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5 Reasons to Offer Philanthropic Planning
By Roger D. Silk, PhD, CFA
and CEO of Sterling Foundation Management
May 14, 2002 7:00 am ET
Doing business with generous clients can be both professionally and spiritually uplifting.
Here's a riddle with a profitable answer:
What asset pool grew approximately 10% per year for the last 20 years (net of all expenses, and with withdrawals exceeding 5% a year), currently holds over $300 billion, and is projected to grow into the trillions?
Answer: Assets held in private foundations. And experts predict that over the next 30 years, this pool will grow to $5 trillion or $10 trillion.
More and more advisors are recognizing this trend and see private foundations as an important tool for targeting the high-net-worth market. If you don't already provide some form of charitable planning, here are five reasons why you may want to consider offering high-end philanthropic services:
- Philanthropic clients make better clients. If you think that people who give to charity are more generous than average, you'd be right. And that generous spirit often extends to the way they relate to other people in their lives, including advisors. I'm not saying that philanthropic people don't demand value, but they understand that hanging onto every penny is not the goal in life, and they tend to be more understanding and more willing to pay fairly for valued services.
- Philanthropic clients make better clients. If you think that people who give to charity are more generous than average, you'd be right. And that generous spirit often extends to the way they relate to other people in their lives, including advisors. I'm not saying that philanthropic people don't demand value, but they understand that hanging onto every penny is not the goal in life, and they tend to be more understanding and more willing to pay fairly for valued services.
- There's less competition. Not many advisors are sophisticated about charitable giving-which means a large number of high-net-worth clients do not have easy access to good information about philanthropic alternatives. If they are not your clients now, you may be able to attract them by offering a value-added service that they're not getting from their current advisors. And if they are your clients now and you're not providing them a full range of philanthropic alternatives, you may find yourself on the short end one day.
- Philanthropy is a rapidly growing field. Philanthropy is a burgeoning field. We're seeing growth in all areas, from assets held by foundations and endowments to the number of different charitable planning vehicles to the explosion of donor advised funds. The number of private foundations alone is growing exponentially, with thousands created every year. This kind of growth offers you an expanding market of high-net-worth prospects needing investment and philanthropic expertise.
- Trillions will flow into philanthropy-and need to be managed. Paul Schervish of Boston University has estimated that approximately $40 trillion will pass from one generation to the next over the next 20 years. Of this, trillions-not billions-will go to charity. A great percentage of this wealth transfer will end up in private foundations, advised and managed by people like you. This flow of assets into foundations represents the greatest boon to philanthropic causes in history. It will also create billions of dollars in fees for the advisory industry. I estimate that an average foundation (not a large one) can easily be worth half a million dollars in fees over a 30-year life.
And there is a sixth reason: advisors who really understand philanthropy know that it is more than good business-it's just plain good.
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