2002 Study of the financial adviser’s role in philanthropy
Working Paper No. CPNS25
Dr Kym Madden
Centre of Philanthropy and Nonprofit Studies Queensland University of Technology
Brisbane, Australia
April 2004
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1
Abstract
This paper presents the key findings from a study of Australian financial advisers’
attitudes to philanthropic planning with high net worth clients, and the extent to which
they engage in it. This is the first study of its kind in Australia and is based on a
United States (U.S.) study by The Philanthropic Initiative (TPI) in 2001.
The TPI study showed U.S. financial advisers were reluctant to ask clients about
charitable giving, an attitude that is also reflected in the United Kingdom (The Giving
Campaign, 2001, 2003, 2004). Despite this, U.S. advisers are increasingly interested
in doing so, compared to earlier studies, and desire greater knowledge and skills in
this area. While financial advisers in the United Kingdom (U.K.) are more cautious,
they too desire better information and training about planned giving.
The growing willingness by U.S. advisers and, to a lesser extent, U.K. advisers to
become more competent in charitable planning reflects new opportunities arising
from the huge intergenerational wealth expected to be transferred in the next few
decades, a trend that is also affecting Australia.
This study’s findings suggest that Australian financial advisers, like U.K. advisers, are
not as active in asking their high net worth clients about philanthropy as their U.S.
counterparts. Further, they perceived the use of charitable vehicles by clients as
lower. On a positive note, given the growing opportunities for financial advisers to
incorporate strategic philanthropy in their services, the majority of Australian advisers
surveyed believed that clients could find satisfaction through philanthropic giving.
They welcomed resources and support that would assist in guiding clients interested
in tax effective giving. The materials identified as most likely to be helpful to them
were identified as educational materials they could share with clients, a single
Centre of Philanthropy and Nonprofit Studies 1 Working Paper No. CPNS25
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volume of philanthropic options, case histories and, to a lesser extent, sample
documents for private foundations and relevant ‘how to’ articles in professional
journals.
An initial interpretation of the findings suggests that Australian financial planners
have a low level of interest in planned giving. A closer inspection of the mix of results
suggests a more complex story, with signs of emerging interest. For example, in
response to a specific question, many advisers showed interest in joining a
professional network that promoted philanthropic giving and resources on the
condition that it was both confidential and non-commercial in nature. Thus this
study’s results suggest latent, but not active, interest in philanthropic planning by
Australian financial planners advising high net worth clients.
1.0 Introduction
Despite recent uncertainties, the expected transfer of wealth by the current older
generation across developed countries, including Australia, is widely acknowledged
as the largest in history (AMP, 2003; Havens and Schervish, 2003; TPI, 2000). It is a
trend based on significant increases in housing wealth, superannuation, savings, and
investments (AMP, 2003) with expected benefit to females as well as males, as
reported by Steinberg and Cain (2003). In the U.S, the most commonly cited figure is
that at least $US41 trillion dollars (in 1998 dollars) will be transferred by 2052
(Havens & Schervish, 2003). In Australia, there are no clear figures but simulations
by leading financial services company AMP confirm a substantial positive impact
over the next 30 years. Additional factors such as smaller family size, increased life
expectancy, and substantial wealth that has already been accumulated through
changes to the value of property and shares mean that retirees are increasingly
wealthy, even before inheritances, a trend that is also occurring in other countries
Centre of Philanthropy and Nonprofit Studies 2 Working Paper No. CPNS25
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such as the U.K., Italy and Sweden (AMP, 2003). The wealth held by older
Australians was approximately 22 per cent of total household wealth in 2003 and will
increase to 47 per cent by 2030 (AMP, 2003; Kelly, 2002).
As a result, high net worth individuals are increasingly well placed to consider
opportunities for charitable giving. Boston College’s Social Welfare Research
Institute’s study of intergenerational transfers suggests that up to $US25 trillion will
be given in the U.S. to nonprofits over the coming decades, mostly through
planned gifts. Further, the study shows that, in the U.S. at least, more than four out
of five high net worth households say they wish to do more financially for the
nonprofit community (Prince, 2000). In the U.K. a study by the Giving Campaign
showed a widespread desire by donors, including the wealthy, to contribute to the
improvement of people’s lives through financial gifts (2004).
In Australia, today, it is the high net worth donor who gives the most on average to
the nonprofit sector. The latest figures from the Australian Taxation Office suggest
that donating taxpayers earning between $500,000 and $1 million annually claim
an average of $6,515 in tax-deductible donations. Once they earn over $1 million,
however, this figure jumps almost 10 times with the average donating taxpayer in
Australia claiming $64,638 in charitable gifts (CPNS, 2004). While Australia differs
from the U.S. in many respects, it is likely that the nonprofit sector in Australia will
also benefit from the accelerated transfer of wealth to individuals, if not to the same
degree.
At the same time as this growing capacity for philanthropic activities by individuals
come new tax-effective charitable vehicles and new charity financial products in
Australia and elsewhere. In the U.K., for example, improved tax breaks for
charitable giving has meant a huge boon to the nonprofit and financial services
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sector (The Giving Campaign, 2003). In Australia, the introduction of Prescribed
Private Funds (PPFs) as a new type of donation deductible vehicle has been linked
to a substantial increase in donations from the higher income earner in just one
year (CPNS, 2004).
Overall, there are new opportunities for individuals to think more strategically about
what their charitable dollar can achieve, as well as how they can give in tax-
efficient ways (The Giving Campaign, 2001). Moreover, the few studies in this area
of advising high net worth individuals about charitable giving suggest a need by
such individuals for quality assistance in this area. One recent study in the U.S.
suggests that affluent individuals who want to make gifts to charities did not always
know how best to do so (Weems, 2002). Moreover, while many U.S. affluent
individuals wanted to engage in philanthropic giving, they also did not want to
jeopardise their own financial situation and lifestyle (Prince, 2000). As the income
and wealth of affluent individuals continues to grow, more ‘will see themselves
capable…of doing something more systematic and formative for the people and
causes they care about’ (Havens et al, 2003 p.38). Nevertheless, the complexity of
the financial environment regarding assets and options for tax treatment is likely to
increase demand for ‘the most financially congenial contribution strategy’ (p.23).
Leading Californian donors suggested that there was an unsatisfied need for
information about all charitable options, clear explanations of these options, and
advice that suited their circumstances (Stone and McElwee, 2004). While these
donors wanted an appropriate approach by advisers, for example, they did not
wish for their financial advisers to be ‘pushy’, they perceived that their advisers
could do more to assist them with their philanthropic needs (TPI, 2000; Stone &
McElwee, 2004). Thus there appears to be potential for advisers to provide more
Centre of Philanthropy and Nonprofit Studies 4 Working Paper No. CPNS25
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comprehensive and strategic services in philanthropic planning, which has served
to widen the gap between actual and ideal practice in the U.S.
In a similar vein, affluent individuals in the U.K. wanted to ‘do good’ and ‘make a
difference’ through philanthropic giving (The Giving Campaign, 2004, p.3). Two of
the key reasons they held back was a fear that they may not be able to afford it,
and they had little guidance about an appropriate level of giving. A study of charity
financial products by The Giving Campaign suggests that the need for financial
advice was largely unfulfilled, although many clients respond well to it (2003).
This apparent lack of informed assistance from financial advisers or other sources
supports earlier studies that show U.S. financial advisers have been extremely
reluctant to discuss a client’s philanthropic giving unless specific advice was sought
by clients (TPI 2000). In the U.K., too, financial advisers traditionally have avoided
discussing giving to charity with their clients at all (The Giving Campaign, 2001).
Almost 60 per cent of independent financial advisers (IFAs) and nearly half the
stockbrokers surveyed never or hardly ever gave such advice. Moreover, over 80 per
cent of stockbrokers in the U.K. said it was the client, not themselves, who raised the
issue of giving money to charity. When they did give advice, they showed great
caution and largely recommended the same one or two giving methods, regardless of
client needs. It appears that U.K. advisers had limited knowledge of charitable
vehicles, for example, stockbrokers and investment managers were more aware than
others of benefits of donating shares. Overall, The Giving Campaign’s study showed
a generally under-developed culture of giving advice about tax-efficient or planned
giving to charity in the U.K. (2001).
