Help clients give wisely

With the holiday season upon us, financial advisers should talk to clients about their plans for charitable giving. By helping clients devise a well-thought-out giving strategy, which includes vetting charities they intend to give money to, advisers can help clients help others and keep them safe from holiday fraudsters.

It’s estimated that 98.4% of high-net-worth households give to charity, according to the 2014 U.S. Trust Study of High Net Worth Philanthropy. Between now and the end of the year is when many clients send money to their favorite charities.

Not coincidentally, it’s also the time of year when charities begin marketing aggressively for donations. In fact, most charities receive about 30% to 40% of their annual donations during the holiday season. Today, charities are soliciting funds in more ways than ever, including through Facebook, Twitter, mobile apps and even by leveraging “Giving Tuesday,” the annual day dedicated to charitable giving that falls on the day after Cyber Monday.

But not all charities are created equal.

Many are well-run and work hard to keep spending on administration and fund raising to a minimum, thereby putting more of the donations they receive toward their stated mission. Many are transparent about how they operate and keep their programs and services closely aligned with their mission.

But some charities are run with far less efficiency and transparency and are not deserving of your clients’ goodwill or hard-earned dollars. Others are simply fronts for hucksters.

Financial advisers have an opportunity to play a valuable role in helping clients develop — and adhere to — a charitable giving strategy. First and foremost, they can encourage clients to be more intentional about their giving.

IMPULSE SPEND

Many charities use the warm and fuzzy feelings generated by the holiday season to get clients to make impulse contributions. This tends to lead to a scattershot approach to giving that dilutes clients’ abilities to effect meaningful change for the causes that are near and dear to their hearts.

Advisers should encourage clients to focus their giving on donations that provide them with the greatest sense of fulfillment. In terms of making a difference, it is better to give more dollars to a few organizations than fewer dollars to a lot.

Advisers also should encourage clients to put pen to paper and jot down their overall charitable objectives. Having a plan will make it easier for clients to resist the urge to spread their charitable dollars haphazardly, perhaps in response to a particularly appealing pitch letter that arrives in the mail.

Finally, advisers should insist that clients thoroughly vet any organization they are considering making a donation to — even those they have given money to in the past.

Better yet, advisers could offer to vet those charities themselves. Thanks to organizations and tools like the Better Business Bureau’s Wise Giving Alliance (Give.org), Charity Navigator (charitynavigator.org), CharityWatch (charitywatch.org) and GuideStar (guidestar.org), advisers can quickly and easily learn enough about a charity to ascertain whether it is reputable and well-run.

Providing clients with the reassurance that their charitable dollars are being well spent — or letting them know if a particular charity is questionable — is an excellent way for advisers to earn their clients’ appreciation.

It also opens the door for discussions with clients about assets outside of the adviser’s purview. Certain complex assets — private stock, real estate, art and other collectibles — often offer certain tax advantages when donated to charity.

Charitable giving is on the rise in the U.S. Last year, Americans gave $358.4 billion, a 7.1% increase from the previous year, according to Giving USA’s most recent annual report on philanthropy.

Financial advisers should not relinquish their role as stewards of their clients’ wealth by avoiding discussions about philanthropy.

Related Topics: Charitable Contributions