Donors Turning to Wealth Advisors

In each of the past few years, Bank of America and The Center on Philanthropy at Indiana University have conducted a study of high net-worth philanthropy. The study focuses on the giving of wealthy families, not institutional foundations (although the wealthy families may very well have their own foundations).

You can find a summary of the findings here. Because they’ve been conducting the survey for the past couple of years, they are now able to track changes in donor behavior. What I found most striking was the marked shift in whom major donors are turning to for advice on their giving decisions. The chart below shows that the number of wealthy donors who reported they asked nonprofit personnel for advice dropped by 29% while the number who reported asking their wealth advisor for advice increased 96%. Major donors are now turning to wealth advisors for giving advice more frequently than they turn to nonprofits.

But the shift wasn’t just towards wealth advisors. Accountants, attorneys, wealth advisors, and bank/trust employees all saw an increasing demand from donors for giving advice, while nonprofit employees and donors’ peers saw a decreasing level of demand. This is clear evidence that the convergence of philanthropy and wealth management that I’ve been writing about for two years is playing out.

But this shift presents a serious danger.

I’ve just published a series I wrote for Wealth Manager magazine in which I claim that this convergence is playing out and will continue. But I also state that the wealth management industry is significantly underserving their philanthropic clients. Look, most wealth managers don’t know squat about philanthropy. But like it or not donors are thinking about their giving as a financial activity more and more. This is a good thing because most all donors have the capacity to give more than they do today. This is partly because they do not effectively take advantage of the available tax strategies to lower the cost of their giving and partly because most donors have never actually worked with a financial professional to determine how much they can give. Instead, they use rules of thumb or don’t give it much thought and don’t realize they can give much more while maintaining their financial security.

So what to do? In January, I’m speaking to a gathering of the Northern California Planned Giving Council. My message to them will be that wealth advisors do not represent the enemy, but most of them need a lot of help to climb the philanthropy learning curve. It may not be the obligation of the nonprofit community to educate wealth advisors, but I think there is a huge opportunity available to those nonprofits that see the shift that is occurring and get out in front of the curve by working hard to educate the financial crowd.


  1. Michael Moody says:

    This post is spot-on, Sean, as are those articles you did for Wealth Manager magazine. (I really like the idea of a “philanthropic concierge.”)

    The question we are left with, though, is HOW to help wealth advisors “climb the philanthropy learning curve” as you say? How do those of us who want to increase the understanding of philanthropy go about reaching this audience? Conferences? Business school curriculum? Articles in the magazines they read, like you’ve been doing? Covert Blackberry hacks (ok, maybe that’s getting a little desperate…)?

  2. That’s the tough question Michael. Research shows that while 90% of wealth management clients want their wealth advisor to help them with their philanthropy, 60% of wealth advisors think it is inappropriate for them to bring up the subject. It isn’t just that they don’t understand it, it is that they find the subject inappropriate in the way that you don’t talk to your clients about politics or religion.

    When nonprofits approach wealth managers about the subject of philanthropy, it is usually to talk with the advisor about the mission of the nonprofit and hope that the advisor will refer donors to the nonprofit. In fact, doing so may very well be inappropriate and anyway being referred to a nonprofit is not what most clients are looking for.

    It seems to me that the nonprofit community would be well served to advocate for more technical education for wealth advisors around philanthropic vehicles. While the “philanthropic concierge” role may be far off for most advisors, there are programs like the Chartered Advisor in Philanthropy program (newly under the leadership of Phil Cubeta) that can quickly help wealth advisors get a handle on philanthropy.

  3. Adin Miller says:

    Is it the responsibility of nonprofits to provide the education or is there a finer distinction, i.e., should grantmakers provide that education? I’m very curious to know what is the best mechanism to set up a convergence between wealth managers and philanthropy experts.

  4. I don’t think it is so much about “responsibility”, it is about incentives. Grantmakers should see it as in their best interest to educate donors. A few do some work in this area. But nonprofits are going to be the ones on the short end of the stick if donors keep asking wealth managers for advice and those wealth managers discourage giving. Hopefully, the education will come from many sources. I just think that the biggest opportunity and the biggest risks sit squarely with the nonprofits.