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Proactive Charitable Counseling Can Grow and Retain AUM

Encouraging your clients to give their money away can actually lead to them giving you more of it to manage.

Encouraging your clients to give their money away can actually lead to them giving you more of it to manage.

A recent study by Foundation Source, the nation’s largest provider of comprehensive support services for private foundations, titled “Good Works, Better Business” indicates that actively engaging in philanthropic discussions with clients can lead to increased assets under management and strengthen the bonds between the advisor, client and client’s family. The survey questioned 106 wealth managers, 64 percent of whom have more than 20 years experience and nearly 70 percent of whom manage a majority of clients with at least $1 million in investable assets.

The main takeaway from the survey is that it found a direct correlation between providing guidance for charitable giving and actually managing those assets — 57 percent of respondents who originated the idea of a private foundation also manage the assets. 29 percent do so for the more common donor-advised funds.

Further, broaching philanthropic topics with clients can help advisors secure the oft-elusive introduction to the rest of the family. 87 percent of respondents indicated that philanthropy allows them to meet the spouses and families of clients. Some advisors have already taken this advice to heart, as 66 percent of respondents report discussing philanthropy with clients either “often” (42 percent) or “at every meeting” (24 percent).

Joe Fuschillo, Chief Distribution Officer at Foundation Source notes, “All clients are interested in the futures of their families, and philanthropic vehicles are a great way to bring the family together on a continual basis.” He continues, “[Philanthropic vehicles] are sort of an ongoing approach to making a difference in society as opposed to a single event. They’re conducive to ongoing involvement of the family and position the wealth manager as a trusted advisor.”

However, given the ugly statistics surrounding asset retention after a client dies, it’s a wonder that more advisors aren’t leaping at the chance to make contact. According to the study, advisors may be overrating their knowledge of philanthropic vehicles. 78 percent of respondents claimed to have a “thorough understanding” of donor advised funds, while 63 percent felt the same about private foundations. However, when asked a battery of six true/false question about the details of those very vehicles, the respondents answered each question incorrectly at least 25 percent of the time and at most 48 percent — basically the equivalent of guessing.

“In order to provide the best philanthropic advice, it is important for advisors to thoroughly understand the capabilities and benefits that these two most popular charitable giving vehicles offer,” Fuschillo adds.

Thankfully, advisors seem willing to learn, as 78 percent of respondents said they want to learn more about charitable giving and philanthropy. And learn they must, because if advisors aren’t proactive about starting conversations about philanthropic vehicles, clients are highly unlikely to broach the topic on their own. 54 percent of respondents noted that fewer than 10 percent of their clients had asked for information about philanthropic vehicles.

Page Snow, Chief Philanthropic Officer at Foundation Source explains, “Many advisors grew up in an industry that’s so investment centric, but now there’s an expectation that your wealth advisor is going to be able counsel you on aspects other than just asset allocation.” She believes that advisors should start by “... thinking about the client holistically. Not just asset allocation, but asset preservation and transfer.”

Not only do philanthropic vehicles provide another value add, but they expand an advisor’s toolbox, potentially offering new options for advisors to expand their businesses and, more importantly, relationships with clients and their families.

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