Giving in the land of plenty

Long gone are the days when a hastily written cheque is enough to soothe the social conscience of the relatively time poor. And most people have tired of the intrusive evening phone call, or being accosted on the street, requesting a donation to some well-deserving cause.

Nowadays, socially aware and concerned people are looking for more meaningful ways to contribute to the community in which they live, over the longer term.

Many Australians are increasingly seeing success as more about the effect they have on the world (in their own modest way), rather than the amount of money they are idling away in a bank account.

With the significant increase in, and transfer of, wealth over the past 20 years, the current generation is probably one of the first to have money that is truly in excess of their needs.

They don’t need to wait until old age or death to be charitable and they are looking for ways to become connected and involved with the causes they wish to support.

These new patterns in charitable giving open up a myriad of both challenges and opportunities for financial planners.

These challenges arise and are discussed in our network of 20 or so Sydney-based advisers across the financial planning, accounting and law professions, who have a common interest in advising on philanthropic giving.

The members of this professional network are increasingly interested in improving their knowledge about the best ways for clients to give, where to obtain research and what taxation issues are relevant.

Apart from a personal commitment to philanthropy, this network of advisers share a strong conviction that being able to provide their clients with advice on charitable giving is a sensible business proposition, because:

n it gives them the opportunity to build a deeper and stronger relationship with their clients;

n it may facilitate introductions to other like-minded clients; and

n it forms part of a holistic financial plan, most suitable for fee-for-service advisers

To me, the opportunities are self-evident and have been well documented. And unlike the next tax-driven investment scheme, charitable giving is not just a fad.

Certainly (and rightly), high profile givers such as Warren Buffet, Bill Gates and, closer to home, Geoff Dixon have made headlines with their phenomenal (in some cases potential) contributions.

But as I’ve pointed out in previous articles, giving is a growing trend, particularly as government sector support shrinks and the increasing needs, not only of our ageing population but also of a more complex society, puts greater pressure on government resources.

One of our key lessons to date is that advisers should view philanthropy as simply another element of the advice proposition.

We are not providing a product or service but giving advice, and therefore the same amount of rigour should be given to research into determining the best solution for the client’s philanthropic needs as for their other needs, such as superannuation.

Which brings me to the vexing issue of appropriate education and training for planners who want to be an integral part of their client’s charitable giving program.

Advisers consistently confess that they do not feel adequately prepared to ask questions about their clients’ philanthropic goals, nor do they feel properly educated about the various charitable-giving options.

After all, there are some 77,000 registered charities in Australia, along with several foundations, such as the Sydney Community Foundation, so there is a lot to consider.

Hopefully we have learned some lessons from our experience with the self-managed superannuation funds (SMSF) in the 1990s, where some narrow focused advisers and accountants recommended clients establish a SMSF, treating them as a kind of one-size-fits-all, without fully taking into account the degree of responsibility and ongoing cost to the client.

The same could easily happen with Prescribed Private Funds, one of the more popular vehicles available to clients for philanthropic giving.

These funds, like SMSFs, are not off-the-shelf solutions that can be provided to all clients. Like SMSFs, they involve cost and complexity that may not be appropriate to the client’s needs.

At the same time, they do offer the valuable ability to lock away the founding capital and protect it in times of economic downturn.

There are other perfectly appropriate options such as institutional charitable funds and community foundations that might better suit a client’s needs.

To my mind, we need more formal education in this area to equip advisers to have meaningful discussions with their clients and to offer them appropriate solutions, along the lines of:

n what are your objectives when it comes to giving?

n what types of causes do you want to support?

n how will you choose which cause you want to support?

n how will you decide how much money you want to give?

n how often do you want to make donations?

n how little or much do you want to be involved with your chosen charity or cause? and

n what happens to your wishes if your family does not want to become involved?

Not only do advisers need to know what questions to ask, they of course need to carefully guide their clients as they struggle to answer them.

A session that I believe will be invaluable to interested advisers at the Financial Planning Association (FPA) conference will include Tim Hardy from Enrich Australia. The topic of the session is the business benefits of philanthropy.

Tim and his partner Mandy have worked over the past three years to develop training courses for advisers on the introduction and application of philanthropy. The course focuses on equipping advisers with the ‘soft skills’ needed to discuss philanthropy with clients.

There are also courses in related areas such as estate planning and charities available at the University of Technology, Sydney, and Swinburne University in Melbourne.

Though it is still early days, is now the time for the Financial Planning Association to develop and accredit specific training courses in the area of advice on philanthropic giving?

Advisers need to be formally equipped to research options properly and to ensure that advice is truly in their client’s best interests, just as they must in the more traditional areas of financial planning.

For advisers who see the need, who want to be involved for personal reasons or as a business decision — or both, it is important to be fully educated about the different choices available to clients and to structure a program for charitable giving.

Remember, at the end of the day, it’s a win for your client, a win for your business and a win for the wider community.

For further resources and information you can join the Professional Advisers Group (for Sydney-based financial advisers, solicitors and accountants) by e-mailing me at [email protected] or by going to www.gatewayforgiving.com.au

Bruce Christie is an authorised representative of Centric Wealth and a director of the Sydney Community Foundation.