These U.S. and U.K. studies show financial advisers’ resistance to discussing a
client’s needs in this area has been based around three difficulties: concern about
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the ethics of their raising philanthropic questions with clients (being unsure that it
would be appropriate for them to do so); concern about how to handle such
discussions sensitively (not wanting to risk embarrassing or offending their clients);
and concern that they lacked information and resources to provide adequate advice
about approaches to charitable giving.
However, an extensive study in 2000 by The Philanthropic Initiative (TPI), Inc. of
Boston suggests change may be occurring, at least for U.S. financial and legal
advisers: advisers are expressing an unprecedented level of interest in
philanthropic planning with their high net worth clients, with some indications that
they are becoming more active in this area (TPI 2000). This emerging interest by
advisers in philanthropy may be explained by the growing realization that transfer
of wealth broadens the activities to which clients may wish to apply their money.
Two key obstacles for financial advisers wishing to be more proactive in assisting
clients with philanthropic planning were a lack of planning tools and a lack of
resources and information (TPI, 2000). U.S. advisers generally wanted more and
better materials and templates to make their discussions more effective and to help
them counsel interested clients about their philanthropic options. Overall, this
comprehensive survey showed substantial gaps between what financial advisers
wanted and what existed regarding philanthropic planning.
Findings across both the U.S. and the U.K. suggest that financial advisers have an
opportunity to better assist affluent individuals to plan and manage their charitable
giving (TPI 2000; The Giving Campaign 2001). In so doing, benefits are likely to
accrue to both donating individuals and their financial advisers, as well as to
individual charities and the wider community.
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Individuals will benefit if their charitable giving is satisfactory to them. Part of this
satisfaction is obtaining sound advice, finding the right resources and using
contacts to facilitate decision-making (Stone and McElwee, 2004). Even better if
donors can achieve both positive philanthropic outcomes and look after their
financial affairs (The Giving Campaign, 2003). By intelligently integrating
philanthropy into their estate planning, says Karoff (1994), individuals can satisfy
the need to ‘feel good about themselves’ as well as being an effective way of
passing on family values to the next generation and beyond (p.47).
For the financial planner and advisory firms, philanthropic planning skills will
contribute to and help develop client relationships, based around meeting a client’s
overall needs and desires. According to Weems (2002, p. 56), this is a ‘golden
opportunity’ for advisers as it draws upon their ability to provide objective financial
advice and, based on their existing advisory relationships with their clients, allows
them to extend their services to clients.
The potential for cross-over between the charitable and financial services sectors is
great. In the U.S., total charitable giving was over $US240 billion in 2002 but many
individuals who give do not take advantage of financial advice and strategies that
would enable them to ‘give smarter’ (Olson, 2003, p.12). For example, an analysis of
affluent tax filers in the U.S. showed an average of $3000 in capital gains tax savings
could have been achieved if appreciated assets instead of cash had been donated
(The New Tithing Group, 2003, p.4). In the U.K., total charitable giving from
individuals of all incomes was estimated at ₤7.3 billion in 2003, approximately one
twelfth of the ₤80 billion plus that flowed into life and investment financial services,
excluding insurance products and retail banking (The Giving Campaign, 2003). Yet
the linkage between these sectors was relatively low: research points to tax effective
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charity vehicles being underutilised by donors and such vehicles are not well
publicised within the financial services sector (p.2).
Philanthropic planning competence brings the potential for advisers to develop client
relationships, with future rewards attached to increased loyalty, increased funds
under management and referrals (Prince, 1998). An advisory firm could develop its
reputation by encompassing giving strategies and attract clients by its capacities
(The Institute for Philanthropy, 2003). Further, advisers are likely benefit from ‘a
sense of personal satisfaction by doing well for their clients and charity’, a benefit that
should not be discounted (Prince, 2000, p. 24). In the U.K., three quarters of
independent financial advisers and stockbrokers said a strong incentive for them to
offer advice on tax efficient or planned giving was the opportunity to do a good job for
their clients; to deliver quality advice (The Giving Campaign, 2001). Indeed, advisors
have the opportunity to inform clients about options for higher levels of giving and
advise on investment strategies and protection for a client’s circumstances (The
Institute for Philanthropy, 2003).
Importantly, the contribution that planned giving makes to the common good is
great, and expanding the use of planned giving vehicles expands this community
benefit (TPI, 2000). These three key opportunities – for financial advisers, clients
themselves and the broader community – underpin the interest by the Centre of
Philanthropy and Nonprofit Studies (CPNS) in undertaking this research.
2.0 The purpose of this study
This study was undertaken because there was little known about Australian
financial adviser attitudes to philanthropic planning. Using TPI’s survey of U.S.
financial advisers in 2000 as a basis, this study sought to investigate the financial
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adviser’s role in philanthropy, as Australian advisers saw it, and to compare
findings.
In particular, this study’s purpose was to:
1. Identify Australian financial advisers’ attitudes to philanthropic planning;
2. Determine the extent to which they engaged in philanthropic planning;
3. Identify advisers’ perceptions of client attitudes towards philanthropy;
4. Identify resources that informed advisers, in reality and that were ideally
wanted, about philanthropic planning.
This study was planned as introductory research that would provide a platform for
a more extensive investigation of the attitudes and behaviours of professional
advisers in Australia. The rationale for using the TPI survey, with slight
modifications to suit the local context for the study, was that this research was
arguably the most up-to-date comprehensive research with professional advisers
available, reaching some 500 financial advisers, accountants, insurance
professionals and lawyers. Further, its conclusions were drawn from the advisers’
survey itself plus in-depth interviews with a further 89 advisers, donor surveys,
focus groups and workshops (TPI, 2000). Thus, by using the survey template
provided by TPI, this study’s findings can be compared against the robust U.S.
research.
3.0 Method
The study comprised a mail self-completion survey of 66 financial advisers and
estate lawyers who counselled high net worth clients, located in Melbourne, Sydney
and/or Brisbane, the three largest cities in Australia. High net worth was defined for
this study as having assets of over $2 million or earning over $500,000 annually,
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using the Australian Security & Investment Commission’s (ASIC’s) definition of ‘gold
card investor’ (www.asic.gov.au). The study was undertaken in September and
October, 2002.
There are no definitive numbers of professionals in Australia who offer advice to
individual clients on financial matters: they span the fields of accounting, law and
financial planning. The number of financial planners is estimated between 15,000 to
18,000 (http://www.moneymanagement.com.au/articles/17/0c01af17) but possibly
fewer than 1,000 across Australia may be primarily involved in advising high net
worth clients. This estimate is based on Australia’s relatively small population and, in
turn, its limited number of high net worth individuals. For example, in 1999-2000
there were some 7,750 individuals with an annual taxable income of over $500,000 a
year (Australian Taxation Office, 2003).
The survey’s questions largely replicated a telephone survey of U.S. financial
planning and insurance advisers, lawyers and accountants in 2001 (TPI, 2001), with
some minor modifications to suit the Australian context and the resources available.
A total of 74 questions were asked, including demographic and optional ones. See
Appendix 1 for a copy of the survey. Most of the questions were closed-ended
quantitative, but several allowed for elaboration or alternative answers. Questions
were grouped into five key sections:
A. Adviser and client behaviour regarding philanthropy
B. Motivations for or against discussing philanthropic giving
C. When advisers discussed philanthropic giving
D. Client motivations for and against philanthropic giving
E. Actual and ideal resources for philanthropic planning.
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In all, close to 300 surveys were distributed to potential respondents through the co-
operation of several large financial service firms that gave CPNS access to their staff
lists. Additional surveys were distributed with the co-operation of a professional
association for estate lawyers. The survey itself was accompanied by an invitation to
participate, an explanation of the purpose of the study and instructions for
completion. Up to two follow-up messages were sent to potential participants to
encourage returns.
A response rate of approximately 30 per cent was achieved, which is a good
response for self-completion surveys and a high response for such a lengthy one.
This suggests the internal method of distribution worked well and/or that participants
found the topic of interest. This is especially so as not all recipients of the survey
were pre-qualified by CPNS. Also, it was difficult to precisely determine the number
of surveys distributed, as one firm co-operated on the basis of their use of email for
dissemination.
In brief, data was collected over a two month period in late 2002 with the support of a
small number of leading financial and legal organisations that raised advisers’
awareness of the study and helped to disseminate the survey to qualified
participants. Analysis of the findings took a further two months and findings were
informally communicated to key stakeholder groups up to the preparation of this
Working Paper.
4.0 Results
Who completed the survey?
