Why advisers should market philanthropic giving to entrepreneurs

New study from Fidelity Charitable finds business owners donate more than average Americans

Sep 19, 2018 @ 2:04 pm

By Sarah Min

Financial advisers who want to attract and retain entrepreneurial prospects and clients might want to start conversations on philanthropic giving. In a new study, Fidelity Charitable found that business owners are more likely than others to invest their time, money and talent in charitable causes.

"550,000 Americans become entrepreneurs every month," Pamela Norely, president of Fidelity Charitable, said in a statement. "The sheer size of this group, coupled with an expressed interest in having a positive social impact, means they have a tremendous influence on the philanthropic sector."

Nearly half of entrepreneurs are likely to identify themselves as philanthropists, versus 30% of non-business owners, according to the report. Entrepreneurs donate 50% more annually than non-entrepreneurs. And 62% want to provide leadership in charitable causes in their communities, versus half of non-entrepreneurs.

Advisers have a huge opportunity to speak to business-founder and business-owner prospects and clients on philanthropic giving, particularly when they're planning to sell their business, according to Karla Valas, managing director of Fidelity Charitable's Complex Assets Group. Entrepreneurial clients are more likely to give to charity at this stage. According to the report, three out of 10 entrepreneurs plan to sell their business in the next five years, and nearly 68% of those plan to give to charity when they do.

(More: The power of philanthropy shifts to women, and advisers are taking notice)

While business owners often give to charity after a sale, Ms. Valas said financial advisers can advise them to opt for more tax-efficient ways to give. Entrepreneurs often have private ownership in their businesses, something Ms. Valas said financial advisers should utilize more.

"Charities don't focus in on fund-raising through these private complex assets. They say 'give us cash, give us a check,' but the most sophisticated advisers are recommending strategies that leverage this other asset — the private capital of these assets as the smartest philanthropic funding source," Ms. Valas said.

This more strategic method for philanthropic entrepreneurs, when possible, gives away a piece of the company before it is sold so the charity can take the donation on a pre-tax basis.

Only 26% of entrepreneurs plan to donate shares of a business before they sell it. And 27% plan to set up donor-advised funds or foundations as a way to make ongoing charitable donations.

"For an entrepreneur, that's gotta be a part of the conversation. But we know all too often that clients sell their business and do their philanthropy afterwards, so it's critical that advisers get ahead of that move," Ms. Valas said.


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