Why Philanthropy? Why Now?

Against this cultural background, the plethora of research encouraging financial service providers to add philanthropy to their practices is much more easily understood.

Thoughtful philanthropy touches on the core values, beliefs, and dreams that are the province of creative “right brain thinking.” In the words of self-described businessman-turned social entrepreneur Bob Buford, philanthropy can be a major catalyst in helping entrepreneurs move from “success to significance.” Philanthropy can turn a life into a legacy.  It can create social or political leverage, aid donors in becoming experts on a variety of subjects, and help them emerge as role models on local or global scales. 

Philanthropy can serve as a meaningful break for clients who are between business ventures.  It can be a positive means of assisting newly wealthy clients as they transition into the roles and responsibilities associated with great wealth.

Philanthropy can offer high net worth families a means of transferring values, a positive reason to meet, an opportunity to discuss values without judgment or criticism, and a process for developing a variety of competencies, including solid decision-making skills. 

And given world conditions, philanthropy is the one place where the concept of scarcity will continue to exist dramatically: even with the 2006 infusion from Warren Buffet, the Gates Foundation still does not possess all the money it needs to address the extraordinary health and education challenges that its founders are undertaking.  What if more wealthy parents followed the examples of Buffett and the Gates?  Just think what life lessons could be delivered by injecting the concept of scarcity back into the lives of children who will otherwise grow up in family environments where all needs are effortlessly met.

And why is now the perfect time for financial advisors to pick up the torch of philanthropic advice? 

It’s perfect because philanthropy and philanthropists really are changing.  The advisors who recognize these changes and become early adopters of tactics to address the entire continuum of philanthropic needs will be the ones who benefit the most.

So what are the changes? 

Traditionally, philanthropy was practiced by inheritors of wealth, and philanthropic advice was delivered by fundraisers seeking gifts for specific charities. In the developed world, however, the creators of wealth now outnumber the inheritors of wealth. In his August 2005 study for Registered Rep magazine, Russ Prince points out that 9 out of 10 wealth holders in the U.S. fall into the “creator” category.   

These creators of wealth play by different charitable rules, and their charitable horizons do not end at the U.S. border. They want to do more than write checks in response to solicitations: they want a comprehensive understanding of whom, what, how, and why. They have grown weary of not getting the “whole story” from charities, even those they value and respect, and they want a holistic approach that will help them use their philanthropic dollars to move the world closer to their ideal.

Many high-profile American entrepreneurs such as the Gates, Oprah Winfrey, and John Chambers have charitable horizons that are global in scope, and other less well-known philanthropists are following suit.  For example, the October 2006 Wall Street Journal quotes certified financial planner Andi Y.H Kang, of Huntington Beach, who observes that many newly wealthy Asian-American clients are “eager to make donations to health and education in China and South Korea.  They are passionate about reconnecting with their roots and making a difference in the lives of people who haven’t been as fortunate as they have.”

While we might have expected groups such as The Philanthropic Initiative and the National Center for Family Philanthropy to promote philanthropy, who could have foreseen the day when  Citigroup, Inc., would launch a philanthropic fund, allowing 10 to 20 clients from its private bank and Smith Barney brokerage unit to donate large amounts of money to poor entrepreneurs in developing countries?

Changes like these add new layers of complexity to the philanthropic experience and the provision of philanthropic advice.  As a result, philanthropic advice is decoupling itself from charities much as software advice decoupled from hardware sales in the last half of our century.   The question remains:  who will be truly qualified to provide the philanthropic advice needed by the high net worth market?

A Golden Opportunity for Advisors

“Demand is growing for financial advisors who can help investors meet their philanthropic as well as financial goals,” observes The Wall Street Journal’s Victoria Knight.  “The new services are part of a broad push by advisory firms to provide a one-stop shop in what is becoming an increasingly competitive marketplace for wealthy clients.”

Registered Rep magazine columnist John Churchill agrees. “The wealthy,” he asserts, are “under served and waiting.”  To support his assertion, Churchill points to the Capgemini/Merrill Lynch World Wealth Report revealing that the needs of millionaires in the $5-30M range are not being met.  ”Less than half…have…created formal plans [estate, philanthropic and charitable giving].”

Russ Prince offers additional insight into the advisory service gap:  in his 2005 research, he found a significant discrepancy in the perceptions of advisors and their high net worth clients regarding the importance of assistance in making “meaningful” gifts.  Advisors grossly underestimated the importance of this service to their clients.  Prince distinguishes the “meaningful” gift from the standard portfolio of planned gift transactions and emphasizes that advisors who focus solely on isolated gift transactions or gifts after death are missing an opportunity to increase their value and credibility in clients’ eyes.

Knight agrees. “Advisors can help clients evaluate altruistic options, forge alliances with like-minded clients, and connect with experts.” Says twenty-year veteran Renata Rafferty, this means providing advice that “goes beyond creating financial and legal structures for giving.” Affluent clients also want advisors who can “truly understand personal goals and family situations,” says Matt Oeschli, practice management guru, Registered Rep columnist, and president of the Oeschli Institute in Greensboro, North Carolina.  Advisors who step into this breach, says the Capgemini/Merrill Lynch report, “will find tremendous opportunity to play a central role in their clients financial lives.”

This suggests a number of implications for savvy advisors:

1.  Philanthropy can become a prized specialization – a unique weapon in the battle against commoditization in the financial services industry.

2.  Philanthropy can keep you at the table with your client when other advisors attempt to minimize your participation.

3.  Philanthropy can help you attract new clients or expand your services to current clients.

4.  Philanthropy provides you with a reason to stay in touch with your clients even when they’re not in transaction mode

5.  Philanthropic conversations deepen your insights into the hopes, dreams, and fears of your clients.  These insights provide you with opportunities to serve more empathetically and holistically, design experiences that are more satisfying for clients, and build client loyalty.

6. Philanthropy positions you and your firm to serve the next generation and steward its assets.

How Do You Capture the Opportunity?

So you’re sold on the benefits of adding philanthropy to your practice?  What do you do now? 

First, make the commitment to philanthropy now.  Become an early adopter.

Secondly, ensure that your practice of philanthropy has a process—one that ensures you don’t have to reinvent the wheel with each client, but which also allows each client’s unique circumstances and potential impact on the world to emerge.

Why is process so important? 

In this ever-changing, often mystifying world of charitable possibilities, clients often feel overwhelmed by options, fearful of making mistakes, and uncertain of how to evaluate the real impact of their giving. Process shapes the design of the client’s giving experience -- and yours, too.  The right process ensures that you and your client reach the right destination while creating meaning, discovery, and client satisfaction along the way.  Your philanthropic planning process is to your clients (to steal a phrase from author Barbara Sher) “what a loom is to a weaver.” 

So how do you develop a distinctive, effective philanthropic planning process?

You can read the research.  There’s tons of it.

You can network with peers and contact all relevant organizations:  The Financial Planning Association, Advisors in Philanthropy, The Legacy Companies, World Vision’s Financial Advisors Network….The list grows longer every day.

You could take the sum of all your real-life client experiences, distill them into your most inspirational and instructive stories, use the lessons learned to reverse engineer a process, and create tools to support each step in that process,

OR,

You could test our assertion that we’ve already done that homework for you. 

We think the easiest and most exciting way to be on the front end of the greatest philanthropic age in history is to join hands with someone who has been where you want to go and can show you how to get there.

Take a closer look at how Philanthropy Coach can benefit your practice, examine the program’s curriculum, see what our alumni have to say, or reserve your space in the 2009 Class of Philanthropy Coach now.