The advisers in this study comprised Australian financial planners, accountants and
estate lawyers based in Melbourne, Sydney or Brisbane who advised high net worth
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individual clients about financial matters. Respondents were predominantly male (58
male, 8 female respondents) and they largely worked in firms employing over 20
professionals. Indeed, more than one third of respondents worked in large firms (with
more than 100 professionals).
The largest age group was under 50 years old, as Figure 1 shows:
• Almost 40 per cent of respondents are aged under 40 years old;
• Almost 35 per cent are 41-50 years;
• Just over 20 per cent are 51-60 years.
4.8%
20.6%
34.9%
39.7%
61-70
51-60
41-50
Under 40
FIGURE 1. Age of advisers in survey. N=63.
Finally, respondents generally did not engage in substantial philanthropic giving
themselves (65 per cent of advisers saying they did not, 35 per cent saying they did).
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Key findings to the study’s concerns are presented next. The survey instrument is
provided in Appendix 1 and all additional details are held in CPNS’s working
database files, which are available if this information is of interest.
How many high net worth clients do advisers counsel?
Three quarters of advisers in this study counselled more than 10 individuals with a
high net worth in the past year, and half had over 20 high net worth clients (75 per
cent and 50 per cent, respectively). For these clients, half the advisers were from 70
to 100 per cent the principal financial advisor. For some 19 per cent of advisers,
however, they were not the principal adviser for any of these clients. Overall, the
extent to which the adviser was the client’s principal adviser varied greatly.
Is it the policy of advisers to discuss charitable giving with their clients?
Advisers generally did not discuss charitable giving as a matter of policy with their
clients: some 75 per cent of advisers said it was not their policy to ask clients about
any interest in charitable giving or philanthropy. Some 75 per cent of advisers had
discussed philanthropy with over 10 per cent of their clients but almost 19 per cent
had not discussed it with clients at all. See Figure 2.
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0
2
4
6
8
1012
14
1618
0 10 20 30 40 50 60 70 80 90 100
Percentage of clients
Num
ber o
f adv
iser
s
FIGURE 2. Percentage of high net clients with whom advisers have
discussed philanthropy. N=64. Do advisers help clients develop strategies for charitable giving?
The great majority of financial advisers do not develop strategies for helping clients
develop a focus for charitable giving, as Figure 3 shows.
85.9%
14.1%
No
Yes
FIGURE 3. Whether advisers develop strategies for helping
clients develop a focus for charitable giving. N=64.
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Do advisers refer clients to other parties for assistance with philanthropy?
Just under half of all advisers referred clients to others for assistance with their
charitable giving, as Figure 4 shows. That is, the majority of advisers do not link
clients to others who might be of assistance to them.
Those who did refer clients to third parties for direct assistance with philanthropy
relied upon a range of third parties, as Figure 5 shows. Of these, the two most
commonly used third parties were:
• Charitable foundations (relied upon by 19.7 per cent of advisers who referred
clients); and
• Lawyers (relied upon by 18.5% of advisers who referred clients).
53.1%
46.9%
No
Yes
FIGURE 4. Whether advisers refer clients to other parties who
can help them with charitable giving. N=64.
Centre of Philanthropy and Nonprofit Studies 15 Working Paper No. CPNS25
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12.1%
16.7%
7.6%
13.6%19.7%
12.1%
18.2%
Other
Organisations
Giving advisers
AccountantsFoundations
Specif ic charity
Law yers
FIGURE 5. Third parties to whom clients were referred by
advisers for advice on philanthropic matters. N=34. Note: ‘Giving advisers’ refers to ‘planned giving professionals’. Also ‘organisations’ refers to ‘charitable organisations’ (covering several charities or causes), and ‘foundations’ refers to ‘charitable/community foundations’.
How often are charitable vehicles used by clients?
Charitable vehicles were not used widely by clients for philanthropic activities.
Advisers report that only a small percentage of clients used a charitable vehicle such
as a private foundation or charitable trust governed by trustees, a community
foundation or donor-advised funds at a professional trust company. For example, 75
per cent of advisers report that up to 10 per cent of their clients used private
foundations or charitable trusts and 25 per cent report that up to 10 per cent of their
clients used a community foundation.
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A substantial number of advisers report no clients using either of these vehicles (48
per cent and 61 per cent of advisers, respectively).
Overall, the most popular method of giving was through a private foundation or
charitable trust governed by the trustee, followed by community foundations and
donor-advised funds at a trust company (see Figure 6). However, only a small
number of advisers were involved in such vehicles, and these clients made up a very
small percent of their client pool.
Incidentally, adviser responses were low for these questions (42 out of 66), possibly
due to a perception of irrelevance to them and so actual percentages of those using
these vehicles may be smaller.
02468
101214161820
0 10 20 30 40 50 60 70 80 90 100
Percentage of clients
Num
ber o
f adv
iser
s
FIGURE 6. Percentage of high net worth clients who intend to have
charitable trusts or private foundations created at their deaths, or make substantial charitable bequests. N=50.
Clients did sometimes use alternative mechanisms for substantial charitable giving
but usage reported by advisers was low. For 75 per cent of advisers, fewer than 50
Centre of Philanthropy and Nonprofit Studies 17 Working Paper No. CPNS25
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per cent of their clients used other methods and for a further 17 per cent of advisers,
none of their clients used other methods for giving.
This same pattern showed in the legacies area. Just over 60 per cent of advisers had
clients intending to have charitable trusts or alternatives created at their deaths, but
these clients represented a very small percent of the adviser’s total client group. The
rest did not intend to give in that manner.
Why do advisers engage in philanthropic discussions with clients?
Advisers were concerned mostly with clients’ needs. Of different reasons suggested
to advisers for raising the subject of philanthropic giving with clients, the most
important was that giving can provide personal or family satisfaction (nominated by
almost 75 per cent of all advisers), followed by its potential to reduce taxes if planned
wisely (55 per cent). Advisers who did not agree, took a neutral position rather than
disagree.
Two other reasons – that it’s important for people to make a difference if they can,
and that charities can use the money more wisely than the government – were seen
in a more neutral light by advisers, with some differences of opinion, and so may be
seen as less important, from the advisers’ perspective.
Why don’t advisers engage in philanthropic discussions with clients?
When asked about eight potential reasons for not raising the topic of charitable giving
with clients, advisers varied widely in their responses. For example, advisers’
responses differed dramatically for whether they thought this was due to a lack of
knowledge about the tools of charitable giving, as Figure 7 shows.
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The most support for any reason not to discuss philanthropy with clients, at almost 33
per cent of advisers, was that the client had not expressed charitable interests in the
past. To a great extent, advisers disagreed on why they did not raise philanthropy in
their discussions with their clients.
Indeed, there appeared to be stronger agreement on what was not important than on
what was important for choosing not to discuss philanthropy. For example, reasons
such as ‘I lack familiarity with a client’s personal life or values’, ‘It’s not my job to raise
the topic’, ‘I don’t feel comfortable talking about the topic’ and ‘I don’t have personal
experience/history with charitable giving’ were each rated as not important.
1=not important 5=very important
4.03.02.01.0
Freq
uenc
y
20
10
0
Std. Dev = 1.15 Mean = 2.5
N = 64.00
FIGURE 7. Perceived importance of a lack of personal knowledge
of the tools of charitable giving in not raising philanthropy with clients. N=64.
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Overall, responses for this question were very mixed and further research is needed
to identify whether different types of advisers respond similarly.
When do advisers discuss philanthropic giving with clients?
It should be kept in mind that most advisers did not discuss philanthropy with clients.
Nevertheless, in response to a series of statements, advisers were more likely to
discuss philanthropic giving with clients when they had detailed knowledge of their
client’s financial picture (almost 90 per cent strongly or somewhat agreeing). Half
suggest they often raise the topic when the client is regularly volunteering time to
community activities. Importantly, however, they report discussing it only when the
client has expressed an interest in it first (68 per cent of advisers either strongly or
somewhat agreeing), as Figure 8 shows.
There was only a small level of support for the level of assets being a trigger for
discussion. Almost 68 per cent of advisers disagreed with the statement ‘I often raise
the subject of philanthropy when there are more assets than needed’ and of these
advisers, most strongly disagreed (40 per cent of all responses). When asked if there
was a particular asset level at which they would encourage clients to consider
charitable giving, over half said no. Of the 30 per cent who said there was an asset
level where clients might engage in substantial giving, the most likely level was
between $2 million and $5 million.
