NextGen Clients Need Charitable Giving Advice

NextGen Clients Need Charitable Giving Advice

Millennials are the so-called “giving generation,” but many advisors aren’t talking about philanthropy strategies with their NextGen clients. It’s a wasted opportunity for millennials, but also for advisors to grow the relationship and prove their value to potential long-term clients. 

“Charities are something we, as financial planners, overlook a lot,” says Amy Hubble of Oklahoma City-based Radix Financial. “I don’t think we, when we’re doing financial planning with NextGen clients think that [charitable giving] is the number one we need to be talking about."

When it comes to NextGen clients, Hubble says advisors are instead concerned about getting student loans paid off and making sure that these clients’ 401(k) allocations are correct. Which are important aspects. Meanwhile, charitable giving seems to be something advisors don’t worry about until clients are large enough for complete, multi-year, multi-generation, foundation and estate planning techniques, Hubble told the audience at the annual Financial Planning Association conference in Boston over the weekend. “Sometimes we don’t even ask the question: are you giving to charity?”

But NextGen clients are giving—84 percent of millennials say they have given to a charity in the last year, according to a recent survey cited by Hubble. Yet for the most part, these donations lack a cohesive strategy, they’re unfocused and, many times, unaccounted for when it comes to tax deductions, she says.

“To me, that means I’ve got 55 million people with taxable, ordinary earned income that it is our job to make sure we can deduct against,” Hubble says. Even if clients don’t care about giving back, there are benefits to be had that can motivate NextGen investors to get more active. It’s a conversation advisors need to make sure they’re having, Hubble says. 

For example, many young tech employees have restricted stock from employers. When it vests, Hubble says many say they want to sell it because they want to avoid paying taxes. “That should be a queue. As soon that comes out of their mouth, the next thing that needs to come out of your mouth is: ‘Do you give to charity?’” she says. 

“It’s the perfect opportunity,” Hubble says. Advisors should take the time to walk through options with a client around reaching out to the charity to see if they accept an in-kind donation of the stock. If so, the client will get a maximum deduction and he or she won’t have to sell and pay a capital gains tax. Win-win. 

“People give for all different reasons, different motivations,” Hubble says. She noted that former Star Trek actor LeVar Burton raised $6.4 million through Kickstarter for an app that was centered around his long-running Reading Rainbow show by raffling off a dinner with himself and Brent Spiner (Lieutenant Commander Data from Star Trek). There was no tax deduction for giving, Hubble says, but people liked the social and nostalgic aspects of the project.

Hubble says that working with NextGen clients on developing a charitable giving strategy not only helps them, but it can benefit the firm as well. By finding solutions through charitable giving, advisors can show (instead of tell) clients the value proposition of working with the firm and, at the same time, grow the relationship.

Additioanlly, every year, Radix financial pledges to give back 10 percent of their investment management fees to 501(c)3 of their clients choosing. The firm does it every November on #givingtuesday. Hubble says that the firm benefits through the social media recognition, as well as gains clients’ goodwill and they obtain additional information on the client by getting to know what matters to them. 

Yet Hubble admits that not all firms are able to adopt the same level of firm-wide giving. But advisors can get plugged in with their local community foundation or talk with firm leaders about offering small charities the ability to accept donations.

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