Why advisers should market philanthropic giving to entrepreneurs

Why advisers should market philanthropic giving to entrepreneurs
New study from Fidelity Charitable finds business owners donate more than average Americans.
SEP 19, 2018
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.

Latest News

SEC bars ex-broker who sold clients phony private equity fund
SEC bars ex-broker who sold clients phony private equity fund

Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.

The key to attracting and retaining the next generation of advisors? Client-focused training
The key to attracting and retaining the next generation of advisors? Client-focused training

From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.

Chuck Roberts, ex-star at Stifel, barred from the securities industry
Chuck Roberts, ex-star at Stifel, barred from the securities industry

"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.

SEC to weigh ‘innovation exception’ tied to crypto, Atkins says
SEC to weigh ‘innovation exception’ tied to crypto, Atkins says

Chair also praised the passage of stablecoin legislation this week.

Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest
Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest

Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.