Now’s the time of year when many of us take time to reflect on the past 12 months. With the pandemic, the volatile elections, civil unrest and our leadership’s reaction to different crisis situations, 2020 will go down as a year like no other.
At my age, many would say I’m on the final lap of my career. Personally, I don’t think I’ve slowed down a bit since I started working during the tumultuous 1960s and 1970s. But I realize I don’t have that much time left to get something big accomplished in my career.
That’s why I decided to try to make a difference about something very important to me--philanthropy. I’ve never been satisfied with the way that many financial advisors address (or avoid discussing) philanthropy. This situation can’t continue.
Over my career, I’ve facilitated an estimated $1 billion of giving to worthy causes by our clients. That’s an awfully big number, which I’m very proud of. But, apparently, it hasn’t been enough. With so many people and organizations in dire need of help today, planned giving has never been more important.
A recent survey of Fidelity Charitable donors found that more than half were very apprehensive about the nonprofit sector’s ability to weather the pandemic—particularly small, community-based organizations and human services charities. Fidelity also found that only two in 10 donors believe the pandemic will significantly influence their giving in 2021 and beyond—indicating that the majority of donors plan to stay the course with their usual giving behaviors.
As some of you know, I’m a third-generation entrepreneur. It’s in my DNA to shake things up and “go big or go home” in everything I do. Sometimes I stumble hard. But, that’s the only way I know to make breakthroughs and to achieve exponential improvement—that is, “10X Thinking,” to borrow a term from my mentor Dan Sullivan.
As a profession, we need to apply 10X thinking to planned giving and intentional philanthropy. That’s what my 10 Billion for Charity initiative is all about. As mentioned earlier, my BHAG (Big Hairy Audacious Goal) is to raise $10 billion for charity before I retire. I’m about 10% of the way to my goal, but I need your help. By the way, if we get to $10 billion quickly, I’m just going to 10x that until we reach $100 billion.
Financial advisors ask me all the time: “How do I even get started on becoming a philanthropic advisor? Where do I begin?”
My answer: “Just start talking to your clients and prospects about their philanthropic intentions. Talk to other advisors and question them about what their goals and dreams are for their philanthropic capital.”
The more you have those conversations about philanthropy, the more comfortable you get with the concept. When you start talking to clients and prospects: You’re going to start hearing things like “charity begins at home.” I must have heard that cliché thousands of time during my career.
Here’s the thing: We’re not asking clients to take money away from their kids. We’re just trying to get advisors and clients to understand that there are smart, legal ways to take money away from taxes and inefficient government programs that we don’t necessarily agree with--and reallocate that money toward charitable causes we care about.
Every two years, U.S. Trust does a massive survey of high net worth families—the kinds of families you want to work with. In the latest edition (2018), nearly one-third of respondents (31%) said they would switch to a new advisor if that new advisor would talk to them willingly about philanthropy.
Think about that number: 31%. That sounds like a pretty big opportunity to me.
But many advisors still believe that encouraging clients to donate some of their assets to charity means fewer assets for them to manage (and earn fees on). So, they tend not to suggest philanthropy, even to clients they know are generous and cause oriented.
Unfortunately, that short-sighted thinking isn’t helping clients in the long run; it’s not helping society and it’s not helping your practice. Did you know that many giving mechanisms allow advisors to continue their money management activities for a client? Many giving strategies actually free up more client’s assets for an advisor to manage—not less.
For instance, using a charitable remainder trust prior to the sale of a piece of real estate produces a nice income tax deduction for the donor and helps them avoid capital gains tax. The donor now has 100% of their capital available for investment, and the advisor (that is, you) has new assets under management (AUM) to manage. Further, a donor may want to “replace” the real estate asset that will eventually transfer to charity. The replacement usually comes from a new life insurance policy. Advisors who are knowledgeable about the application of charitable planning strategies can find many ways to increase their income and will never feel threatened about losing assets.
Don’t Fight the Trends
We have many problems in the world today, but I’m encouraged by the groundswell of support for social and environmental causes. I haven’t seen this level of awareness since I was a young man in the 1960s. Plus, there’s unprecedented interest in socially responsible investing and planet sustainability, especially among younger adults. These are the folks who will be running companies soon and inheriting trillions of dollars in wealth.
These societal shifts are happening at a time when estate taxes, property taxes and income taxes are likely to go way up for many affluent clients. As a result, these clients are going to look at giving as another opportunity to improve their personal situation as well as their family’s situation.
The pandemic has made everyone starkly aware of how fragile life is. Almost everybody knows someone who’s died prematurely, and this reckoning of our mortality has spiked the interest in estate planning. As professionals, we need to educate our clients about how best to help the causes and organizations they believe in—and the tools to make that happen.
If you deploy planned giving tools properly, you not only keep your client’s inheritance intact, but also you can often make it larger. Instead of clients giving their money to the government in the form of taxes, their wealth could be reallocated to causes and concerns they hold dear. That’s what I reiterate to skeptical advisors who keep telling me it’s not possible to grow your practice by helping clients give their assets away.
Growing your AUM while helping clients give wealth away isn’t impossible. It just requires a commitment to learn the basics of philanthropy. Contrary to what many advisors tell me, understanding philanthropy isn’t “too complicated.”
If you want to keep it simple and stay in your lane that’s fine. Just keeping letting clients pay a lot of taxes and write big checks. Most won’t leave you for that, but it will become harder for you to attract new high-net-worth clients because you won’t be positioned to help them those clients with philanthropy.
Invest a little time to learn about philanthropic planning. It will improve your practice; it will improve how you look at the world; and it will improve how the world looks at you. Your upside is unlimited.
Randy A. Fox, CFP, AEP the founder of Two Hawks Consulting, LLC and creator of the 10 Billion for Charity initiative. He is a nationally known wealth strategist, philanthropic estate planner, educator and speaker. He is currently the editor in chief of Planned Giving Design Center, a national newsletter and website for philanthropic advisors. He is a past winner of the Fithian Leadership Award by the International Association of Advisors in Philanthropy.