cause” that they’re focused on—they just want to make the biggest impact possible. They’re more likely to be concerned most with how a charity obtains and uses its funding.

For instance, one donor may support charities such as the Canadian Red Cross, which receives a large amount of government funding. Another donor might seek out similar or associated charities that don’t have official support, and perhaps “need” the funding more.

These impact-focused clients will want to see where their money is going. That’s where funding breakdowns from CIS’ Chimp.net platform come in handy: They outline where a charity gets its money, and how it’s spent.

In most cases, your client will be concerned both with fulfilling their values and with making a measurable impact. Understanding the interplay between these two motivations can help you better guide your client’s giving.

What donations have given you the most satisfaction?

It’s hard to quantify the satisfaction you get from doing a good deed. But anyone who gives to charity on a regular basis likely has a favourite cause they’ve supported in the past.

That could be due to a sense of urgency—for instance, during the Fort McMurray wildfires, when donations poured in from across the country.

Or it could come from a sense of having made an impact. Think of charities like World Vision, which sends donors photos in the mail of the children they’ve sponsored. It’s a classic example of a charity helping their donors feel the satisfaction of doing good when their impact extends to a faraway place.

Getting to the root of what makes the giving experience satisfying for your client will help you make the right choices when it comes time to help them choose where to commit their wealth.

Are there any donations you’ve regretted? Why?

This is the flip side of the “most satisfaction” question. Because, empowering as it can be to support charitable causes, negative experiences still happen.

One potential regret for your client could be a lost opportunity cost. For instance, suppose they donated money to an organization funding HIV/AIDS research—only to find out, too late, that a similar organization was running a donation-matching campaign at the same time.

They could have doubled their impact, but because they didn’t have the right information, they missed their chance.

Or maybe they donated to a cause only to find out their money wasn’t spent the way they would have liked—for instance, on raising awareness about hunger in Canada, without materially contributing to relieving it.

Getting to know these pain points can help you filter out which causes your client is most likely to enjoy supporting, building their giving experience so they feel encouraged to keep giving.

Step 3: Find Out How They Give

Once you understand the motivations underlying your clients’ philanthropy, it’s time to learn more about how they carry it out.

Ask them:

What assets do you usually give?

Donating complex assets is an increasingly popular means of supporting charity—but your client may not know that. Privately traded stock, real estate, and even artwork can all be used to support charity—provided you use a structure that’s right for the job, such as a donor advised fund (DAF).

Talking to your client about assets not only lets you plan how to manage their donations; it can open up untapped resources for charitable giving, ultimately increasing your AUM.

Do you make any recurring donations?

If your client has already established a rapport with a charity—supporting them on a regular, recurring basis—it will be up to you to help manage that relationship.

But if your client is only making sporadic, one-off donations, it could be an opportunity to start to help them establish an ongoing relationship with a charity, and manage their giving in a more controlled way.

Do family members advise your giving decisions?

It’s not uncommon for a philanthropist to call on their spouse or children for giving advice. Figuring out early on who is involved in charitable decision-making can help you plan meetings with you client so everyone is included. And if those family members are beneficiaries of your client, working with them on philanthropy now is a good way to build a relationship that lasts.

Would you like to give more?

If your client isn’t working with a professional, it probably means they lack a cohesive plan for how they’d like to practice philanthropy. Without such a plan, it’s hard to spot places where giving can be made more effective.

A simple question like this one has the potential to open the floodgates. You’ll get insights into your client’s plans for the future, their approach to giving, and what you can do to help them grow their impact. When you start talking about aspirations, you build a stronger connection with your client—and plant the seeds to grow the charitable assets under your management.

The Matter of Legacies

Finally, you should discuss with your client when they want the bulk of their giving to take place: During their lifetime, or after.

This isn’t just about how your client’s legacy is managed. It’s about planning how they give in the here-and-now. If your client has plans to leave large, complex legacy, you’ll need to spend more time planning it. But if your client is more focused on the present, you’ll be focusing more on where your client’s money goes from one year to the next.

Importantly, this will also affect how your client gets their tax receipts, and how that affects their finances.

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