Anne Brayley, vice president professional advisory services at the Toronto Community Foundation recently spoke with Sara Plant, vice-president and national director, wealth services at BMO Harris Private Banking, about high-net-worth clients and their approach to philanthropy.
Brayley: You work with successful individuals and families. What conversations do you have with them about philanthropy as part of their wealth management strategy?
Plant: Philanthropy is a great way for our families to find common purpose. Parents also see it as a way to transfer values that are important to them, while engaging their children in learning. We find our affluent clients are more interested in the concept of creating a legacy to see their charitable intentions carried on into the next generation.
Brayley: What differences exist across demographics?
Plant: There can be a lot of complexity around giving because there are so many options right now. The majority of charitable giving used to be a cheque-writing exercise. Now gifts of securities, life insurance policies and donor-advised funds have become more widely used in the past few years.
We find those in their 50s and 60s are more comfortable with these tools, because they’ve been actively giving and have become familiar with them. This group also tends to be thinking about how to create their legacy in their lifetime.
For some in their later years, it can be overwhelming to understand a myriad of options if they are used to the tradition of writing cheques to their favourite charities. In those cases, there is a tendency to keep it simple, and structure their philanthropy into the estate plan.
The differences in approach to giving in terms of age could also be explained by the era in which they grew up. Seniors born in the Depression era would have grown up in a less prosperous time with a different approach to spending, saving and giving. Baby boomers would have grown up in more prosperous times, so they’re more comfortable with giving.
Brayley: Have you observed any gender differences in giving?
Plant: We talk to many couples about their philanthropic giving, and in most cases their decisions are jointly made. When men and women act independently in choosing charities to support, we have seen that women tend to take a more emotional approach, whereas men may lean towards the pragmatic.
The differences in gender can even out as the male ages. Men often demonstrate a more emotional side as they age, such that the husband and wife approach philanthropy in a similar manner in their older years. When deciding on which philanthropic vehicle to use for their charity, both make decisions based on the goals they want to achieve.
Brayley: What are some of the unique philanthropic structures you’ve introduced to clients?
Plant: The charitable remainder trust is a vehicle that is not widely used in Canada. However, it can be a tax-effective way to leave a charitable legacy while allowing the individual access to an income stream from the investment earnings on the capital during his or her lifetime.
Another structure is the alter ego trust. In this instance, the individual can use the capital in his or her lifetime. The assets of the trust exist outside the estate upon death, and may create tax savings around probate fees.
When the gift is made to a charity, it can also provide the donor with anonymity, as the assets are not a matter of public record. It is important to understand the impact that taxes can have on any strategy, so I recommend clients seek professional advice.
Brayley: What advice would you share with other advisors that might help them in their philanthropic conversations with clients?
Plant: It’s important that a discussion on philanthropy happen in the context of a client’s overall wealth management plan. Also, the philanthropic conversation shouldn’t be a one-time event. There are different ways to give that are appropriate at different times. Philanthropy needs to be part of a continuous review, embedded in a family’s value set.