When should advisors ask clients about charity?

Often. Only 25% of advisors frequently discuss charitable giving with clients, according to a 2010 survey by Mackenzie Financial. That’s because talking about charity requires that you get personal with clients.

“The comfort level among advisors remains relatively low, but it’s growing,” says Brad Offman, vice president, strategic philanthropy at Mackenzie Financial. “The biggest challenges are becoming comfortable with the technical subject matter and [not] seeing it as too private a subject.”

How to ask

If you don’t raise the topic, nobody will. In the Mackenzie survey, fewer than 10% of advisors said clients regularly initiate charitable conversations.

The simplest question—“do you give to charity, and if so, how?”—is an effective starting point.

“Then I ask, ‘Are you open to ways of giving that benefit both the charity and yourself?’ ” says Jay Nadler, an insurance and tax strategist with Marathon Benefit Corp. in Calgary. He notes that by asking the question this way, and then laying out the potential benefits, a firm “No” from a client changes to, “I’ve never thought about it.” Those benefits can include:

  • legacy building
  • tax savings
  • something meaningful to focus on during retirement
  • passing values to a younger generation
  • supporting causes
  • restructuring existing giving to have a greater impact for both donor and recipient

Events that commonly trigger charitable giving include major life transitions such as receiving an inheritance or selling a business. Estate and tax planning are also times when you can bring up philanthropy.

Around each planning exercise, a list of questions will help you broach the subject at the right time, in the right way. External resources will build your technical knowledge (go to advisor.ca/charity for a list).

The business case for talking charity is clear. Besides potential new sales, such as life insurance, you can attract wealthy clients, who dominate the philanthropic sphere, and build deeper relationships with existing clients by knowing how to fold charitable giving into a tax and investment strategy. Also, charity draws on many areas of financial expertise, making it a natural way to build your referral business.

Here are four times to bring up charity.

1. Tax planning

The majority of charitable giving occurs in the final few months of each year to capture tax savings. So it’s the easiest entry point to philanthropy for advisors.

“Advisors are more comfortable bringing it up in a tax-based context,” Offman says. It’s easier to say, “Here’s how much you’ll save in taxes” than to ask how a client wants to be remembered.

Changes to Canada’s tax system have made it increasingly attractive to use charitable donations to offset taxes. Used correctly, charitable tax credits can offset up to 75% of net income, and up to 100% of net income upon death.

Technical knowledge is important, but so is understanding a client’s motives for giving.

According to Imagine Canada, a group that advocates for the charitable sector, income tax credits rank fifth on the list of top reasons for philanthropy, behind compassion for a cause, having been personally affected by something a charity supports and fulfilling religious beliefs.

Tax returns often reveal clues that a client is inclined toward philanthropy.

“When I review my clients’ tax returns, I’m always drawn to the donations section,” says Keith Thomson, managing director of Stonegate Private Counsel in Toronto. “If I see that a client gives to the Canadian Cancer Society or Sick Kids Hospital, I ask what motivated them.”

No one’s ever told him it’s none of his business. Instead, “What I often get are unbelievable stories about how their kid was saved at age five and it has prompted annual donations,” Thomson says.

“From that comes further conversations in which I can ask whether they are interested in making their existing giving more effective for both sides.”

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