Identify Untapped Opportunity with Charitable Planning

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Two thirds of financial advisors (65%) believe that the need to differentiate their firm from competition will be greater than ever over the next five years, according to the June Independent Advisor Outlook Study from Charles Schwab. Incorporating charitable planning services into a practice is one way to meet this challenge.

Many advisors tell Schwab Charitable that they promote philanthropic services and advice as a way to stand out from competitors and broaden relationships with key clients. According to Justyn Volesko at AJ Wealth Strategies in New York, "You are adding value in an area where they didn’t necessarily know there was value to be added, and it becomes more of a personal discussion with the client." Hear why charitable planning is such an important part of Justyn's practice.

Seven opportunities

Meaningful wealth management and planning discussions often start with understanding a client's dreams and goals. For many clients this includes philanthropic goals. There are seven common events that give advisors an opportunity to deepen a client relationship by exploring the client's charitable giving goals and motivations.

  1. New client meeting
  2. Portfolio review
  3. Tax return review
  4. Planning for a major tax event
  5. Retirement planning
  6. Estate planning
  7. Planning for family giving

Download Schwab Charitable's investment advisor guide on "Initiating Charitable Conversations" to find out questions advisors can ask clients in each of these situations to understand how clients view philanthropy.

Building a referral engine

One of the practices that distinguish top-performing advisory firms is a deep commitment to referral marketing, according to Charles Schwab's analysis of the 2016 RIA Benchmarking Study.1 Charitable planning can help drive referrals in three ways:

  1. Advisors tell us that conversations about charitable planning help build trust and loyalty, which lead to client referrals and longer term relationships.
  2. Sharing your personal philanthropic interests creates an even stronger connection with clients. When you talk about why philanthropy is meaningful to you, it can enhance your credibility and spark more referrals.
  3. Finally, philanthropy can also improve your reputation in your community, which has been identified as a key component of successful referral marketing at top-performing firms.1

Expanding your service offering

Despite the significant benefits of discussing charitable planning and giving with clients, the opportunity remains largely untapped. A 2015 survey by U.S. Trust2 found that only 18% of wealthy investors discuss strategic giving with their financial advisors. Donor-advised funds offer a simple way to bridge that gap and start building a charitable offering.

If you're not already familiar with donor-advised funds, start by taking the Schwab Charitable tutorial for advisors. Then, dig in deeper to the significant tax benefits by reading Schwab Charitable’s briefs on donating appreciated assets and investments. Clients are generally happy to know that they can often increase the amount they give to charity by as much as 20% if they donate appreciated assets or investments that they have held for more than one year. These can include publicly-traded stock as well as more complex assets such as restricted stock, privately held shares (C-Corp, S-Corp, and limited partnership interests), initial public offerings, real estate, and private equity and hedge fund interests.

Investing a donor-advised fund account balance for potential growth is another powerful strategy for helping clients maximize the impact of their philanthropic goals. Since Schwab Charitable's inception in 1999, investment growth has made an additional $1 billion available donors to grant to charity.

Staying close to clients

Depending on the donor-advised fund account provider, advisors can often receive copies of their clients’ account statements, link their clients' donor-advised fund accounts to their master account, and even recommend grants on their clients’ behalf. For Schwab Charitable accounts with balances of more than $250,000, advisors can also actively manage the assets and develop a customized investment portfolio using Schwab's open-architecture platform.

In the next two months, many advisors will sit down with their clients to review tax returns. This is a good time to look forward and start a conversation about charitable planning that can help clients maximize their tax benefits in 2017.

1. Schwab 2016 Market Knowledge Tools® (MKT), Growth and transformation: How top-performing RIAs are creating enduring value.
2. 2015 "U.S. Trust Insights on Wealth and Worth.®"

This information is for advisor use only and is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, Schwab Charitable recommends consultation with a qualified tax advisor.

Schwab Charitable is the name used for the combined programs and services of Schwab Charitable Fund an independent nonprofit organization. Schwab Charitable Fund has entered into service agreements with certain affiliates of The Charles Schwab Corporation.

For informational purposes only. Third party trademarks are the property of their respective owners and used with permission. Third party firms and their employees are not affiliated with or an employee of Schwab.

Information included on this site is intended to be an overview and is subject to change. Experiences expressed by advisors may not be representative of the experience of other advisors and are not a guarantee of future success.

© Schwab Charitable

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