Welcome to Financial Advisor IQ

UBS: Rich Clients Harbor Skepticism About Charity

October 23, 2014

Millionaires who want to donate to charities but feel skeptical about the results can gain clarity and focus from their financial advisors, according to new findings from UBS. Rich clients often open their wallets but doubt how effective their gifts will turn out to be. That presents an opportunity for advisors to boost wealthy clients’ confidence while improving their allocation of resources.

Brad Bernstein, a UBS advisor in Philadelphia, suggests to clients that they mix online research with hands-on labor at the organizations they favor. “Volunteering is a great way to see for yourself that you are effecting positive change,” he tells FA-IQ in an e-mail. “You also can easily analyze charities to see how much of your monetary donation will go toward the actual cause versus covering administrative costs. One great resource I recommend to my clients is Charity Navigator, which provides in-depth insight into charity organizations’ levels of transparency, financial performance, leadership profiles and more.”

UBS recently released its latest quarterly Investor Watch survey, which found that 91% of millionaires polled donated to charities in the past year yet only 20% considered their giving highly effective. More than half of respondents said they had not only donated money but also volunteered time to their favored causes.

Even though millionaires who incorporate financial planning into their giving tend to be more satisfied with the results, only 9% of respondents said they receive such guidance from their advisors. Clients who do receive guidance benefit from tax-deduction strategies, although they often see this as an afterthought, according to the survey. UBS surveyed 2,210 U.S. investors in September, 1,372 of whom had at least $1 million in investable assets.

On average, charitable giving rose 28% among the wealthy between 2011 and 2013, according to U.S. Trust. The Bank of America unit also released its annual Study of High-Net-Worth Philanthropy on Oct. 22. In 2011, the wealthy gave an average of $53,519; and in 2013, they gave $68,580. But whereas donations in 2011 averaged 9% of household income, they dropped to 8% two years later. U.S. Trust’s results were based on data from 632 households with at least $1 million in investable assets or an annual income of at least $200,000.

By Chris Latham