Planners taught the benefits of giving

Planners are starting to take notice of the benefits in signing their clients up to philanthropic schemes, with government research finding Australians contribute more than $11 billion annually.

Speaking to an audience of nearly 60 financial services professionals, the executive director of philanthropy consulting firm Enrich Australia, Tim Hardy, described how advisers should be encouraging their clients to be more charitable by setting up trusts such as a Prescribed Private Fund (PPF).

According to Hardy, there is a strong business case for advisers to encourage their clients to participate in philanthropy.

“Many financial planners think of the word ‘philanthropy’ as giving away money and a loss of potential funds under management, it’s actually the exact opposite. Although the money is no longer accessible, in the sense that it is committed to be donated, it is still ‘yours’ in the sense that you still need to manage and administer the fund . . . In many ways, a PPF is like a DIY super fund,” Hardy said.

“Not only that, but by discussing these issues with clients you begin to deepen and strengthen your relationships. And by offering philanthropic services you will find that it will bring in new business also.”

Introduced in 2001 by the Australian TaxationOffice, a PPF is a private trust that can be managed by an individual or business for the purpose of giving.

PPFs have undergone a surge in total asset numbers in the past year, rising from $450 million in January 2006 to over $1 billion in January 2007.

Also speaking at the Enrich launch, executive director of Social Ventures Australia Chris Cuffe said besides the effect of feeling good about oneself, PPFs offer a number of tax exemptions and interesting ways of redirecting tax liabilities into the fund.

“I myself started a foundation when I realised I was due to receive a large sum of money. Instead of losing most of it to capital gains tax, I had the money moved into the PPF. So this is a good catalyst for advisers to suggest a client set up a PPF.”

Advisers were also alerted to the fact that many charities are starting to partner with financial advisers and actually direct their regular donors to advisers when they need to set up a PPF, thus increasing their client base.

“So planners have a great opportunity; it’s not just about philanthropy and the spirit of giving, there are tangible benefits.”