Advising Philanthropists: Principles and Practice

The Magic of Philanthropy Advising

How do you fit two pieces of magic into one short article? Read on and see!

The first comes in a reminder about the benefits of adding philanthropy into conversations that professional advisors have with clients:

Anything that attracts clients to your practice equates to an added revenue stream. Anything that binds clients to you and your firm, and not just individual clients but also their children and sometimes even their grandchildren – this is indeed a ‘magical’ glue that creates a ‘sticky business’. Source: Canadian Association of Gift Planner report, p.4

Whilst magical glue that binds clients to your firm sounds enticing, many professional advisors worry about mentioning philanthropy because it can be a deeply personal topic, and because advisors may not feel equipped to respond to the issues and questions that follow. Our new book, Advising Philanthropists: Principles and Practice was written to help with both those concerns. Professional advisors are busy people so the second magical element is that we’ve reduced that 250 page book into five bullet points which summarise what we cover:

• Philanthropy advising, defined as ‘the provision of skilled support for thoughtful donors’, is becoming a mainstream concern. Most people donate some money every year, and they are increasingly keen to do so more strategically and effectively which creates the need and opportunity for more professionals to offer this service.

• Professional advisors already have the ear of their clients on financial and legal matters and there are obvious synergies that make them well-placed to extend the scope of the conversation into philanthropy advising, such as understanding tax planning and how to structure financial vehicles. However, there is also a need for specialist understanding of the nonprofit sector as well as a profoundly personal and emotional aspect to private giving. The distinctive context of philanthropic action therefore requires advisors to embrace additional skill sets and mind sets as well as understanding their limits and when to bring in more specialist expertise.

• Different donors need different kinds of help and support at different times depending on their life stage and how far advanced are their philanthropic plans. The types of information and services that philanthropy advisors typically provide include: support to identify clients’ values, passions and goals that will underlie their overall philanthropic plan; clarification of the financial parameters – how much money is available and over what time period; advice on structures and vehicles for giving that best fit clients’ tax, financial and legal circumstances; consideration of how best to involve others (such as family members) and collaborate with partners to increase impact; setting up tools and administrative systems to manage donations and proportionate evaluation so that plans can be adjusted as needed; facilitating peer support and education on how the nonprofit sector operates; engaging with key ideas and debates to help donors become more confident and thoughtful givers.

• Clearly there is a lot more to philanthropy advising than first meets the eye, but advisors also need to remember that philanthropy is the voluntary distribution of private resources to achieve public good, so the process needs to be positive, hopeful and ideally joyful, as well as thorough. Advisors play a crucial role in ensuring that donors have confidence that their contributions are making the hoped-for difference. Engaging with the joy of giving and boosting donor confidence are two ways that advisors help increase the overall amounts of philanthropic giving because satisfied donors tend to maintain and increase their contributions.

• Assisting clients with their charitable planning helps the advisor to stand out from the crowd of other wealth managers, lawyers and ,accountants. There are at least three compelling business reasons for philanthropy advice services to be offered within professional practices:

1. To gain new clients: a US Trust study found that 60% of professional advisors who advised high-net-worth clients believed that discussing philanthropy with their clients helped them to establish new relationships. If clients want and expect this service, they will take their business elsewhere if it is not on offer.
2. To retain clients and their extended family: if advisors look at the long-term legacy and include younger generations in philanthropic conversations, it is more likely that the family will stay with their advisors rather than move their money at the point of succession.
3. To deepen relationships with clients: talking about philanthropy means having meaningful conversations about clients’ values, passions, relationship to their wealth, and thoughts on their legacy. These intimate discussions support the move to being a trusted advisor who will then be more likely to retain their clients and be recommended to other potential clients.

Clearly, these five bullet points only scratch the surface of the issues and insights covered in the book which, for example, also looks at all kinds of tricky aspects such as the role of philanthropy advisors in mitigating power dynamics between donors and those they support, how much advisors should challenge their clients, and how to measure impact. But we hope this article gives a taste of how the book can help professional advisors deepen their knowledge about what philanthropy advising involves, and to improve this element of their practice.

There is one final magical element to end this short overview. The reason we both care deeply about explaining and encouraging philanthropy advising is because, at its best, skilled support enables clients to produce better social outcomes and fulfill their desire to see meaningful change resulting from their donations. We view this as akin to the fabled alchemists’ magical trick of turning the base metal of donations into the most precious of golden results: greater societal impact and greater client satisfaction.