Vast majority of Canadian HNW investors seek to give back, and their financial advisors can play a key role
This article was provided by Charitable Impact.
Canadian investors are focused on growing their wealth and how they can use it to live the lives they want to lead. For many, charitable giving is a significant part of that vision. Whether your client is a successful entrepreneur with significant shares in a private company, someone contemplating their estate plan with ample resources for their family, or an investor facing large capital gains from a successfully managed portfolio, chances are they’re already donating to charities—either proactively or through the fundraising requests of others.
Philanthropy remains a priority for many high-net-worth (HNW) individuals. As their trusted advisor, you have a unique opportunity to guide them in making giving a seamless part of their wealth management strategy. However, one of the biggest challenges for advisors is retaining client assets when philanthropy enters the picture. This is where Donor-Advised Funds (DAFs) come in. A donor-advised fund functions much like any other investment account under your management, with the key distinction that the DAF is the client. This allows you to retain and manage assets (cash or securities) donated into the fund.
So, whether motivated by tax savings, estate planning, or a belief in a particular cause, by introducing DAFs into your service offering, you can help your clients achieve both their financial and philanthropic goals throughout their lives, and even after their passing without compromising on asset management. No wonder it is seen as a highly flexible giving tool.
The Untapped Potential: Engaging with a DAF provider
The statistics are compelling: 87% of affluent investors express a desire to make an impact through charitable giving, yet only 6% say they receive charitable planning help from their advisors. This suggests a significant opportunity for financial advisors to meet clients where they are at with the services they want while differentiating themselves from their peers.
In a report by Charities Aid Foundation (CAF) that sampled over 215 financial professionals, it was revealed that a significant number didn’t feel prepared to support clients in their philanthropic pursuits, with a mere 5% feeling very confident in providing charitable planning advice. This gap is not surprising. On the one hand, financial professionals are busy managing clients and a constantly changing economic environment. On the other hand, there are few obvious places to point advisors seeking to learn about the specifics of the charity sector-an unfortunate problem in the space However, when you combine the competencies of a strong DAF provider with those of the financial advisor, the knowledge and capability gaps start to quickly evaporate. This is one reason why DAFs' popularity has surged in recent years, despite being part of the charitable landscape for decades, particularly among affluent investors.
How a DAF works is quite simple. Donors can contribute at any time and receive an immediate charitable tax receipt for the fair market value of the donated assets. Those assets are then held in a DAF for the donor and can be invested. When the donor is ready, they can make grant requests to fund any registered charities they want to support with any amount held in their DAF.
Depending on the DAF provider you choose to work with, donors can donate and hold various asset types, such as public securities, life insurance, private company shares, real estate, and even fine art. As such, the strategic flexibility of the DAF provider you choose to work with is a key consideration.
Incorporating philanthropic-related services into your advisory practice is not just about asset management; it also helps to foster closer relationships with clients and their family members. It’s no surprise that philanthropy is a useful relational and planning tool as wealth transitions to the next-generation. With the next generation of clients increasingly identifying with “impact creation”, advisors who fail to incorporate philanthropy into their service models risk losing this type of client.
The Strategic Advantage of DAFs
A DAF is not just a philanthropic tool—it’s a strategic vehicle that simplifies the logistics of charitable giving by consolidating donations in and out of a single fund, allowing people to take a more thoughtful and calculated approach to their philanthropy over time.
This presents a valuable opportunity for advisors to help clients incorporate their charitable aspirations into their broader financial strategy without taking on the administrative burdens themselves. DAFs handle all the administrative tasks, ensure compliance, and distribute grants to charities. Strong modern DAFs also provide philanthropic advisory services to help financial professionals and their clients have the best possible experience from giving while allowing advisors to focus on their core strength—overseeing their clients' financial portfolios and managing relationships.
Donor-advised funds offer financial advisors a solid opportunity to provide a comprehensive service that meets clients' financial and charitable goals, strengthening relationships and differentiating their practice in the market. It’s a strategic move that benefits everyone involved. After all, we are never surprised by the financial professionals who have told us they’ve found their own sense of purpose and meaning by helping their clients manage their charitable giving.
A win-win scenario that aligns with your clients' values and secures your position as their trusted advisor.
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The Charitable Impact Advantage
At Charitable Impact, Canada’s leading Donor-advised fund, our Charitable Investment Program is designed to seamlessly integrate charitable donations with wealth management and other financial planning services. It also offers high-level customer support services for advisors and their clients. By partnering with us, advisors can offer clients a streamlined, impactful way to achieve their philanthropic goals without losing the ability to manage the donated assets. This collaboration strengthens client relationships and enhances advisors' value propositions.
