Clients Donating More To Charity Than Advisors Realize

Advisors Providing Charitable Planning Advice Help Clients Give More; Those Who Don't May be Missing Critical Engagement Opportunity

BOSTON, June 13, 2012 — Fidelity Charitable released findings from new research today showing that a greater number of wealthy individuals who use financial advisors are giving to charity — and giving at higher levels — than advisors estimate. Advisors with clients averaging at least $1 million in investable assets estimate that less than half (48 percent) of their client base makes charitable giving an annual activity or financial goal. Yet, a separate survey shows that the vast majority (93 percent) of individuals at the same asset level who work with a financial advisor make charitable contributions on an annual basis.

The findings come as part of Fidelity Charitable's 2012 "Advice & Giving" research — a comparative study of 146 financial advisors with clients averaging at least $1 million in investable assets and 183 individuals with at least $1 million in investable assets and $100,000 in household income who use a financial advisor.

Wealthy clients are also giving more than advisors believe. Advisors estimate that on average, 54 percent of clients with at least $1 million in assets gave $2,500 or more to charity in the past 12 months. However, half (51 percent) of the clients surveyed report they give at least double that amount — between $5,000 and $100,000 or more — to charity each year.

"Charitable giving is a key, annual activity for the vast majority of wealthy individuals working with advisors," said Sarah Libbey, president of Fidelity Charitable. "Advisors who take time to talk about this important financial subject are tapping an opportunity to better understand their clients and their immediate and long-term goals. It's also an opportunity that can ultimately result in bringing in more assets for the advisors to manage."

Clients and Advisors Find Value in Charitable Planning Advice

The research also shows that both advisors and clients benefit from charitable planning discussions — especially when charitable giving is integrated into a client's overall financial plan. Clients report that integrating charitable planning into an overall financial plan facilitates tax planning (76 percent) and enables them to give more money to charity (47 percent), among other benefits.

Nearly three-quarters of advisors (72 percent) with clients averaging at least $1 million in investable assets report they've personally found offering financial strategies for charitable giving to be a relationship builder and more than half (57 percent) say it helps position them as a broad financial expert. In addition, a third (37 percent) report say such discussions lead to a multi-generational relationship with their clients, and also can be a referral source (35 percent).

"Charitable giving is a key priority for many of our clients," said Alina Montes, senior vice president at Brown Brothers Harriman in New York. "Offering guidance in this area helps clients maximize their giving and enhances our relationship with them at the same time. It is one of the ways we differentiate ourselves as a firm."

Client Interest in Tactical Advice Presents Opportunities for Advisors

A key strategy of charitable giving is leveraging assets that can maximize charitable donations. Donating long-term appreciated publicly traded assets — as well as non-publicly traded assets — to a public charity allows donors to potentially eliminate capital gains taxes and take a full, fair market value deduction for the assets at the time of donation. The elimination of the capital gains taxes means that donating these assets directly to charity (rather than liquidating them and donating the after-tax proceeds) allows more of a donor's gift to be available for charitable purposes.

Presenting this type of giving strategy represents a key entry point for advisors as they approach the charitable planning discussion. In fact, of clients interested in receiving advice, "deciding which asset to contribute" was the top strategy in which donors expressed interest, with "determining which vehicle to use" cited as the second-highest area of interest.

Majority of Donations Still Made in Cash

With the majority of clients (91%) reporting that donations are most often made with cash — which may be the least tax-advantaged way to give — advisors have a strong opportunity to help clients think more strategically about which assets to give. The research shows that clients receiving financial advice for charitable giving are significantly more likely to fund donations with appreciated securities (30 percent vs. 10 percent) than those not receiving advice.

"The great news is that when advisors engage clients in charitable planning discussions, both advisors and clients report that the clients are able to give more money to charity," said Libbey. "Simple strategies such as helping clients recognize the benefits of harvesting their portfolios can increase a client's financial charitable impact, while highlighting an advisor's value at the same time."

Ownership of Complex Assets is Underestimated

In addition to publicly traded assets, 34 percent of wealthy clients report that they own complex assets — assets such as closely held or private C-corp and S-corp stock, restricted stock, limited partnership interests, real estate and other assets — as part of their overall wealth portfolio. Complex assets can be another, very strategic way to maximize giving, allowing for the same type of tax advantages as those available when publicly-traded assets are contributed to public charities. Yet, advisors believe that only a quarter (24 percent) of their clients own these types of assets, and 59 percent report "never" or "not often" recommending them as a means to helping a client achieve their charitable giving goals.

"With such a high percentage of Americans' — and especially baby boomers' — wealth tied up in privately held business interests, the opportunity is huge for both clients and advisors as this group seeks help in monetizing these assets for key life goals," said Libbey. "Advisors can tap resources such as our in-house team of charitable giving experts to help them provide charitable giving advice that will make a difference to their clients. There's tremendous value in helping people give."

About the Advice & Giving Study

The 2012 Advice & Giving study is comprised of two surveys, one with 500 financial advisors and the other with 183 wealthy individuals. Market Probe, an independent global market research firm, conducted this year's study. The advisor survey was fielded online between March 15th and March 29th using the Harris Interactive Financial Advisor Intermediary Panel. Data are weighted to reflect the current distribution of advisors with an average account size of at least $250,000 among firm types according to FINRA, excluding insurance firms. The advisor survey includes 146 advisors with average client assets of at least $1 million. The results of this advisor segment are reported in this release.

The wealthy individual survey was conducted online between March 19th and March 23rd with respondents who work with a paid financial advisor, have at least $100,000 in household income and a minimum of $1 million in investable assets excluding their primary residence. Survey results may not be representative of all financial advisors or wealthy individuals meeting the same criteria as those surveyed for this study.

About Fidelity Charitable

Fidelity Charitable is an independent public charity, established in 1991, with the mission to further the American tradition of philanthropy by providing programs that make charitable giving simple and effective. Since its inception, the program has helped donors support more than 150,000 nonprofit organizations with over $13 billion in grants.

Fidelity Charitable is the brand name for Fidelity® Charitable Gift Fund, an independent public charity with a donor-advised fund program. Various Fidelity companies provide services to Fidelity Charitable. The Fidelity Charitable name and logo are service marks, and Fidelity is a registered service mark, of FMR LLC, used by Fidelity Charitable under license. Giving Account is a registered service mark of the Trustees of Fidelity Charitable.

Third party marks contained herein are the property of their respective owners.

© 2012 Trustees of Fidelity Charitable. All rights reserved.

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