InFocus: Philanthropy

How much should clients give to charity?

How much should clients give to charity?

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Clients, even wealthy ones, ask that question a lot, according to Marvi Ricker, vice president and managing director of philanthropic services for BMO Private Banking.

“It really is challenging to answer, due to individual circumstances,” says Ricker. “The good news is advisors are in a great position to help clients work out how much they can afford to invest in the community, to put their wealth to good use and leave a legacy they truly believe in.”

Recent research shows that people who give typically donate between 2-3% of their income to charity, says Marina Glogovac, president and CEO of CanadaHelps.org.

“Everyone's financial situation is different, but for people new to charitable giving I'd encourage them to start at 1% of their gross income as a minimum, and grow from there,” says Glogovac. “For many, giving to charity comes from a spiritual place and many places of worship encourage members to give up to 10% of their income.”

Whatever the motivation to give, Glogovac believes we should always be thinking about whether we can do more.

“If you already give and live comfortably, challenge yourself,” she says. “Sometimes, the more you give, the more you realize you can afford!”

Also, Glogovac recommends that people plan their charitable giving.

“Often giving is emotional – it isn’t rooted in a logical or rational paradigm. Planning your giving strategically each year helps make sure you have the greatest impact on causes you care about most,” she says.

Jo-Anne Ryan, vice president of philanthropic advisory services at TD Wealth, and the executive director of The Private Giving Foundation, agrees the best way to approach the question of “how much to give?” is to create a plan.

“With our clients we develop a comprehensive financial plan, and we project where they are going to be in five years,” says Ryan. “The client often begins to see that they will have more money than they can spend in their lifetime. This opens up the perfect opportunity to discuss a giving target and how it fits into the overall plan.”

How much to give isn’t something people talk about or think about every day, so it can be really useful to have a guideline to help with the decision, according to John Hallward, chairman of The GIV3 Foundation.

“On GIV3.ca there is a donation calculator, which is based on a survey of a thousand Canadian adults, asking them what they feel is fair and reasonable to give,” says Hallward. “The calculator helps to give a third-party perspective. Canadians generally feel that wealthier people should give a slightly higher level (above 3% of gross income), while for those with lower incomes, or who are unemployed or retired, the suggested level is lower (closer to 1%). Of course for wealthier individuals there are more complex considerations such as overall net worth and how much they and their heirs will need to be comfortable.”

Hallward says that a big challenge is the lack of any clear social norm as to how much to donate. People are more willing to do their share when they are aware of what their peers are giving.

“It’s human nature to want to pull an equal load with others,” says Hallward. “If you knew most people in your community were donating 3% of their income, would that help you? A lot of people would say yes.”

Financial advisors are working with the top echelons of people with wealth in Canada, the prime donors. This is a great opportunity to talk about charitable giving and set a target, he adds. 

But for some advisors, there is a fear that money donated is money lost; if they help their clients to give away money there will be less assets to manage. Not true - the research proves that to be only part of the story, says Hallward.

“If you talk to your client about their values and charitable giving, the research says you actually build a stronger relationship. That can lead your client to recommend you to family, friends and colleagues.”

And that, says Hallward, is good for business and for giving.
 
Look in the coming weeks for more 10 Ways articles:
Involving the family in charitable planning

 

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With the vast majority of Canadians contributing to charities each year, philanthropy presents an array of opportunities as well as challenges for professional advisors. According to recent Ipsos Canada research  wealthy Canadians are looking to their financial advisors to play a role in helping and advising them about their charitable giving. This series of 10 articles explores various topics around philanthropy as well as providing insight and resources to help you enhance your philanthropic conversations with clients. Follow these links for more information: e-resources for professional advisorscontinuing education in philanthropy, and starting a foundation.