U.S. Trust Survey Finds Positive Trends in the Prevalence and Quality of Philanthropic Conversations Between Advisors and Clients

Thursday, July 19, 2018

U.S. Trust Survey Finds Positive Trends in the Prevalence and Quality of Philanthropic Conversations Between Advisors and Clients
Advisors Are Second Only to a Spouse or Partner as a Source for Philanthropic Information

BOSTON, MA (Thursday, July 19, 2018) – Discussions between advisors and high net worth (HNW) clients about philanthropy are on the rise, finds the U.S. Trust Study of the Philanthropic Conversation, as clients report advisors to be a valuable source of information, second only to their spouse or partner. However, the study reveals several disconnects between advisors and their clients. For instance, many advisors underestimate their clients’ desire to discuss philanthropy early in their advisory relationship, and overestimate the importance of tax benefits as a motivation for giving.

To better understand advisors’ approach to and HNW individuals’ expectations of these discussions, The Philanthropic Initiative (TPI) partnered with U.S. Trust, Bank of America Private Wealth Management on a nationwide survey of more than 300 advisors – including wealth advisors, trust and estate attorneys, accountants, and other tax professionals – and a random sample of more than 100 HNW individuals with $3 million or more in investable assets who are actively engaged in charitable giving and who engage at least one of these advisor types.

“Charitable giving is an important dimension of an individual’s or family’s wealth experience, and the role of the advisor is correspondingly so,” said Ann Limberg, head of philanthropic solutions and family office at U.S. Trust. “Therefore, the better advisors are at addressing their clients’ philanthropic needs, the more likely they are to enhance their client relationships and grow their business.”

Evident progress: aligning advisor practices and client expectations

The 2018 survey responses were compared to results from the groups’ initial 2013 survey, and the study findings demonstrate improvement in the philanthropic conversation between advisors and clients, including:

  • The vast majority of advisors (91 percent) believe that discussing philanthropy with their client is important, and 53 percent perceive it to be very important.
  • A higher proportion of advisors make it their practice to ask their clients about philanthropy (80 percent today versus 71 percent in 2013).
  • The vast majority (94 percent) of advisors discuss philanthropy with some of their clients, including 44 percent who discuss it with a majority of their clients.
  • Advisors are taking a more balanced approach to initiating philanthropic conversations with a mix of technical topics (tax benefits, estate planning) and personal topics (passions, goals) which align to clients’ reported preferences.
  • The majority (76 percent) of clients who discuss philanthropy with their advisor rate their advisor’s ability to discuss their personal values and charitable goals as strong, up from 63 percent in 2013.

“Clients rely heavily on their advisors for guidance with their giving. It is encouraging, therefore, to see more advisors recognizing the importance of philanthropy to their clients and a corresponding uptick in the number of philanthropic conversations taking place between clients and their advisors,” said Claire Costello, national philanthropic practice executive for U.S. Trust. “Advisors who approach these conversations in a meaningful way – focusing on personal goals and passions as well as the more technical aspects of giving – are more likely to satisfy their clients’ philanthropic needs while also growing their business.”

Advisor misperceptions: client motivations and hesitations about giving

Advisors correctly gauge HNW clients’ top motivations for giving, namely: passion for a cause, impact on the community, and a desire to give back. However, they misperceive the importance of reducing taxes and enhancing the family name or business as motivations. In light of recent changes, the study explored the potential impact of the 2017 Tax Cuts and Jobs Act on giving levels and found that advisors overestimate its impact: only 7 percent of donors plan to decrease their giving, compared to 16 percent of advisors who anticipate a reduction from clients.

With respect to clients’ hesitations about giving, advisors miss the mark. Clients report barriers, such as lack of connection to nonprofit organizations and fear of gifts not being used wisely,

while advisors perceive clients’ primary reasons for hesitating to be centered on issues of wealth preservation, including not having enough money for themselves or their heirs.

“The research results indicate that advisors’ understanding of their clients’ philanthropic needs is increasing. However, advisor misperceptions about clients’ motivations and barriers to giving persist. This may result in missed opportunities – for clients who may not be receiving the support they seek and for advisors who may be less able to deepen and retain client relationships,” said Ellen Remmer, a senior partner with TPI.

