Let’s talk about the elephant in the room.
Often, one of the biggest obstacles for financial advisors in recommending a charitable instrument such as a donor-advised fund is the threat of loss. If a client moves a portion of his investments out of his portfolio and into an outside tool like a donor-advised fund, it can diminish the potential income the advisor can make from the larger portfolio invested in the market.
It’s a fair concern because as much as we love helping individuals, we still must pay the bills.
However, one might argue, especially for someone who works for a donor-advised fund, that the societal benefits are universally significant, potentially offsetting larger financial gains.
For individuals who are tax averse or even entrepreneurial, philanthropy often fills gaps where government funding or commercial investment might be lacking, such as in healthcare, education, and public infrastructure. Such philanthropic action allows for the establishment of hospitals, schools, libraries, and other essential services that improve community well-being.
Further, philanthropic initiatives can strengthen communities by fostering a sense of solidarity and mutual support. Programs encouraging community involvement, volunteerism, and civic engagement help build stronger, more resilient communities and significantly benefit all citizens.
A Win-Win Path
So, back to the elephant—do we help our clients move funds away from the portfolios we, as investment advisors, oversee, or do we encourage the philanthropic instinct that so many of those we work with have?
Let me propose following the path of Desmond Tutu, who is supposed to have said, “There is only one way to eat an elephant: a bite at a time.” Instead of just seeing the big problem—the whole elephant—see opportunities provided over time by working with your client’s charitable goals.
Financial advisors play a crucial role in guiding clients through the complex landscape of philanthropy. By helping clients be more philanthropic, advisors not only support their clients’ desires to make a positive impact but also enhance their professional relationships, optimize tax benefits, and contribute to societal well-being.
This holistic approach to wealth management can lead to better outcomes for clients, advisors, and the broader community.
Philanthropy can also be a powerful tool for attracting new clients who want more than financial growth—they want their wealth to make a difference. Advisors who emphasize charitable planning can appeal to this growing demographic.
In doing so, your practice will grow and society will benefit—one client at a time.
