Including charitable giving in the advisor-client conversation.
Canadians can take pride in the spirit of generosity that flows across this country and the charitable giving that supports thousands of organizations dedicated to families, health initiatives, the arts and more. According to Statistics Canada, nearly $12 billion was donated to Canadian charities in 2018, with high-income earners and seniors the most generous. Taxpayers with incomes of at least $80,000 accounted for 35 per cent of all donors.
However, the 2021 Giving Report reveals a troubling trend. Online donations now account for 86 per cent of donations made, but the overall amount given is down 10 per cent. Fewer Canadians seem to be donating, with numbers gradually decreasing from 24 per cent in 2007 to 19 per cent in 2017. And it seems that generosity comes with age – those aged 55 and up are donating nearly twice as much as the 25–54 age bracket.
Despite the dip in donation amounts, it’s clear that charitable giving continues to be important for many Canadians. And this fact represents an opportunity to add value to the advisor-client relationship by including philanthropic guidance in your practice. Through deeper conversations, you can uncover a client’s motivations to give, and help them consider such scenarios for charitable giving opportunities as selling a business, receiving an inheritance or leaving a legacy gift. Or you could help a client get into the habit of regular charitable contributions.
Motivations to give
Discussions with clients about investing, saving for retirement, tax planning and insurance tend to be routine, but the topic of philanthropy seems to be less common. Research on charitable giving in Canada suggests more advisors could add philanthropy to the conversation. The first step is understanding what motivates a client to give, and their priorities may not be quite what you expect.
The Philanthropic Conversation study considered 178 high net worth clients with investible assets of more than $1 million. When asked about their motivations to give, their top reasons included making an impact on the community (55 per cent), a desire to give back (50 per cent) and a passion for a cause (32 per cent). Considerations such as reducing taxes (21 per cent), creating a family legacy (4 per cent) and enhancing a family name or business (0 per cent) were ranked much lower.
The study, which also included 258 advisors, found that when conversations about philanthropy had occurred, the discussion was focused on the technical and tax aspects – whereas clients would rather discuss their values and passions around giving. A few additional awareness statistics on the topic:
- Whether meaningful conversations about charitable giving are happening depends on who you ask, with 91 per cent of advisors reporting that they discussed the topic with their clients, while only 13 per cent of clients felt they had discussed the topic with their advisor.
- Of the clients who said charitable giving was discussed, only 36 per cent felt it was a meaningful and useful discussion.
- Advisors may have misperceptions about the appropriate time to have a conversation about philanthropy. Although 55 per cent of advisors feel this conversation should wait till a relationship has been well established, 40 per cent of clients say anytime is the right time, including in the first one or two meetings with an advisor.
Starting the conversation
Philanthropy is often a very personal decision for a client, and the topic requires a great deal of care and sensitivity on the part of the advisor. But as in any important conversation, having a plan to guide the discussion can help to ensure you have a meaningful interaction that builds a deeper level of trust while also giving you a strong sense of your client’s values. Here are a few ideas:
Add philanthropy to the agenda: As stated above, research indicates that clients want to talk about charitable giving, even in the early stages of the advisor-client relationship. Along with investment goals and insurance needs, add a line for philanthropy to the meeting agenda and allow for time to explore your client’s views about giving back.
Ask questions: A client may have clear ideas about philanthropy or may not really know how to get started. A few open-ended questions can help:
- What is important to you? What are your values and beliefs?
- What organizations have made an impact in your life – education, cultural, health, etc.?
- What would you like to accomplish with your donation?
A plan for giving
Charitable giving comes in many forms. It could be a spontaneous donation at a charity event, a monthly payroll deduction program or a careful philanthropy strategy incorporated into an estate plan. Just like a plan for investing, a plan for charitable giving can help a client to become more thoughtful about the organizations they wish to support and what makes sense for their budget.
When helping a client to formulate a plan, possible barriers to giving can be useful to understand ahead of time. Here are a few potential obstacles cited in Imagine Canada’s report “Thirty Years of Giving in Canada”:
- 69 per cent felt they couldn’t afford to give more
- 29 per cent felt their donation wouldn’t be used effectively
- 28 per cent said no one asked them about charitable giving
- 16 per cent felt the tax credit wasn’t large enough
- 13 per cent said they didn’t know where to give
Your client’s stage of life can also play a large factor in their plan for giving – a plan that should be reviewed annually while making suitable adjustments. According to Community Foundations of Canada guidelines:
- Individuals in their 20s typically make spontaneous cash donations or donate by participating in special events or activities
- People in their 30s lean toward convenience and tend to opt for automatic online monthly donations to their favourite organizations
- Clients in their 40s and 50s may be looking for tax strategies, and this is where a life insurance policy can help. A modest monthly life insurance premium generates an annual tax credit, eventually resulting in a sizeable charitable gift for a specified organization
- Clients with holdings in mutual funds and stocks can take advantage of tax savings by using these assets as a gift in kind to their favourite charity
- Estate planning can include considerations for philanthropy and tax savings, where donors can designate charities as the beneficiaries of investment vehicles such as Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Funds (RRIFs) and Tax-Free Savings Accounts (TFSAs)
This article provides additional insights into charitable contributions and tax strategies. For additional investment strategies pertaining to charitable giving, refer to this article on Series T mutual funds in this issue.
More than ever, charities rely on the generosity of Canadians. Having the knowledge to offer effective philanthropy strategies for your clients at all their investment and insurance stages of life can help to set you apart from the crowd. For more information on talking to your clients about philanthropy, consider this resource created by Community Foundations of Canada.
 Statistics Canada, “Charitable Donors, 2019,” The Daily, last modified March 8, 2021, www150.statcan.gc.ca/n1/daily-quotidien/210308/dq210308c-eng.htm (accessed October 5, 2021).
 Ibid., p. 19.
 Ibid., p. 20.
 Ibid., p. 23.