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1.5%
7.6%
22.7%
33.3%
34.8%
Don't know
Strongly disagree
Somew hat disagree
Somew hat agree
Strongly agree
FIGURE 8 Advisers’ level of agreement with the statement ‘I only
discuss charitable giving when the client expresses an interest in it first’. N=66.
Why do clients engage in philanthropic giving?
There were two most compelling reasons for high net worth clients to engage in
philanthropic giving, from the advisers’ perspective: they desired to improve their
community or they cared greatly about a cause, issue or institution. Nearly 90 per
cent agreed improving the community was either a very or somewhat important
motivator, as Figure 9 shows, while 86 per cent of advisers felt caring about a
cause/organisation was a strong motivator, as Figure 10 shows.
Centre of Philanthropy and Nonprofit Studies 21 Working Paper No. CPNS25
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3.1%
3.1%
4.6%
43.1%
46.2%
Not sure
Not important at all
Not very important
Somew hat important
Very important
FIGURE 9. Advisers’ perception of the importance of improving
the community in a client’s decision to engage in philanthropy. N=65.
Also perceived to be important in prompting giving were the tax benefits in the gift,
and religious or spiritual motivations (63 per cent and 57 per cent respectively).
There was some disagreement about the importance of enhancing one’s personal or
family name in the community, having a tradition of family giving and creating a
family legacy: none of these were seen as critical for high net worth clients generally.
Of potential reasons to give, the least important was being asked to do so by a
business or social acquaintance and not being able to say no.
Centre of Philanthropy and Nonprofit Studies 22 Working Paper No. CPNS25
23
4.6%
1.5%
7.7%
41.5%
44.6%
Not sure
Not important at all
Not very important
Somew hat important
Very important
FIGURE 10. Advisers’ perception of the importance of caring about
a cause, issue or institution in a client’s decision to engage in philanthropy. N=65.
Why don’t clients engage in philanthropic giving?
As to why high net worth individuals do not engage in charitable giving, advisers felt
there were lots of reasons. Indeed, seven out of nine potential reasons offered them
were perceived as important obstacles. The top three, however, all related to fear of
not having enough money to do so. The most overwhelming reason of these was
their concern to have enough to pass on to their children (with over 75 per cent of all
advisers agreeing with this statement and 27 per cent strongly agreeing), as Figure
11 shows. The two other leading reasons for clients not to engage in philanthropy
were perceived as clients thinking their wealth much smaller than it actually was
(over 70 per cent agreeing) or clients thought they would need their assets
themselves (68 per cent agreeing).
Centre of Philanthropy and Nonprofit Studies 23 Working Paper No. CPNS25
24
Also perceived to be important as an obstacle was a concern by clients that their gifts
would not be used wisely (64 per cent agreeing, respectively).
11.3%
8.1%
4.8%
48.4%
27.4%
Not sure
Not important at all
Not very important
Somew hat important
Very important
FIGURE 11. Adviser rated importance of thinking there will not be
enough money left for the children to the clients’ decision not to engage in philanthropy. N=62.
How important are different types of resources for advisers?
Advisers nominated seminars and training as the most helpful resources for them in
philanthropic planning, currently. Almost 70 per cent agreed that these are at least
somewhat important. Two other types of resources were also valued by a majority of
advisers: advice by colleagues and storytelling by other donors (64 per cent and 56
per cent of all advisers, respectively, saying these are at least somewhat important).
While these latter two attracted less overall support, all three were keenly embraced
by some 20 per cent of advisers This is relevant as, as noted, most advisers were not
active in advising clients on philanthropic giving. Figure 12 shows advisers’
Centre of Philanthropy and Nonprofit Studies 24 Working Paper No. CPNS25
25
perceptions of the helpfulness of different types of philanthropic resources (capturing
extreme positions only).
05
10152025303540
Sem
inar
s an
dtra
inin
g
Prof
essi
onal
jour
nals
Sto
ries
byot
her d
onor
s
Softw
are
Advi
ce fr
ompr
ofes
sion
als
Adv
ice
from
colle
gues
Num
ber o
f adv
iser
s
very important
not important at all
FIGURE 12. Advisers’ perception of resources as very important or
completely unimportant for them (contrasts extreme positions).
Even resources seen as helpful by many advisers were perceived by some as not
helpful at all, which indicates that further research may show different types of needs
by advisers. For example, advisers were strongly divided about advice from planned
giving professionals: some 50 per cent found them at least somewhat important but
27 per cent completely disagreed, as Figure 13 shows. That is, this source of
information was not at all important to over a quarter of them.
Overall, retirement/charitable giving software was the least helpful resource for them
and, to a lesser extent, articles in professional journals (with 81 per cent and 66 per
cent, respectively, describing them as not very important or not important at all).
Centre of Philanthropy and Nonprofit Studies 25 Working Paper No. CPNS25
26
7.8%
26.6%
14.1%
35.9%
15.6%
Not sure
Not important at all
Not very important
Somew hat important
Very important
FIGURE 13. Advisers’ perceptions of the importance of advice
from planned giving professionals in their advising clients about philanthropy. N=64.
It should be noted that all these responses related to resources as they were
currently offered or presented or, more accurately, as they were perceived by
advisers in their current form. This is an important distinction to make as advisers
were also asked about how useful such resources could or would ideally work for
them (reported next). For example, on one hand advisers generally did not find
articles in professional journals useful for them and, on the other, they said they
would like to get information from professional journals. The previous responses,
then, refer to resources in their current form ‘warts and all’ while the following
responses refer to the value of these resources if perceived shortcomings or
obstacles were addressed. This kind of finding warrants further investigation and
elaboration to gain insight into advisers’ perceived needs. In brief, there appears to
be potential for some resources to be more helpful for advisers.
Centre of Philanthropy and Nonprofit Studies 26 Working Paper No. CPNS25
27
In terms of the resources that advisers would ideally like to be able to use for
philanthropic planning, a variety of materials sparked interest. Figure 14 shows a
comparison of ten different types of resources in terms of their appeal for financial
advisers thinking about philanthropic planning.
0
10
20
30
40
50
60
"How
to"
artic
les
Sin
gle
volu
me
Sam
ple
fund
agre
emen
ts
Sam
ple
docu
men
ts
Edu
catio
nal
mat
eria
ls
Cas
ehi
stor
ies
Web
site
Tele
phon
ehe
lp li
ne
Em
ail
lists
erve
Tele
phon
em
ento
ring
Num
ber o
f adv
iser
s
FIGURE 14. Advisers’ perceptions of resources as helpful for philanthropic
planning, as they are or could be (combines adviser perceptions of somewhat helpful and very helpful resources).
Four types of materials topped the list of resources with the widest appeal for
advisers regarding philanthropic planning:
1. educational materials about philanthropy to share with clients (84 per cent of
advisers seeing these as at least somewhat helpful);
2. sample documents for private foundations (83 per cent);
3. a single volume providing an overview of philanthropic options (81 per cent);
4. case histories (80 per cent), and ‘how to’ articles in professional journals (75
per cent).
Centre of Philanthropy and Nonprofit Studies 27 Working Paper No. CPNS25
28
Three of these inspired the most intense interest of all options:
1. educational materials about philanthropy they could share with clients (47 per
cent of all advisers saying this would be very helpful to them);
2. a single volume of philanthropic options (44 per cent saying this would be
very helpful to them); and
3. case histories (44 per cent saying this would be very helpful to them).
Moreover, other types of resources about philanthropic planning were not dismissed.
The majority of advisers also thought the two additional resources would assist them:
sample fund agreements with community foundations (66 per cent of all advisers
agreeing that this would be at least somewhat helpful), and an interactive website
would be helpful (52 per cent agreeing).
As well, most of the study’s participants (67.7 per cent) responded positively when
asked about their interest in participating in a network of professional advisers that
promoted charitable giving and identified resources useful to advisers, as Figure 15
shows. Such a network was presented as being run on a non-commercial, strictly
confidential, limited membership basis.
In contrast, advisers shied away from mentoring by telephone (77 per cent saying
this would be not very helpful or not helpful at all), a telephone help line for advisers
at a local community foundation (63 per cent) and an email Listserve devoted to
developments in charitable giving (56 per cent). These were not seen as particularly
helpful resources.
