The Australian Centre for Philanthropy and Nonprofit Studies, qut
Chapter 17: Professional advisers and giving
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Chapter 17: Professional advisers and givingKatie McDonaldThe Australian Centre for Philanthropy and Nonprofit Studies, Queensland University of Technology Professional advisers and givingLiterature on the role of professional advisers as intermediaries in facilitating giving in Australia typically draws on the fields of estate planning, financial planning, wealth management, high-net-worth-individuals (HNWIs), planned giving and the theory of planned behaviour. Key authors within an Australian context include Kym Madden, Wendy Scaife, Marie Crittall and Cameron Newton from the Queensland University of Technology and Christopher Baker from Swinburne University. In the United States (US), Stephen and Paula Johnson from The Philanthropic Initiative are leading authors, while research on financial advisers in Canada has been led by Walter Wymer.
Recognising that philanthropy is an obvious area of opportunity in service development, advisory firms in the US have begun promoting philanthropy among their high-net-worth clients (Backer and Friedland 2008; Johnson 2000; Johnson, Johnson and Kingman 2004). Professional advisers are uniquely positioned to promote philanthropy because they already have a good understanding of their clients’ overall financial position, values and interests (Johnson 2000). Advisers can help potential donors reflect on their financial position, clarify their values, identify the most appropriate mechanisms for giving and explore opportunities (Backer and Friedland 2008). As such, advisers can play both a technical and strategic role in giving philanthropic advice (Johnson 2005). Despite evidence that more financial advisers in the US are ‘asking the philanthropic question’ this type of advice remains limited and unpredictable (Johnson 2000; Backer and Friedland 2008). Similarly, research in Canada has found that only a minority of financial planners regularly raise the topic of philanthropy, believe their clients are interested in philanthropy, and feel sufficiently knowledgeable to assist their clients with philanthropic planning (Wymer, Scaife and McDonald 2012). Indeed, only about half of Canadian financial advisers believe they are well informed about their clients’ interest in philanthropic giving (Madden and Wymer 2008). From the client perspective, HNWIs have increasingly complex needs. Research suggests they want to give more to charitable causes and would benefit from professional advice in doing so because of the complex tax implications. The Center on Philanthropy (2010) found that the majority of US high-net-worth households consult an accountant (68%), lawyer (41%) or financial adviser (39%) before giving to a charity. Yet many report frustration with the quality of advice they receive (Stone and McElwee 2004). High-net-worth donors recognise social problems are complex and global, they want their gifts to be highly strategic and effective capital investments in social change (Raymond 2010). Financial advisers can assist donors with planning and structuring giving for high impact. International research has also recognised the unique role that financial advisers can play in promoting philanthropy at the national level. Those seeking to promote philanthropy have realised the enormous influence that advisers can have on how high-net-worth donors practice philanthropy. They are also well positioned to identify philanthropic potential among individuals who do not currently give (Johnson, Johnson and Kingman 2004). This may be particularly true for charitable bequests as financial advisers are one of the key channels through which bequests are marketed (Brown 2004). The Giving Campaign (2004), which sought to encourage a broad culture of giving in the UK, specifically targeted financial advisers in recognition of their potential for cultivating philanthropy.
The most recent installment has found that advisers remain reticent to provide philanthropic advice to their high-net-worth clients (Crittall, Scaife and Boldeman 2015). Findings show that most advisers have discussed philanthropy with less than 10% of their high-net-worth clients and less than a third have personally developed a philanthropic strategy for a client. While they generally view philanthropy positively and a greater proportion are donating their own funds to charity, trends show a slight decrease in advisers’ perceptions of client interest in philanthropy and desire to discuss philanthropy with wealthy clients (Crittall, Scaife and Boldeman 2015). The most significant constraints for advisers in providing philanthropic advice were a lack of knowledge about how to advise in this area and a belief that such advice falls outside of an adviser’s ‘professional role’ (Crittall, Scaife and Boldeman 2015). The 2009 study of professional advisers in Australia identified two distinct categories of financial advisers (warm and cool advisers) in relation to their propensity for providing philanthropic advice to high-net-worth clients (Madden 2009). ‘Warm advisers’ were found to have more positive feelings about philanthropy, personally engage in giving (and at higher amounts), have experience developing philanthropic strategies for clients and were more inclined to ask clients about their philanthropic needs (Madden 2009). In contrast, ‘cool advisers’ tended not to have the same propensities for providing advice to their clients. The study suggests that HNWIs may have gravely different experiences when it comes to accessing philanthropic advice—depending on the adviser they deal with. Indeed, other Australian research focused on advice needs from the perspective of HNWIs found that their philanthropic interests and needs are generally ignored and that there are considerable inconsistencies in advisers’ capacity to provide such advice (Madden and Scaife 2008c; Scaife, McDonald and Smyllie 2011). Across