Integrating charitable planning
Transcript of the video:
Integrating charitable planning in a practice
I'm Kim Laughton. I have the pleasure of running Schwab Charitable.
And our donors continue to be very generous. In the coming year they will give away over $3 billion to over 80,000 charities.
And advisors are a big part of the story. They are uniquely placed to help clients to align their giving with their values, and to incorporate giving into their overall wealth management and financial planning strategy. At Schwab Charitable, we work with over 2,200 independent advisors. They are of all sizes around the country, and they tell us that the conversations they have with clients about their giving help them to deepen their relationships and to generate referrals.
So we're here to discuss how advisors can supercharge their philanthropy offering into a true differentiator for their practice.
Providing basic charitable giving used to be a differentiator. It's no longer a differentiator because according to Schwab Advisor Services last year's Benchmarking Survey, the 2019 RIA Benchmarking Survey, almost 80%, so 79% of advisors now offer charitable planning, and they include that in their service offering. So those that aren't are really behind, and those that do continue to need to add and make those services more robust.
Drew, let's start with you. Can you tell us about your firm's experience with charitable planning and how you incorporate it into your practice?
Well, we've really been drawn into it, I would say, over the years, really kind of trying to respond and be proactive with clients. And I think that it's been increasingly important to clients and how they're going about philanthropy.
I would say it's changed and evolved over the years, and I think there's a generational shift going on within how our client base is viewing philanthropy.
You know, the old model, where we might sit down with a client, you know, once a year, and they're approaching their charitable giving as, you know, let's review the list from last year, 20 names, scratch these two, add these two, increase, decrease, and run through it.
I think what we're seeing today is driven by the younger generation, but, honestly, the older generations, I think, are getting dragged along, too, by their younger generations.
You know, more and more clients seem to be thinking about it as, you know, impact philanthropy, and what are they really going to do to drive change within a particular organization, you know, around some cause and some issue.
It's a totally different conversation today that I think is really… starts with looking at the… an examination of the mission and values and what the client is trying to change in the world, and what they're passionate about. And then helping them to develop a plan on how to execute, and I think it has to start with those topics. And then from there we get into figuring out what are the right vehicles, what are the right structures, how do we maximize tax benefits and so forth?
The conversation is changing and continuing to evolve, and I would say that, you know, we learn as much from our clients on this. And I think listening and being aware to what they're thinking about and doing allow us to help better serve them going forward.
Right. And then, Rick, you're working more directly with advisors. Can you talk a bit about how you all do that at Aperio and what you're seeing from your side?
Sure. Yeah. No, it's interesting to hear Drew talk a little bit about kind of the evolution and how they work with their clients, because we're seeing a very…we kind of evolved very similarly. And what Drew is describing is very… you know, that happens a lot with our advisor clients, where basically we try to help those advisors, we educate them, really, as the types of things that are out there.
We worked with an advisor and he had a client, a very successful Silicon Valley executive, she had worked in the industry for years, did very well and retired. And was… her passion is really equality, and women's, you know, inclusion, and promoting diversity. So she wanted to set up a donor-advised fund, and, again, we identified certain securities that we could actually peel off that were very highly appreciated, started to construct that donor-advised fund. But the mission there was she was going to provide and make grants to organizations that promoted education of women, you know, again, diversity at corporations, the workplace. And while that portfolio was constructed and as it grew, she wanted the values to very much reflect that overall mission. And so in a public equity portfolio what we did, we took a look at companies that had representation of women on their board, and if a company didn't have a woman on the board we excluded those companies.
For advisor who maybe aren't as sophisticated as your firms are in managing both charitable planning and values-based investing, what would be the two to three takeaways or pieces of advice you would have for them on how they can get started or how they can build upon what they already have if they have very little in their firm?
I think a lot of it is…has to start with listening and helping the clients to clarify and define. Now that we've figured out the purpose and the missions and what we want do, what's the budget that we can allocate, you know, over what timeframe for charitable that allows you to make sure you're still able to support your lifestyle and needs?
And then on the back end, too, a lot of advisors, you know, we tend to be very focused, and we understand how to analyze an investment to try to maximize that after-tax risk-adjusted return.
But I think as you start working with clients who are interested in impact investing, for example, I think there's a shift in the focus in trying to recognize that there are other factors at play here and other things that you need to be looking at in order to say, you know, is this investment achieving the goals and objectives we have? Because on the back end we're going to want to measure success and progress, and say, ‘You know, did those charitable dollars, what was the impact, how did it work out?' And they don't all work out, but on the same side as the investments, you know, what are we trying to achieve on a financial return, as well as a social return?
And, Rick, how about tips that you would have?
Yeah, I couldn't agree more with Drew. Once the portfolio… if you have too many constraints, if you start to deviate too far from the benchmark, there's a chance that at some point it's going to underperform the benchmark.
But what we try to do is just educate folks that, you know, just be aware, you know, this isn't going to track exactly, but from a tax standpoint, if we can actually tax-efficiently manage that portfolio, that's going to give some value, too, to the end-client.
And, overall, if we can thematically embed kind of what's passionate to the client, you know, then they'll feel good about that, as well.
It actually becomes quite fun and exciting, and I think a great way to interact with the clients and engage with them beyond the portfolio, beyond their investments, in a way that is, quite frankly, many times more meaningful to them, than whatever the next municipal bond I might find for them. They just don't get excited in the same way.
Yeah. No, it opens up conversations and really you get to know them so much better. We've heard that as well.