Further, additional analysis comprising cross-tabulations for demography, adviser
behaviour and adviser attitudes/perceptions was conducted but no clear patterns
Centre of Philanthropy and Nonprofit Studies 28 Working Paper No. CPNS25
29
emerged. At times, the numbers involved were too low to draw sound conclusions. At
other times, results were mixed, with weak associations for variables investigated.
More comprehensive research is indicated, as noted in the Conclusion.
32.3%
67.7%
No
Yes
FIGURE 15. Whether advisers would join a network formed to
promote the growth of charitable giving and philanthropy and to identify resources that would be useful to advisers. N=65.
5.0 How Australian advisers compare to U.S. advisers
This section compares the results of this study with the most recent U.S. study (TPI,
2000). However, there are a number of environmental factors that should be borne in
mind when engaging in comparisons between the U.S. and Australia.
Importantly, there are significant differences in the revenue structure for the nonprofit
sector, as indicated by The Johns Hopkins Comparative Nonprofit Sector Project
(see Table 1). The U.S. has a greater culture of philanthropic giving than Australia
Centre of Philanthropy and Nonprofit Studies 29 Working Paper No. CPNS25
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and a wider range of tax incentives for such behaviour to a broader class of
organisations. It is widely recognised that the financial planning issue of death duties
or estate tax is a significant issue for U.S. citizens who can largely mitigate the tax
impact by making charitable donations (Burrill, 2001). In Australia, death duties were
repealed in the 1970s.
Table 1: Revenue Structure of the Nonprofit Sector in 1995 Expressed as Per Cent of Total Revenue
Country Public Sector Donations Private fees & charges
Australia 30 9 61 U.K. 47 9 45 U.S.A. 31 13 57
Average 36 10 54
Source: Compiled from figures provided by Johns Hopkins Comparative Nonprofit Sector Project (http://www.jhu.edu/~cnp/country.html accessed 27 April 2004)
Financial planning has been used frequently in the U.S. to allow the vast majority of
potential estate tax payers to avoid the tax by philanthropic donations. Before 2002,
one partner in a U.S. household could pass on death an unlimited amount of assets
to his or her spouse and $675,000 in property and other assets to heirs free from
taxation under the U.S. Federal estate tax laws. The estate tax rates of 55 per cent
on taxable estates of $3 million or more are among the highest in the developed
world. An additional surtax of 5 per cent is applied to estates above $10 million to
recapture the benefit of lower tax rates. In 2002, however, a new estate tax regime
was introduced over a ten year phase-in period. The Economic Growth and Tax
Relief Act of 2003 repeals the 5 per cent surtax and tax rates in excess of 50 per cent
effective for 2002. The tax will be reduced gradually until it disappears in 2010 but
the tax will be reinstated in 2011 unless new legislation is passed.
Centre of Philanthropy and Nonprofit Studies 30 Working Paper No. CPNS25
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There has been significant debate about the effect of such a reduction in estate tax
on philanthropic gifts in the U.S., with only time telling what the outcome will be. For
further discussion, see Bass and Irons (2003), Burrill (2001) and Rooney and Tempel
(2001). For the foreseeable future, differences between the U.S. and Australian tax
environments are liable to affect philanthropic planning by financial advisers in these
countries.
The following comparison of data highlights the main similarities and differences
between Australian and U.S. financial advisers (where a similar survey was
conducted). Inconclusive data are not included.
• Profile of adviser. The profile of the U.S. financial adviser survey respondent
broadly matched that of the Australian respondent. In both studies the
majority of advisors tended to be the principal adviser for their high net worth
clients (i.e. they were the principal financial adviser in over half of their client
base). They differed in that Australian advisers counselled a greater number
of clients with a net worth of two million dollars or more or an annual income
in excess of $500,000. While 75 per cent of Australians counselled more than
10 high net clients, 75 percent of the U.S. advisers counselled 6 or more.
• Discussion of philanthropy with clients. While most Australian advisers
had discussed philanthropy to a small degree with these clients, it was not
their policy to ask about their client’s interest in charitable giving or
philanthropy. In contrast, the majority of U.S. advisers reported that they did
generally discuss philanthropy with their high net worth clients, and that it was
their practice to ask these clients about their interest in charitable giving
(although it should be noted that there appeared to be some contrasting data
around this topic at different stages of the TPI study).
Centre of Philanthropy and Nonprofit Studies 31 Working Paper No. CPNS25
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• Client behaviour. On average, Australian advisers reported that few if any of
their clients intended to have charitable trusts or private foundations created
at their deaths, or to make substantial charitable bequests. Approximately 20
per cent of U.S. clients were reported as intending to have charitable trusts
established at their deaths.
• Motivations for discussing philanthropy, or not. Advisers in Australia and
the U.S. were similar in that both placed importance on the client finding
personal or family satisfaction in giving in choosing to discuss giving with
them. Further, advisers in both countries agreed that feeling uncomfortable
talking about the topic and not having personal experience/history with
charitable giving were not important in their choosing not to discuss
philanthropy with clients.
However, some differences emerged. In deciding to discuss philanthropy with
their clients, Australian advisers placed less importance than U.S. advisers on
the following two reasons - ‘by planning wisely, charitable giving can reduce
taxes’ and ‘charities can use money more wisely than the government will if it
goes to taxes’. Further, in choosing not to discuss philanthropy, Australian
advisers placed more importance than U.S. advisers on the reason that ‘the
client has not expressed charitable interests in the past’.
• When advisers are likely to discuss philanthropy with clients. Advisers
in Australia and the U.S. were similar in that they claimed to be more likely to
raise the subject of philanthropy when they had a detailed knowledge of their
client’s financial picture. In both countries, the majority of advisers said there
Centre of Philanthropy and Nonprofit Studies 32 Working Paper No. CPNS25
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was not a particular asset level at which they would encourage clients to
consider charitable giving. Australian advisers who disagreed suggested that
this level was $2,000,001 to $5,000,000, which was similar to U.S. advisers.
They differed however about the importance of some triggers. Australian
advisers generally disagreed with the statement, ‘I often raise the subject of
philanthropy when there are more assets than needed’ while American
advisers strongly agreed with it. Australian advisers also generally agreed
with the statement, ‘I only raise the subject of philanthropy when the client
expresses an interest in it first’, in contrast to U.S. advisers who did not.
Finally, Australian advisers were strongly divided in whether they agreed with
‘I often raise the subject when a client is regularly volunteering his/her time in
the community’ whereas U.S. advisers generally agreed with it.
• Perceived client motivations for philanthropic giving. Advisers in
Australia and the U.S. were similar in that both agreed that four important
client reasons for engaging in philanthropy were ‘they want to improve their
community’, ‘they care greatly about a cause, issue, and institution’, ‘they
have spiritual or religious motivations’ and ‘they see tax benefits in the gift’.
Further, advisers in both the U.S. and Australia agreed that an unimportant
client reason for engaging in philanthropy was that ‘they are asked by a
business or social acquaintance to whom they cannot say no’.
They differed, however, in that Australian advisers disagreed that ‘a tradition
of family giving’ was important to clients in engaging in philanthropy, while
U.S. advisers agreed that this was an important motivator.
Centre of Philanthropy and Nonprofit Studies 33 Working Paper No. CPNS25
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• Perceived motivations for clients not engaging in philanthropy. Advisers
in Australia and the U.S. were similar in that both agreed that important
reasons why clients did not engage in philanthropy was ‘they don’t think they
will have enough money left for their children’, ‘they perceive their wealth to
be smaller than it is’ and ‘they don’t think their gifts will be used wisely’. They
differed in that Australian advisers perceived another important motivation for
clients not to engage in philanthropy was ‘they don’t think they will have
enough money for themselves’ but this was not rated as important by U.S.
advisers.
• Resources for philanthropic planning. Advisers in Australia and the U.S.
were similar in that the majority of advisers in both countries rated seminars/
training and advice from colleagues as important. As well, both rated the
following resources as generally helpful:
o philanthropic-related materials to share with clients;
o sample documents from private foundations;
o a single volume of philanthropic options;
o case histories;
o ‘how to’ articles in professional journals; and
o sample fund agreements with community foundations.
Similarly, Australian and U.S. advisers did not think that mentoring by
telephone would be particularly helpful.
They differed in the following respects:
• The majority of advisers in Australia rated both retirement planning
or charitable giving software and articles in professional journals
as unimportant, while U.S. advisers saw these as important;
Centre of Philanthropy and Nonprofit Studies 34 Working Paper No. CPNS25
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• Australian advisers were strongly divided in the worth of advice
from planned giving professionals, whereas U.S. advisers agreed
with it.
