Buffett suddenly less quotable

Warren Buffett’s call to alms hasn’t gone unnoticed in the financial fraternity of Toronto. But while most feel Buffett’s initiative is sound, his intentions may not be. In short, no one’s getting swayed that easily.

For those who came in late, Warren Buffet and Bill Gates are asking the world’s billionaires to sign a pledge, which asks them to commit to give at least half of their wealth to philanthropic and charitable groups within their lifetimes or after their deaths.

“It is a great challenge indeed but these two people have only now become so gifting,” says Tony De Thomasis, president, De Thomas Financial Corp. in Toronto. “Is it their old age, and why did they not say this when they were age 40?”

Some other ‘raised eyebrow’ responses made no attempt to hide their skepticism either.

“Obviously (it is) a concept which is driven by a number of factors,” says James R. Taylor, CLU, Financial Health Management. “Impacting society through success, positioning a legacy and, in the U.S., addressing the estate tax problem that foundations and gifting mitigate.”

Ken Hawkins, chief investment strategist, Weigh House Investor Services, views Buffett’s attempt to promote philanthropy as a dollar store in Beverly Hills. Harmless, but pointless.

“Although Mr. Buffett’s initiative is well meaning, it is probably unnecessary,” says Hawkins adding that, in general, most billionaires are generous when it comes to charity.

Well, maybe not, because there are billionaires and then there are billionaires, as De Thomasis puts it.

“While $2 billion is a vast fortune, compared with $10 billion (it is) not so much, and compared to $50 billion even less so,” he says pointing out that both Buffett and Gates are close to the $50 billion mark.

Many respondents are quick to point out there are no billionaires in their book. Hawking finds a facetious way to convey that. “I am taking the ‘challenge’ to all my billionaire clients.”

Then there are other challenges, as far as Canada goes, that come in the way of billionaires giving away half their wealth. For starters, there aren’t that many billionaires in Canada. Add to that the moral, legal and corporate governance obligations that mandate charity must begin at home.

“I believe charitable giving by billionaires is the norm, however, giving away half your wealth is a challenge under certain circumstances,” says Mike Macdonald, vice president, consulting, Weigh House Investor Services. “Often your wealth is in company shares and selling significant portions impacts corporate governance, family control of a business and succession planning.”

Macdonald says many billionaires are trustees of intergenerational wealth and are not at liberty to divest an inherited family fortune which is expected to be passed on to the next generation.

Hawkins agrees. “For even wealthy clients with a net worth of $10,000,000, leaving it to their children first is a far more important priority than giving it away.”

It may be argued that a philanthropic deed needs the spirit of giving, not billion dollar bank accounts. That being the case, will financial advisors take this challenge to their clients: billionaires, millionaires or otherwise.

Some say no, some hem and haw. “I do not think I have the right to tell clients how they spend their money,” says Hawkins.

To ask clients to give up half their wealth just like that is not going to cut it, says Luis Flores, vice president and investment advisor, Private Investment Management, RBC Dominion.

“It’s really an educational process that takes time. To simply suggest they commit ‘half of their wealth’ to charities could be too much for many clients, but to help them think of a substantial amount to contribute to a cause that is important to them, through a foundation, is definitely a possibility.”

A call like this raises the bar and Buffett and Gates are leading by example, says Tina Tehranchian, financial advisor, Assante Capital Management. “Although many billionaires regularly donate money to charities, this type of pledge really raises the bar and the expectations of the society and their peers when it comes to donating to charities.”

In essence, most advisors agreed that while they can’t push a pledge like that down clients’ throats, all clients should have a philanthropic plan that matches their wealth, personal convictions, tax considerations, and social conscience.

(06/17/2010)