Clients seek more advice about philanthropy

May 1, 2011 @ 12:01 am

By Liz Skinner

Financial advisers play an increasingly important role in helping wealthy clients get the most bang for their philanthropic bucks.

Increased scrutiny on philanthropic organizations is prompting individuals and families who give to non-profit groups to investigate whether their money is producing results.

“Especially a lot of younger clients who are givers, those 60 and down, want some accountability with their giving and want to know that organizations are doing what they say they are going to do,” said Alan Pratt, principal with Pratt Legacy Advisors.

Of course, showing progress in the fight against cancer, feeding starving children, environmental hazards and other causes is a challenge of its own for the recipients. But financial advisers who can help clients think more strategically about their giving can help them make more of an impact with their philanthropic gifts.

SPREAD TOO THIN

One of the traps wealthy people often fall into with their giving is spreading funds too thin to make much of a difference. Even though they give impressive sums, when it is doled out in small increments, it doesn't have much of an effect.

For example, a generous couple in their 60s were making modest contributions to 77 different organizations when they first met with Mr. Pratt, who specializes in philanthropic advising.

Leading the couple through his standard client questionnaire — which includes 80 queries meant to force clients to think hard about what they care about — he helped the pair narrow their giving to 11 organizations that they support through a foundation he helped them establish.

“I took them through a process to think about their cause and belief system, and now their giving is focused and they get involved with their time as well as their money,” Mr. Pratt said.

Many clients want to support smaller organizations where they can meet with the executive director, tour facilities, learn about projects and really know how the group functions in support of its cause, said financial adviser Andrew Feldman, president of A.J. Feldman Financial LLC.

“They want to know where their money is going to go,” he said. “With a larger organization, it's harder to see where all that money goes.”

Looking at an organization's financial statements, talking to people involved with the group and investigating them online should be part of the process donors go through every time they give, no matter the size of the organization, said Annika Ferris, a financial adviser with Brightworth, a wealth advisory firm.

Donors should examine organizations' financials to see how much of their money is actually going toward the work of the charity, as opposed to administrative costs, said estate attorney John McManus, founding principal of McManus & Associates.

“Donors are looking for real, true examples of how their money is going to be applied,” he said.

The financial adviser who has a trusted relationship with a client is exceptionally well-positioned to help wealthy individuals confront important questions and craft a giving plan that makes an impact, said Thomas Tierney, a consultant and co-author of “Give Smart: Philanthropy that Gets Results” (PublicAffairs, 2011).

The adviser isn't there to provide clients answers about which organizations are the most worthy recipients, he said. But the adviser should ask questions that help clients think about and wrestle with tough issues, such as whether they want their wealth to be disseminated while they are alive or dead, what motivates their desire to give and what successes they'd like to achieve, Mr. Tierney said.

“Advisers are in a unique and powerful position to help people decide how to give smart,” he said.

Advisers also should encourage donors to consider serving on the boards of directors for organizations they support, helping coach and guide an organization if they have experience doing that, or helping to raise funds or volunteer in ways that add value, he said.

MONEY, TIME AND INFLUENCE

While giving money gets all the attention, philanthropy is really about giving money, time and influence, Mr. Tierney said. “Time and influence drive the results.”

And research shows there is increased interest in measuring the impact of giving said Una Osili, research director for the Center on Philanthropy at Indiana University.

Wealthy donors participating in the center's 2010 survey were most motivated to give a gift because of how they expected it to make a difference, with 72.4% of donors citing this reason, compared with 67% in the center's 2008 study. The leading motivation back then was “giving back to the community,” a reason cited by 81%, compared with 64.7% in the 2010 study.

“Donors want to know that their gifts are making a difference in the life of the organizations or communities they seek to support,” Ms. Osili said.

E-mail Liz Skinner at lskinner@investmentnews.com.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

May 02

Conference

Women Adviser Summit

The InvestmentNews Women Adviser Summit, a one-day workshop now held in four cities due to popular demand, is uniquely designed for the sophisticated female adviser who wants to take her personal and professional self to the next level.... Learn more

Featured video

INTV

Why some retirement plan advisers think Fidelity is invading their turf

InvestmentNews editor Frederick P. Gabriel Jr. and reporter Greg Iacurci talk about this week's cover story that looks at whether Fidelity Investments is stepping on the toes of retirement plan advisers.

Latest news & opinion

Broker protocol: Indecision over recruiting agreement is rampant

Ruckus over recruiting agreement has even wirehouse lifers wondering if it's time

Cetera reportedly exploring $1.5 billion sale

The company confirmed it's talking to investment bankers to 'explore how to best optimize [its] capital structure at lower costs.'

SEC Chairman Jay Clayton outlines goals for a new fiduciary standard

Rule should provide clarity on role of adviser, enhanced investor protection and regulatory coordination.

Advisers bemoan LPL's technology platform change

Those in a private LinkedIn chat room were sounding off about fears the independent broker-dealer will require a move to ClientWorks before it is fully ready.

Speculation mounts on whether others will follow UBS' latest move to prevent brokers from leaving

UBS brokers must sign a 12-month non-solicit agreement if they want their 2017 bonuses.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print