• The majority of advisers in Australia did not think a telephone help
line for advisers at the local community foundation would be
helpful, unlike U.S. advisers who saw this as potentially useful.
Overall, TPI’s 2001 study indicates an increasing openness by financial advisers in
the U.S. to discussing the philanthropic needs of their high net worth clients,
increasing interest in how this can be done in a sensitive, professional way, and a
growing engagement by financial advisers in philanthropic planning, compared to
earlier U.S. studies. There are no earlier Australian studies for comparison but this
study suggests Australian financial advisers lag behind their U.S. counterparts in
embracing financial solutions for clients wishing to engage in philanthropy.
Nevertheless, there are signs that some Australian advisers are wanting to do more
to meet their clients’ needs in this area.
6.0 Discussion
The results of our survey can be set in context with reference to similar studies in the
United Kingdom and United States. U.S. surveys suggest that high net-worth
individuals want to make gifts to charities but do not always know how, and they
perceive financial advisers as lacking information about philanthropic options
(Weems, 2002; Stone and McElwee, 2002). Indeed, while Americans are generous
givers in comparison to other countries, the wealthy give a smaller percentage of
income than those earning less than $20,000 a year (Giving USA, 1992).
Centre of Philanthropy and Nonprofit Studies 35 Working Paper No. CPNS25
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Furthermore, post-World War 2 economic growth in western countries, and the U.S.
in particular, has guaranteed that large amounts of wealth currently in the possession
of the generation over 50 will pass to children and grandchildren in coming years, as
already noted. This has galvanised interest in patterns of intergenerational transfer of
wealth, especially in the U.S. (Karoff, 1994). Moreover, the U.S. is already seeing
more individuals accruing wealth: from 1997 to 2000, IRS figures show the number of
individuals earning adjusted gross income of $500,000 to $1 million rose 51 per cent
and average assets grew by over 30 per cent to almost $5 million each (New Tithing
Group, 2003). The number of those earning adjusted gross incomes over $1 million
rose 66 per cent from 1997 to 2000 and average assets grew by over 32 per cent to
$20 million each (p.9). This expanding wealth of the affluent represents a rare
opportunity for charity funding to increase in the U.S, and a significant opportunity for
professional advisers to recommend beneficial techniques to facilitate this transfer
(TPI, 2000; Steinberg, 2004). The opportunity will only be realized if donors are
educated about their giving options (Prince, 2000).
In the U.K., there has been a similar interest in encouraging donors and informing
financial advisers. Levels of giving are estimated to have plateaued at an annual £6
billion, well below the target of £10 billion – or 1% of the Gross Domestic Product -
set by The Giving Campaign, a joint effort by U.K. organisations to increase the
amounts of money given to charities and to encourage a culture of giving that
improves the quality of life for others (www.givingcampaign.org.uk). The target looks
attainable compared with Germany’s 1.21% of GDP, and the USA’s 1.91%. Further,
Inland Revenue statistics suggest that wealth in the U.K. trebled between 1982 and
1997, while both individual and corporate tax rates were reduced. Specifically,
planned giving is attracting growing attention as it generates only £0.5 billion of £6
Centre of Philanthropy and Nonprofit Studies 36 Working Paper No. CPNS25
37
billion given to charities in the U.K. One aim of The Giving Campaign, which was
established in 2001, has been to encourage advisers to be more proactive in
advising their clients about the benefits of tax-efficient donations and to assist them
in thinking strategically.
Despite a need by clients for sound counsel about philanthropy and a greater
willingness by advisers to discuss the issue of giving with them (as the U.S. TPI
survey, upon which this Australian study was based, indicates), there are difficulties
for financial advisers wishing to develop their competencies in this area.
In the U.K., financial advisers work in a culture which neglects the giving of advice
about tax-efficient or planned giving to charity: the prevailing attitude appears to be
that they are there to maximise income for the client (and this was what clients
expected) (www.givingcampaign.org.uk). As a result, most adopted a passive stance
in dealing with their clients about philanthropy.
Indeed, even if they were interested in being more proactive, there were challenges.
U.K. advisers generally perceived themselves ill-equipped to offer such advice. They
did not want to embarrass clients who did not want to give, and they felt they lacked
information and training about charitable giving (The Giving Campaign, 2001).
Approximately half of the financial advisers who reported little or no knowledge about
planned giving were from small companies of five employees or less – emphasising
the potential benefits of a network outside of the immediate collegial environment to
offer information in this area. While advisers still expressed the traditional view that
they waited for clients to be more active in seeking philanthropic advice, one
interesting factor to emerge was the interest that financial advisers expressed in
learning more about philanthropic planning in order to ‘do a good job for their clients’
(The Giving Campaign 2001, p.3). For example, the majority of advisers said they
Centre of Philanthropy and Nonprofit Studies 37 Working Paper No. CPNS25
38
were likely to use resources such as publications directed either at themselves or to
be given to clients, if they were available (The Giving Campaign, 2001).
The latest U.S. data provide signs of a change towards greater proactivity by
financial advisers in that country (TPI, 2000). However, the shift is not conclusive. In
follow-up, in-depth interviews conducted as part of the TPI study, more than half of
the U.S. advisers still felt philanthropy was too personal and risky to discuss, at least
with some of their clients. They were nervous about handling client conversations
around donor values and motivations. They also felt they lacked information about
products and tended to restrict themselves to a limited suite of giving mechanisms.
(TPI, 2000.)
Overall, the majority of both U.S. and U.K. advisers expressed a desire to learn more
about how to make conversations about giving effective without making the client
uncomfortable and wanted more, and better, materials to facilitate discussion and
education.
The results of this Australian-based survey suggest that this is the situation here, too.
Even accounting for the different cultures and taxation environments of the U.S., the
U.K. and Australia, relatively few affluent Australian clients appeared to be engaging
in planned giving or planning to establish legacies. Further, they appeared to be
underutilising tax-effective charitable vehicles. There is no suggestion that they do
not find the same personal satisfactions in giving as those in the U.S. or the U.K. as
they are making donations to charity, as the ATO figures indicate (CPNS, 2004).
There appears to be a need by high net worth clients for advice about the optimum
strategies they can employ, a need that will increase as the impact of
intergenerational transfers of wealth are felt.
Centre of Philanthropy and Nonprofit Studies 38 Working Paper No. CPNS25
39
Further, Australian financial advisers reflect the behaviour of their U.K. counterparts:
they are not actively raising philanthropy as a topic with high net worth clients, nor do
they appear to want to do so (at least in any clumsy way). However, many Australian
advisers do see the potential to learn more about philanthropic planning through
seminars and training, and wish to have access to more and better philanthropic
resources, sharing an interest in philanthropy with both their U.K. and U.S.
counterparts.
Like advisers in these countries, Australian financial advisers are generally interested
in developing contacts and knowledge that better equip them about meeting the
philanthropic needs of clients. They like the potential of seminars and training for this,
as well as the sharing of information that came from colleagues and philanthropic
clients. Further, they see the primary types of resources that would assist them as
material to give clients, a guide to philanthropic options, sample agreements, case
studies, and ‘how to’ articles, keeping in mind their professional concerns and needs
not to be ‘sold to’ nor not to ‘sell’ to their clients. All of these reflect the needs and
interests shown by overseas colleagues. This is a latent interest in philanthropy,
then, rather than an active one for Australian financial advisers.
7.0 Future research
This study was intended as a preliminary study of the role of financial advisers and
philanthropy within the Australian context. It is recommended that these findings be
checked through a study with a greater number of professional advisers, and also
include qualitative research such as focus groups or in-depth interviews. Such an
extended study will enable more comprehensive analysis and for richer patterns of
adviser experience, attitudes and behaviour to be understood, especially for different
types of advisers.
Centre of Philanthropy and Nonprofit Studies 39 Working Paper No. CPNS25
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For example, in the current study, statistical analysis was unable to show differences
between types of advisers due to relatively low numbers of advisers assisting clients
with philanthropic giving. Further research is recommended to better understand
adviser motivations for not raising philanthropy as a topic with clients, as well as to
identify the needs of advisers who do advise clients about philanthropy and/or who
are most interested in doing so.