the research, charitable bequests have been identified as a particularly important mechanism for giving—and the mostly commonly recommended by advisers (Crittall, Scaife and Boldeman 2015). Most Australians with a Will have it prepared by a professional adviser or lawyer (83%), yet 92% of those Wills do not include a charitable gift—suggesting a missed opportunity (Baker 2014). Furthermore, of Australian charitable donors who are planning or considering leaving a bequest, only 9% intend to discuss it with an adviser in the coming 12 months (Madden and Scaife 2008b). This suggests that if advisers were more confident in raising the topic those who are already open to the idea of leaving a charitable bequest may be more inclined to solidify their plans. In this case professional advisers may represent a key tipping point for some donors. Key issues and emerging trendsStrategic investment in social changeHNWIs are increasingly reflecting the desire for high impact giving. Rather than just a donation, charitable gifts are seen as a strategic investment in social change. Through their knowledge of the taxation and legal systems, and in some cases social needs and effective grantmaking, professional advisers can help to ensure that such gifts are most effective for donors and the community. Planned, strategic giving is known to increase the size and impact of charitable gifts and can make a big difference to the Australian nonprofit sector. Win-winAdvisory firms have the opportunity to gain a competitive advantage by offering their high-net-worth clients a unique package of services, which goes beyond wealth management to include philanthropic options and advice. Financial advisers are well positioned to play this role as they are already familiar with their clients’ financial situation and goals. This holistic approach can offer a significant value-add for HNWIs. Culture of philanthropyEngaging professional advisers with philanthropy can stimulate charitable giving, especially with high-net-worth clients. This is one mechanism through which a broader culture of philanthropy can be promoted. ReferencesBacker, Thomas E. and Lilli Friedland. 2008. Donor Advisors and Philanthropic Strategy: Human Interaction Research Institute. http://www.issuelab.org/resource/donor_advisors_and_philanthropic_strategy. Baker, Christopher. 2014. Encouraging Charitable Bequests by Australians: Asia-Pacific Centre for Social Investment & Philanthropy, Swinburne University of Technology. http://www.cacwa.org.au/documents/item/174. Brown, David W. 2004. "What research tells us about planned giving." International Journal of Nonprofit and Voluntary Sector Marketing 9 (1): 86-95. doi: 10.1002/nvsm.235. Center on Philanthropy. 2010. "The 2010 Study of High Net Worth Philanthropy: Issues Driving Charitable Activities among Affluent Households.". Indianapolis, IN: Bank of America Merrill Lynch and The Center on Philanthropy at Indiana University. Crittall, Marie, Wendy Scaife and Stephanie Boldeman. 2015. A study of professional advisers in Australia 2014/15. Brisbane, Queensland: The Australian Centre for Philanthropy and Nonprofit Studies, Queensland University of Technology. http://eprints.qut.edu.au/93192/. Johnson, Paula, Stephen Johnson and Andrew Kingman. 2004. "Promoting Philanthropy: Global Challenges and Approaches ". Johnson, S. 2005. "Involving Advisors in Philanthropic Planning: Recommendations from Research." Journal of Gift Planning 9 (1): 11-15; 52-61. Johnson, Stephen. 2000. "Advancing Philanthropy: Tapping the Potential of Legal and Financial Advisors". Madden, K. and W. Wymer. 2008. "Assisting Clients with Philanthropic Planning: A Comparison of Financial Advisors in Canada and Australia." Paper presented at the ARNOVA’s 38th Annual Conference. Madden, Kym. 2002. 2002 Study of the financial adviser's role in philanthropy, Working Paper No. ACPNS 25. Brisbane, Queensland: The Australian Centre for Philanthropy and Nonprofit Studies, Queensland University of Technology. Madden, Kym M. 2009. "Is philanthropy relevant? a study of professional advisers in Australia". Brisbane, Queensland: The Australian Centre for Philanthropy and Nonprofit Studies, Queensland University of Technology. Madden, Kym and Cameron Newton. 2006. "Is the Tide Turning? Professional advisers’ willingness to advise about philanthropy". Brisbane, Queensland: The Australian Centre for Philanthropy and Nonprofit Studies, Queensland University of Technology. Madden, Kym and Wendy Scaife. 2008a. Keeping Giving Going: Charitable Bequests and Australians. Brisbane, Queensland: The Australian Centre for Philanthropy and Nonprofit Studies, Queensland University of Technology. http://eprints.qut.edu.au/27259/. Madden, Kym and Wendy Scaife. 2008b. Looking for the Value-Add: Private Advice Needs of High-Net-Worth Australians, Working Paper No. ACPNS 44. Brisbane, Queensland: The Australian Centre for Philanthropy and Nonprofit Studies, Queensland University of Technology. http://eprints.qut.edu.au/15426/. Raymond, S. 2010. "Changing strategies for philanthropic giving: Implications for financial planners." Journal of Financial Planning 23 (11): 44-49. Scaife, Wendy, Katie McDonald and Sue Smyllie. 2011. A Transformational Role: Donor and charity perspectives on major giving in Australia. Brisbane, Queensland: The Australian Centre for Philanthropy and Nonprofit Studies, Queensland University of Technology. http://eprints.qut.edu.au/40336/. Stone, D. and J. McElwee. 2004. "What California Donors Want In Their Own Voices.". Washington DC: National Centre for Family Philanthropy. The Giving Campaign. 2004. "A wealth of opportunity: how the affluent decide the level of their donations to charity". London: The Giving Campaign. Wymer, Walter, Wendy Scaife and Katie McDonald. 2012. "Financial Planners and Philanthropic Planning." Voluntas: International Journal of Voluntary and Nonprofit Organizations 23 (2): 1-21. doi: 10.1007/s11266-011-9206-4. 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