The value of advice: good for clients and business

The survey found that HNW individuals who consult their advisors about their philanthropy are more structured in their giving. Advisor-client discussions about philanthropy can enhance the perceived value of the advisor. Two in five HNW individuals would be more likely to select an advisor who is knowledgeable about charitable giving, and 53 percent place more value on information from advisors who are philanthropic themselves. In addition, 59 percent of clients report wanting their advisor to refer them to another professional for complex philanthropic needs beyond their advisor’s capabilities.

Seventy-eight percent of advisors are experiencing the impact of philanthropic discussions with their clients on their bottom line. More specifically, having philanthropic conversations has helped advisors to:

  • Establish new clients (60 percent).
  • Deepen existing relationships (74 percent).
  • Build relationships with clients’ extended family (63 percent).

Opportunities for advisors: refining when and what to discuss with clients

While 54 percent of HNW individuals are somewhat satisfied with the philanthropic discussions with their advisors, only 45 percent are fully satisfied. The study identified several opportunities to improve the conversation, including:

  • Most advisors wait to raise the subject of philanthropy until they have detailed knowledge about their client’s financial picture (87 percent) or personal life (85 percent). However, the majority of clients expressed a desire to have philanthropic conversations earlier – specifically 29 percent at their first meeting and another 29 percent within the first few meetings.
  • While initial conversations are more balanced than what the survey found in 2013, clients report that ongoing philanthropic conversations tend to skew toward technical (63 percent) versus personal (32 percent) topics.
  • Advisor knowledge and use of structured giving vehicles is increasing, but there is still room for growth. Only a portion of advisors rate themselves as very familiar with charitable trusts (53 percent), private foundations (38 percent), and donor-advised funds (42 percent).
  • Regarding nonprofit organizations, there is a gap in advisors’ self-rated knowledge of nonprofits versus client perceptions of their knowledge. Most advisors plan to increase their knowledge of philanthropy, including becoming more familiar with nonprofit organizations.

Methodology

The U.S. Trust Study of the Philanthropic Conversation was conducted in May 2018 by Phoenix Marketing International, an independent market research firm, on behalf of U.S. Trust and TPI. Key findings from this research are based on an online survey of a random sample of 314 advisors – including wealth advisors, trust and estate attorneys, accountants, and other tax professionals – and a random sample of 103 HNW individuals with $3 million or more in investable assets who are actively engaged in charitable giving. All data was tested for statistical significance at the 95 percent confidence level.

The Philanthropic Initiative

The Philanthropic Initiative (TPI) is a global philanthropic consulting practice that helps individuals, families, foundations, and corporations develop and execute customized strategies to increase the impact of their giving and achieve philanthropy that is more strategic, effective, and fulfilling. For nearly 30 years, TPI has served as consultant and thought partner to ambitious donors and funders who embrace innovative thinking in their efforts to find local, national, and global levers of change. TPI is committed to actively promoting and advancing strategic philanthropy by conducting cutting-edge research, publishing donor education resources, and training individuals, organizations, and advisors in best practices. In addition, TPI helps professional advisors build their capacity to meet the philanthropic needs of their clients by strengthening the internal culture of philanthropy within firms, and providing tools and resources to enable relationship managers and advisors to better support their clients and attract new clients. TPI is a distinct operating unit of the Boston Foundation.

U.S. Trust’s Philanthropic Solutions Group

U.S. Trust’s Philanthropic Solutions Group serves the needs of nonprofit institutions, philanthropic individuals, and families across the investment businesses with Bank of America. Philanthropic Solutions distributes more than $300 million in grants to charitable organizations annually on behalf of clients where U.S. Trust serves as trustee, co-trustee, or grant-making agent. The investment businesses within Bank of America, including U.S. Trust, Merrill Lynch Wealth Management, and the Merrill Lynch Private Banking and Investment Group are among the nation's leading providers of investment and philanthropic services to individuals, families, foundations, endowments, and other nonprofit organizations.

For more information about The Philanthropic Initiative (TPI), visit www.tpi.org or check out our blog, Deep Social Impact. We’re also on LinkedIn and Twitter @TPIPhilanthropy.