Interestingly, while advisers agreed with many of the potential reasons that clients
might engage in philanthropic giving, as well as strong support for the potential
reasons that clients might not give, they were more circumspect about their own
behaviour. There were few clear reasons for why advisers did not raise the topic of
charitable giving, for example, which suggests that there would be value in obtaining
qualitative data in further research for advisers could provide insight into the advisers’
perspective. Two exceptions were that raising the topic may be uncomfortable for
clients and that the client had not expressed charitable interests in the past. Also,
advisers were divided on whether a lack of personal knowledge of the tools of
charitable giving was a factor. As to timing, the key trigger for discussing philanthropy
with clients was for clients themselves to flag a need in this area.
9.0 Conclusion
This was arguably the first Australian study to specifically investigate financial adviser
behaviour and attitudes towards planned philanthropy, including their perceived role
in assisting clients achieve charitable aims. As such, it provides a valuable base for
monitoring the changes that are likely to occur in the advisory field over the next
decade and more. It also provides a platform for further investigation, so that
Centre of Philanthropy and Nonprofit Studies 40 Working Paper No. CPNS25
41
differences between types of advisers and their needs for philanthropic resources are
better understood.
In conclusion, this study suggests some clear differences and similarities between
advisers in Australia and overseas, putting aside differing legislation and tax
regulations which ensure some differences in study findings. The most obvious
differences between Australian advisers and those in the U.S. relate to their current
orientation: U.S. advisers report more overt interest in philanthropic planning and
suggest they are increasingly proactive in this area. This study suggests that this is
not the case in Australia. At the same time, financial advisers in Australia appear
similar to those in the U.S. and the U.K., in that many feel ill equipped or reticent for
reasons of ethics or professionalism to broach the topic of charitable giving with
clients. Even in the U.S. where attitudes appear to have shifted in recent years,
advisers still express some reluctance in assisting clients in this area.
There is also similar interest across all three countries in a variety of resources that
could help them develop knowledge about philanthropic options, with the only real
differences being that U.S. advisers nominated more types as beneficial.
Findings suggest that Australian financial advisers are not currently enthusiastic
supporters of philanthropic planning but there exist several avenues by which their
awareness and knowledge may be developed. Further, they are similar in many ways
to U.S. and U.K. advisers, and trends occurring overseas may be seen here in the
near to mid future.
Centre of Philanthropy and Nonprofit Studies 41 Working Paper No. CPNS25
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References AMP. 2003. Wealth and Inheritance, AMP.NATSEM Income and Wealth Report, Issue 5, June. Australian Taxation Office. 2003. Selected Items by Age, Sex, Taxable Status and Grade of Taxable Income, Figures from the 1999-2000 Financial Year. Supplied by request to the Centre of Philanthropy and Nonprofit Studies, QUT, Brisbane. Burrill, J.H. 2001. The Effects of Estate Tax ‘Repeal’ on Philanthropy, Trusts & Estates, 140 (10): 20. Centre of Philanthropy and Nonprofit Studies (CPNS). 2004. Tax Deductible Giving in 2000-01, Current Issues Information Sheet 2004/02, Brisbane. Centre of Philanthropy and Nonprofit Studies (CPNS). 2003. Draft Report: 2002 Financial Advisers’ Study, Brisbane. Havens, John J., Paul G. Schervish and Mary A. O’Herlihy. 2003. 2003 Survey of Planned Giving Vehicles, Boston: Social Welfare Research Institute, Boston College. Havens, John J. and Paul G. Schervish. 2003. Why the $41 Trillion Wealth Transfer Estimate is Still Valid: A Review of Challenges and Questions, Boston: Social Welfare Research Institute, Boston College. Joffe, J (Lord). 17 July 2001. Speech to the ICFM Convention. The Giving Campaign website. www.givingcampaign.org.uk/news. (accessed 22 August, 2002). Kelly, S. 2002. Simulating Future Trends in Wealth Inequality, Paper presented to the 2002 Annual Conference of Economists, Adelaide, South Australia, October. Karoff, H.P. 1994. The advisor’s role in philanthropy: A new direction, Trusts & Estates, 133 (4): 47-50. National Association of Fund-Raising Executives. 1992. Giving USA. Cited in Karoff, H.P., 1994: p. 2. Prince, Russ A. 1998. Charitable market is huge opportunity, National Underwriter, 102 (43), 53-54. Rooney, P.M. and Tempel, E.R. 2001. Repeal of the estate tax and its impact on philanthropy, Nonprofit Management & Leadership, 12 (2): 193-211. Steinberg, R. 2004 see www.iupui.edu/~econ/faculty/steinberg.html Steinberg, Margaret A. and Lara Cain. 2003. Putting paid to prescribed roles: A new era for Australian women and philanthropy, Third Sector Review, 9 (1). Stone, Deanne and Jan McElwee. 2004. What California Donors Want In Their Own Voices, Washington D.C: National Centre for Family Philanthropy. The Giving Campaign. 2001. Advice Worth Giving? A Summary of a MORI Survey on the Role of Financial Advisers and Related Professionals in Providing Client Advice on Charitable Giving, London.
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The Giving Campaign. 2001. Lack of Information Stopping Financial Advisers Making The Most of Charitable Giving. www.givingcampaign.org.au. (accessed 7 August 2002). The Giving Campaign website. www.givingcampaing.org.uk. (accessed 7 August 2002). The Giving Campaign. 2003. Charity Financial Products: A New Approach to Giving, London. The Giving Campaign. 2004. A Wealth of Opportunity: How the Affluent Decide the Level of their Donations to Charity, March, London. The Independent Sector. 1992. Giving and Volunteering in the U.S. Cited in Karoff, H. P., 1994: p. 2. The Institute for Philanthropy. 2003. Report of a Seminar on the Role of the Financial Adviser in Encouraging Philanthropy, Tuesday 29 April. http://www.instituteforphilanthropy.org.uk/sum4.html (accessed 20 January 2004) at The Philanthropic Initiative, Inc. (TPI). 2000. Doing Well by Doing Good - Improving Client Service, Increasing Philanthropic Capital: The Legal and Financial Advisor’s Role, Boston. The Philanthropic Initiative website. www.tip.org. (accessed 13 August 2002). Weems, Christopher. 2002. Wealth advisers have a big opportunity in charitable giving, Trusts and Estates, 141 (3): 56. www.iupui.edu/~econ/faculty/steinberg.html: Website for Professor Richard Steinberg, Department of Economics, Indiana University-Purdue University Indianapolis, U.S. Accessed 27 April 2003.
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CONFIDENTIAL
CENTRE OF PHILANTHROPY AND NONPROFIT STUDIES The Professional Adviser’s Role in Philanthropy Questionnaire Thank you for agreeing to participate in this project. By completing and returning this questionnaire you are indicating that you:
• have read and understand the information provided.
• have had any questions answered to your satisfaction.
• understand that if you have any additional questions you may contact the Chief Investigator or Research Assistant.
• understand that you are free to withdraw your offer of participation at any
time, without comment or penalty.
• understand that you can contact the researchers or the Secretary of the University Human Research Ethics Committee (07 3864 2902) if you have concerns about the ethical conduct of the project.
Chief Investigator: Professor Myles McGregor-Lowndes Director Centre of Philanthropy and Nonprofit Studies Queensland University of Technology Ph: 07 3864 2936 Fax: 07 3864 9131 Email: [email protected] Research Assistant: Dr Lara Cain Centre of Philanthropy and Nonprofit Studies Queensland University of Technology Ph: 07 3864 9282 Fax: 07 3864 9131 Email: [email protected]
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The Professional Adviser’s Role in Philanthropy Questionnaire SECTION A Q.1 In the past year, approximately how many clients with a net worth of $2
million or more, or an annual income in excess of $500,000 or more, have you advised?
Insert number
Q.2 Of the clients that you advise with a net worth of $2 million or more, to what percentage are you the principal financial adviser?
%
Circle your response
Q.3 Is it your policy to ask clients about their interest in charitable giving or philanthropy? Yes No
Q.4 With about what percentage of your high net worth clients have you discussed philanthropy or significant charitable giving?
%
Q.5 What percentage of your high net worth clients use the following methods for their philanthropic giving?
– Private foundations or charitable trusts governed by trustees, including your clients themselves?
%
– A community foundation? %
– Donor-advised funds at a trust company, such as Perpetual Trustees.
