The silent tsunami

What if someone told you that there was a segment of the financial services industry which your clients were aggressively participating in today – to the point that fully 95% of all mass-affluent, HNW and Ultra-HNW clients are already actively involved, but that the area is frequently ignored by the majority of financial advisors despite their ability to capitalize on and support their clients’ interest? What if we further noted that the market segment represents not only a $350 billion active market today, but that this is actually a fraction of the multi-trillion dollar opportunity that will be generating asset flow toward this segment over the next decade, and that only a handful of firms are truly focused on supporting the demand?
The segment, of course, is philanthropy – and it represents a virtually untapped and truly underutilized opportunity within this industry for advisors seeking to more effectively connect with their existing and prospective clients on a significant number of levels, each level becoming a more and more critical challenge to advisors and firms on a long-term basis.
Specifically, today’s latest generation of charitable technology is capable of delivering a direct impact to financial organizations who are (1) seeking to develop and foster stronger and deeper advisor relationships with existing clients, directly helping them withstand competitive solicitations; (2) exploring opportunities to identify and mobilize additional client and family assets for investment; (3) trying to improve their connection to their clients spouses and multi-generational family members (aka HEIRS) – in order to improve the critical asset retention rates during wealth transfer; and finally (4) feeling pressed to elevate their overall service offering and improve their differentiation within an increasingly competitive technological and service landscape.
One of the fundamental tools benefiting from this technological evolution is a product which all advisors should be familiar with for supporting the charitable and philanthropic interests of their clients and their families, and it’s one that has rapidly become more popular today than private or family foundations. That instrument is a donor advised fund or ‘DAF.’ A donor advised fund is a cost-effective tool which provides both simplicity in the wealth planning process as well as cost-efficiency and flexibility.
The perception of donor advised funds varies from being a tool utilized only for the beginning ‘giver’ or philanthropist to an instrument being used only by the affluent. The truth is that donor advised funds hold appeal for all demographic groups and each of your clients and prospects is a candidate for a DAF. For evidence we need only look to the fact that today’s accounts range in size from entry level accounts of $500 to $5,000, to initial contributions of $34 million or more. Mark Zuckerberg and his wife recently opened a donor advised fund with $996 million.
While historically advisors and firms have relied on outsourced solutions available through community foundations or mutual fund companies to support the ‘DAF’ aspect of a client’s portfolio, today firms have a new option – one which enables them to keep these assets in-house and under their own firm’s management and brand, and eliminates the need to direct clients to an external solution. That option is a private-labeled and fully ‘turnkey’ donor advised fund platform wrapping the firm’s own investment management policies and custodian.
By enabling a firm to bring the availability of these charitable instruments in-house under a controlled environment rather than sending them to a third-party entity, a firm captures several immediate benefits including: (1) maintenance of the firm’s brand and identity across all clients and family members, (2) control of service levels and the ability to delivery of a consistent client experience – including the technological environment and communication – which is becoming increasingly critical for clients/donors, (3) the ability for advisors to efficiently connect with multi-generational family members, and (4) an open architecture environment allowing a firm to work with any custodian they choose.
Despite the history of DAF programs within the higher education and community foundation markets, the growth of donor advised funds within the financial services space is still in its infancy. Most firms and advisors have yet to fully begin incorporating any philanthropic discussion into their day-to-day planning discussions; yet, based on survey results and client feedback, it would be a welcome addition.
For more information on this market opportunity and how this type of fully supported program could support your firm, the following Whitepaper by Crown Philanthropic Solutions may provide additional insight: Catch the Philanthropic Wave