Welcome to Financial Advisor IQ
Follow

How to Use Philanthropy to Win RIAs Wealthy Clients

By Garrett Keyes July 10, 2019

Providing philanthropic advice can be a great tool for winning wealthy clients, according to the CEO of an RIA which has done just that.

For Ensemble Capital, philanthropic planning started 15 years ago. In 2004 a “very sophisticated high net worth client” called CEO Sean Stannard-Stockton, asking him to sell some valuable stocks and wire the proceeds to a charity. But Stannard-Stockton instead explained that by gifting the shares directly to the non-profit instead of selling them, the client could avoid capital gains tax on the investments and receive a tax deduction.

The client was “a person giving six figures yearly” and he told Stannard-Stockton that he never knew he could do that.

Ensemble’s philanthropic advice offering was officially born from there and has been instrumental to the firm’s growth ever since. A quarter of the firm’s 200 clients have a philanthropic account with Ensemble. The service also helps the advisory compete with other RIAs to win clients and generate referrals, Stannard-Stockton says.

“[High net worth individuals] don’t spend a lot of time talking about tax planning with their peers,” he says. “But they do like to talk about their philanthropic efforts” at galas and other events. “Participating as an adviser [in the philanthropic space] is just more likely to trigger referrals,” Stannard-Stockton says.

Charitable giving is also on the rise among wealthy investors. In 2018 the number of charitable gifts from major donors giving over $1000 increased by 2.6%, a study from the Association of Fundraising Professionals and the Center on Nonprofits and Philanthropy at the Urban Institute, showed.

At Ensemble, philanthropic planning does not mean telling clients which charities to donate to. It means “help[ing] clients make their desired social impact in the most tax-efficient way possible,” Stannard-Stockton says. Ensemble accomplishes this by using a multitude of charitable vehicles like taxable corporations, donor-advised funds, and charitable remainder trusts.

Donor-advised funds and charitable remainder trusts are vehicles that give clients immediate tax deductions. But donor-advised funds let clients recommend how assets are given over time. Charitable remainder trusts make annual distributions to decided beneficiaries for a pre-determined period.

Philanthropic planning has become an integrated part of Ensemble’s overall wealth planning since its introduction, says Stannard-Stockton.

Sean Stannard-Stockton

“For many high net worth individuals, it is an integrated part of their life,” so it makes sense it's an integrated part of Ensemble’s business, he notes.

Stannard-Stockton says philanthropic planning is a service “clients don’t always know they want until they hear about it.”

A version of this article originally appeared in the Financial Times here.