It should go without saying that a core priority of any financial advisor should be cultivating a positive relationship with their clients. Of course, each client has their own unique priorities. There’s no one foolproof method for maintaining those strong interpersonal connections. That being said, there are certainly approaches that are backed by research. Earlier in February, T. Rowe Price released a new white paper, titled The Generosity Effect: Advisor Engagement in Charitable Giving Among High-Net-Worth and Affluent Investors. This white paper dove into how advisors can foster a stronger relationship with their clients through providing advice over charitable giving.
The conversations this white paper will start may come as a surprise to some advisors. After all, charitable giving isn’t always seen as a core part of portfolio construction.
The Rising Need For Advice on Charity
However, the T. Rowe Price study asserts that high-net-worth investors (per the report, those who have $5 million or more in investable assets) and high-income investors are increasingly looking for guidance when it comes to philanthropy. According to the white paper, 76% of survey respondents reported that they would like guidance on philanthropy and charitable donations from their financial advisor.
So, have financial advisors been meeting the moment thus far? The study implies room for improvement. Only 36% of respondents claim that they receive advice from their advisor on the topic. As such, there is plenty here that can be done to improve.
Advisors Are Seeing the Impact
Advisors who take the time to help their clients work through philanthropy seem to be well-rewarded, too. Of those who have received input on charitable donations, 87% of respondents reported higher levels of satisfaction with their advisors.
Financial advisors who have already started providing advice on charitable giving have largely reported strong success, too. The T. Rowe Price study reported that 92% of advisors who have provided assistance with planning philanthropic and charitable donations have witnessed a positive result for their businesses. In particular, 21% have reported getting new clients, 31% have seen increased referrals, 65% noted increased client satisfaction, 54% have seen more client retention, and crucially, 67% report enhanced trust from their clients. These results showcase the wide benefits that supporting philanthropic efforts can have on an advisor’s practice.
The Importance of Planning & Research
However, as previously mentioned, charitable donations and philanthropy oftentimes follow a different route than normally seen with traditional portfolio planning. Notably, the T. Rowe Price report found that 39% of advisors use a defined charitable giving plan as part of their annual planning strategy. Therefore, many advisors act more reactively, leading to less optimized advice.
Advisors looking to offer philanthropy consulting — and those already doing so — can consider a more structured plan for executing clients' charitable wishes. These advisors could help investors reach outcomes closer to their philanthropic goals through a more financial- and tax-efficient means.
“Philanthropy should not be a point of disconnect between advisors and their clients; it’s an opportunity to deepen relationships across generations as advisors help investors clarify their motivations, understand options and build giving strategies that reflect their values,” noted Emily Barczak, Insights Director, T. Rowe Price U.S. Intermediaries Advisor Engagement.
Putting this all together, the T. Rowe Price study makes it clear that, among high-net-worth and affluent investors, there's interest in advisors that help them reach their charitable goals. Advisors who've stayed ahead of the curve and already offer assistance on philanthropy have largely seen positive results. That alone showcases the worthiness of advisors' attention to this cause. However, as with all forms of financial planning, advisors should look to approach philanthropic advice with a clear-cut strategy as a segment for their annual planning approach.
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