It's good business to help clients plan giving

May 6, 2012 @ 12:01 am

By Liz Skinner

Charitable planning is not something financial advisers should give away.

Advisers who help clients develop and execute a philanthropic plan can charge fees for those services just as they charge for investment and financial planning. That will benefit their firm's bottom line and also make clients more satisfied, according to those who specialize in philanthropic giving.

“The clients we want are already fully engaged in philanthropy, even if they won't put that big word on it,” said King McGlaughon, chief executive of Foundation Source Philanthropic Services Inc. “Ignoring that is perilous to your relationship as an adviser and to the client's good health.”

Surveys show that at least 75% of U.S. households give to charities. Typically, gifting rises as wealth increases.

“People pay for intergenerational planning; it can support revenue,” said Yale Levey, an adviser with Royal Alliance Associates Inc. who added philanthropic planning to the wealth advice he provides to clients eight years ago.


Depending on how deeply advisers become involved in the process, they can charge fees for helping clients figure out their overall giving goals and mission, for developing the actual financial plan that will carry out their mission and for setting up the financial tools or products needed to fulfill the plan, said Mr. Levey, who helped start the Metro New York Philanthropic Advisors Network.

Advisers can work with clients and charities to maintain control over assets that are donated but not yet distributed.

For instance, a 91-year-old woman in Seattle who had received a cornea transplant through SightLife wanted to leave a substantial sum to the group.

But at the same time, she wanted the D.A. Davidson & Co. advisers she had worked with for 40 years to be able to direct the investment of the funds, said Robert Vatter, vice president of principal and planned giving for SightLife.

To make this happen, SightLife was named the major beneficiary of her insurance policy, and an endowment was established that gave the advisers responsibility for the asset allocation. As long as the advisers comply with the agreement, including producing regular reports and seeking board approval for changes, they retain control of the assets and therefore can receive a fee for managing them, Mr. Vatter said.

The $702,000 the woman gave the organization in 2008 after her death is now worth about $1 million.

“It was very important to her that the assets remain under control of the advisers,” Mr. Vatter said. “She had peace of mind that her gift was being well-invested.”

When helping clients determine what bequests they want to make, Greg Doepke, an adviser with ACG Advisory Services Inc., which manages about $400 million in assets, uses a formal discovery process with various open-ended questions to help clients understand what is important to them philanthropically.

One strategy he uses involves setting up a charitable remainder trust that transfers money to a charity, with the donor receiving income from the investment. When the trust terminates, usually at the donor's death, the remainder of the principal goes into a donor-advised fund, with the children or grandchildren of the donor often serving as administrators.

“For most people, their passion is not just about the money; it's about other things,” Mr. Doepke said. “They may be financially successful, but if you can help guide them towards what's significant to their life, they'll offer you appreciation and loyalty.”

Advisers who offer a wealth strategy that harnesses and unleashes what clients have created are providing a valued service that strengthens relationships and helps retain clients, said Mr. McGlaughon.


Many believe giving to others will ensure that they are remembered, said Mr. McGlaughon, who added that most people can't name their great-grandparents, and some not even the names of grandparents.

“Philanthropy is about creating a legacy, a memory, a footprint on the Earth that says, "I was here.'” he said.

Advisers should be familiar with the philanthropic tools that clients can use to support their causes, save on taxes and leave their mark for future generations. They also should know philanthropic advisers who do not manage investments but who specialize in leading people through a self-discovery process to help them recognize their philanthropic goals and priorities, Mr. McGlaughon said.

Mr. Doepke said that many advisers aren't comfortable with charitable giving, because they don't know much about available tools. To boost his own knowledge, he's pursuing the chartered adviser in philanthropy designation through The American College.


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