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How Charitable Planning Helps Retain Clients

Build deeper connections by demonstrating that you’re interested in the family and its philanthropic goals.

There’ve been numerous articles in recent years about the number of heirs and spouses who change financial advisors and firms after the deaths of the parents or the wife or husband who was the primary wealth creator. Various studies have shown that roughly 70% of widows and 90% of children leave after the estate is settled.  

To avoid this exodus, many of the authors of these articles have recommended that advisors engage their clients’ spouse and children early in the relationship, include them in periodic meetings, listen to their concerns and goals, and be sensitive that they may have different goals and thoughts than the primary client in the relationship. This advice is appropriate because at a certain point, the spouse and the children will be the ones who control the money and make decisions, and if they don’t know the advisor, the chances of staying are remote.

An advisor’s knowledge of charitable planning and willingness to participate in the conversation may not be the most important reason why clients hire and stay with an advisor. However, for many high-net-worth clients who are philanthropic, the charitable planning conversation is very important because philanthropy is a high priority.

Discussing charitable planning with charitably minded clients enables advisors to demonstrate that they’re eager to help them achieve all of their goals. Regardless of whether an advisor helps clients make qualified charitable distributions from their individual retirement account, set up a donor-advised fund (DAF), private foundation, charitable trust or give directly to charities, clients appreciate the help and discussion. As a side benefit, philanthropic clients regularly refer friends or colleagues with similar interests to their advisors who provide this guidance.

Women More Involved

Studies by the Women’s Philanthropy Institute at the Lilly Family School of Philanthropy, US Trust, Barclays and others have indicated that women are more likely to donate more, volunteer more, be more engaged in their giving and include their children in philanthropic activities. Because women are more passionate about their philanthropy and have a longer life expectancy than men, advisors who engage women to discuss their charitable interests are more likely to retain them as clients after the deaths of their husbands or partners.

Clients’ Children

Getting to know the children may be a bit more of a challenge because they may not be as available or as interested in meeting their parents’ advisor. However, many children are very interested or even more interested than their parents in charitable activities, as they volunteer, serve on junior or regular boards, or are donors themselves. They may be involved in charities that are the same or different from the ones their parents support.

Family charitable vehicles such as DAFs or foundations provide great opportunities to engage the children so they can understand what their responsibilities may be and to determine whether, to what extent and at what time they may wish to participate. Including the clients’ children in the charitable conversation during the clients’ lifetime can enable the children to have input so they can decide whether to carry on the family’s charitable traditions or to determine whether they want to go in a different direction. Some families with foundations may establish DAFs for their children who want to deviate from the mission of the family foundation, but by ascertaining everyone’s goals in advance, advisors are able to help determine the best path for the near and distant future.

This holds true for clients who aren’t married or don’t have children, as relatives or friends become the successor advisors on these charitable vehicles when donors want these accounts to continue after their passing. DAFs and foundations enable financial advisors to remain in their role on these and their other accounts for many years.

Discussing bequests to DAFs, foundations or charities or naming them as the beneficiaries of retirement or other plans while the parents are still living can eliminate any shock or disappointment if the heirs find out after death. When adult children know in advance that their parents will leave money to charity or a charitable vehicle, they typically will welcome this information and take pride in knowing that this is the plan. Years later, they may follow in their parents’ footsteps and do the same with their own children.

Deepen Relationships

Talking with clients about their charitable plans often helps advisors deepen their relationships with clients and increase their exposure to spouses and children who will hopefully remain as clients after the death of the wealth creator. This conversation helps demonstrate to clients that they’re interested in the family and their philanthropic goals and aren’t just interested in managing their assets.  

Ken Nopar is the vice president and senior philanthropic advisor for the American Endowment Foundation (AEF) donor-advised fund.

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