%
Q.6 What percentage of your high net worth clients do a substantial amount of direct charitable giving, other than through the mechanisms in Q.5 above?
%
Q.7 As far as you know, what percentage of your high net worth clients intend to have charitable trusts or private foundations created at their deaths, or make substantial charitable bequests?
% SECTION B
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On a scale of one to five, where one means not important and five means very important, how important are the following reasons to you in choosing to discuss charitable giving and philanthropy with clients? Circle your response.
Not important
Very important
Q.1 It is important for people to make a difference if they can.
1 2 3 4 5
Q.2 Charities can use the money more wisely than the government will if it goes to taxes.
1 2 3 4 5
Q.3 The client can find personal or family satisfaction in giving.
1 2 3 4 5
Q.4 By planning wisely, charitable giving can reduce taxes.
1 2 3 4 5
On a scale of one to five, where one means not important and five means very important, how important are the following reasons for not raising the topic of charitable giving and philanthropy with your clients? Circle your response.
Not important
Very important
Q.5 I don’t feel comfortable talking about the topic. 1 2 3 4 5
Q.6 It’s not my job to raise the topic. 1 2 3 4 5
Q.7 Raising the topic would be uncomfortable for clients.
1 2 3 4 5
Q.8 I worry that the client will question my motives. 1 2 3 4 5
Q.9 The client has not expressed charitable interests in the past.
1 2 3 4 5
Q.10 I lack familiarity with a client’s personal life or values.
1 2 3 4 5
Q.11 I lack personal knowledge of tools of charitable giving.
1 2 3 4 5
Q.12 I don’t have personal experience/history with charitable giving.
1 2 3 4 5
SECTION C Do you agree or disagree with each of the following statements? Circle your response.
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Stro
ngly
ag
ree
Som
ewh
at a
gree
Som
ewh
at
Stro
ngly
di
sagr
ee
Don
’t kn
ow
Q.1 I only discuss charitable giving when the client expresses an interest in it first.
1 2 3 4 5
Q.2 I am more likely to raise the subject of philanthropy when I have detailed knowledge of my client’s financial picture.
1 2 3 4 5
Q.3 I often raise the subject when a client is regularly volunteering his/her time in the community.
1 2 3 4 5
Q.4 I often raise the subject of philanthropy if there are more assets than needed.
1 2 3 4 5
Q.5 Is there a particular asset level at which you would encourage your clients to consider charitable giving?
Yes
1
No
2
Don’t know
3
Q.6 If yes, what is that level? Circle one response
(i) $500,000 or below 1
(ii) $500,001 to $1,000,000 2
(iii) $1,000,001 to $2,000,000 3
(iv) $2,000,001 to $5,000,000 4
(v) $5,000,001 to $10,000,000 5
(vi) Over $10,000,000 6
Q.7 What do you believe are the most important reasons for engaging in philanthropy?
SECTION D As far as you know, how important are each of the following reasons for giving to your client who engages in significant charitable giving? Circle your response.
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Ver
y im
porta
nt
Som
ewha
t im
porta
nt
Not
ver
y im
porta
nt
Not
im
porta
nt
Not
sur
e
Q.1 They have religious or spiritual motivations. 1 2 3 4 5
Q.2 They want to improve their community. 1 2 3 4 5
Q.3 They want to enhance their personal or family name in the community.
1 2 3 4 5
Q.4 They want to publicise or create good will for their business endeavours.
1 2 3 4 5
Q.5 They care greatly about a cause, issue or institution.
1 2 3 4 5
Q.6 They have a tradition of family giving. 1 2 3 4 5
Q.7 They want to create a legacy for their family 1 2 3 4 5
Q.8 They are asked by a business or social acquaintance to whom they cannot say no.
1 2 3 4 5
Q.9 They see tax benefits in the gift. 1 2 3 4 5
Q.10 Other. (please specify)
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SECTION D (Continued) As far as you know, how important are each of the following reasons to your client who decides NOT to engage in philanthropy? Circle your response.
Ver
y im
porta
nt
Som
ewha
t im
porta
nt
Not
ver
y im
porta
nt
Not
im
porta
nt
Not
sur
e
Q.11 They don’t think their gifts will be used wisely. 1 2 3 4 5
Q.12 They don’t think they will have enough money left for themselves.
1 2 3 4 5
Q.13 They don’t think there will be enough money left for the children.
1 2 3 4 5
Q.14 There is no tradition of family giving. 1 2 3 4 5
Q.15 They do not know their passions. 1 2 3 4 5
Q.16 They don’t think it will really make any difference. 1 2 3 4 5
Q.17 They perceive their own wealth to be much smaller than it actually is.
1 2 3 4 5
Q.18 They fear that greater giving will trigger an uncontrollable flood of appeals.
1 2 3 4 5
Q.19 They lack the time. 1 2 3 4 5
Q.20 Other. (please specify)
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SECTION E How important have each of the following resources and materials been in helping you advise your clients on philanthropy? Circle your response.
Ver
y im
porta
nt
Som
ewha
t im
porta
nt
Not
ver
y im
porta
nt
Not
im
porta
nt
Not
sur
e
Q.1 Seminars and training. 1 2 3 4 5
Q.2 Professional journals. 1 2 3 4 5
Q.3 Stories told by other donors. 1 2 3 4 5
Q.4 Retirement planning or charitable giving software. 1 2 3 4 5
Q.5 Advice from planned giving professionals. 1 2 3 4 5
Q.6 Advice from colleagues. 1 2 3 4 5
Q.7 Are there any other resources and materials that are important in helping you advise your clients on philanthropy? (please specify)
Q.8 What organisations, if any, have been most helpful to you in advising your clients on philanthropy? (please specify)
Q.9 What kind of information resources would be helpful to you in working with your clients around philanthropy or charitable planning? (please specify)
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SECTION E (Continued) How helpful are, or would be, the following resources and materials in working with your clients on philanthropy? Circle your response.
Ver
y he
lpfu
l
Som
ewha
t he
lpfu
l
Not
ver
y he
lpfu
l
Not
hel
pful
at
all
Not
sur
e
Q.10 “How to” articles in professional journals. 1 2 3 4 5
Q.11 A single volume providing an overview of philanthropic options.
1 2 3 4 5
Q.12 Sample fund agreements with community foundations.
1 2 3 4 5
Q.13 Sample documents for private foundations. 1 2 3 4 5
Q.14 Educational materials about philanthropy to share with clients.
1 2 3 4 5
Q.15 Case histories. 1 2 3 4 5
Q.16 Interactive Web site. 1 2 3 4 5
Q.17 Telephone help line for advisors at the local community foundation.
1 2 3 4 5
Q.18 An email Listserve devoted to developments in charitable giving.
1 2 3 4 5
Q.19 Mentoring by telephone. 1 2 3 4 5
Q.20 Other. (please specify)
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SECTION F
Circle your response. Yes No
Q.1 Leaving aside conversations with clients about their interest in philanthropy generally, do you develop strategies for helping clients develop a focus for charitable giving?
1 2
Q.2 Do you refer clients to other parties who can help them with such tasks?
1 2
Q.3 If yes, to whom do you refer them? (Circle all applicable)
Lawyers 1
Specific charity 2
Foundations – Charitable/Community 3
Accountants 4
Planned giving professionals 5
Organisations/Charitable Organisations 6
Other (please specify) 7
Yes No
Q.4 Do you personally engage in substantial charitable giving? 1 2
Q.5 What is your age group?
Under 40 1
41 – 50 2
51 – 60 3
61 – 70 4
Over 70 5
Q.6 How many other professionals work in your office?
(i) None 1
(ii) One 2
(iii) Two 3
(iv) 3 – 5 4
(v) 6 – 10 5
(vi) 11 – 20 6
(vii) 21 – 50 7
(viii) 51 – 100 8
(ix) More than 100 9
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(x) Don’t know 10 SECTION F (Continued)
Circle your response. Yes No
Q.7 If a network of professional advisers were to be formed to promote the growth of charitable giving and philanthropy and to identify resources that would be useful to advisers, with absolutely no fund raising purpose or connection with any commercial interest, and with strict rules of confidentiality as to membership, would you be interested in participating?
1
2
Q.8 Are you Female Male
1 2 THANK YOU for completing this detailed questionnaire. Please return in the enclosed reply paid envelope by 8 November 2002. Centre of Philanthropy and Nonprofit Studies Faculty of Business GPO Box 2434 BRISBANE QLD 4001
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