Bank of America analyzed the charitable giving of high net worth individuals in 2014 and found that more than 70 percent of high net worth people believe their gift to a group will make a difference, while a similar number of people said that giving to a favored group gave them personal satisfaction.
Currently 72.5 percent of high net worth households have a giving strategy, but the majority do not consult with a financial professional regarding their giving. That’s a critical mistake, because it reveals that most of these high net worth consumers may be able to contribute to their favorite charities and institutions in a more efficient way that maximizes their contributions.
Financial professionals who present solutions that help their clients achieve charitable goals are likely to develop a broader client base and have a higher retention rate. Charitable giving is an important act for many of the nation’s high net worth consumers, so a financial professional that makes it easy to give can create a deeper connection with his or her clients.
Factoring in charitable giving
Though the majority of high net worth clients want to donate money to the organization’s they believe in, many financial professionals may be reticent to present their clients with options that facilitate charitable giving.
According to Insurance News Net, financial professionals may worry about bumping up against sensitive estate planning issues, and concern about offending a client may trump the desire to help that individual donate to a favorite charity.
The fact is, financial professionals need to start these conversations with clients, because many high net worth individuals may not be aware of how much they are capable of giving. That uncertainty may prevent these individuals from giving at all, which impacts their personal happiness and deprives charities of potential funding.
High net worth people are likely to donate with or without the help of a financial professional; Bank of America found that 98.4 percent of high net worth individuals gave to charity in 2014 while just 65.4 percent of less-wealthy households contributed. Financial professionals can help high net worth clients give even more without jeopardizing other estate planning goals.
Life insurance provides a solution
Financial professionals should introduce life insurance as a possible solution to ensure that money goes to a specific charity after a high net worth client’s death. As part of a large estate plan, a properly structured life insurance policy provides a way for high net worth individuals to give without dramatically affecting their existing estate plan.
There are three basic ways to incorporate life insurance into a plan for charitable giving, according to Insurance News Net. Clients can either alter an existing policy so that a charity becomes the new beneficiary, or they can gift an existing policy so that a charity becomes both the owner and beneficiary. If a client does not currently have a policy that can be altered, a new policy can be created with the specific goal of passing money to a charitable group.
Financial professionals who address high net worth individuals’ desire to donate their money head-on may find that doing so forges deeper client relationships. Charitable giving is an important part of life for many high net worth individuals, and financial professionals’ advice needs to reflect that.
Latest posts by Highland Capital Brokerage (see all)
- Robert W. Finnegan, J.D., CLU®, Published in Trusts & Estates Magazine - June 6, 2018
- May 2018 LTC Newsletter - May 24, 2018
- April 2018 LTC Newsletter - April 26, 2018