Paul Penley

Why don’t the wealthy give more? Because they want the money, says a 2013 SEI Private Wealth Management survey of individuals representing families worth $10 million or more. The top two reasons for not giving more are (1) uncertainty about maintaining lifestyle and (2) desire to make more first. Philanthropy advisors, foundation staff and even Bill Gates can write, speak and convince wealthy individuals about the meaningful impact of giving, but financial advisors hold the keys to the floodgates.

I do wish my research about non-profit effectiveness doubled the size of gifts to high-performing organizations. However, it just doesn’t work that way. If a family I advise fears that bigger gifts could jeopardize a comfortable lifestyle down the road, the giving tends to tighten. It’s only natural.

That’s why our clients are motivated to make bigger gifts when a good financial plan is in place. Estate planners, attorneys or financial advisors who make a clear case for future financial stability drive philanthropy’s growth. When Jay Link at Kardia Planning or Connie Smith at Fairfield & Woods show a client that they can maintain their lifestyle until the age of 100 with a $4 million emergency cushion, the uncertainty about the future disappears. The sense that more money is needed dissipates.

Then the floodgates can open. The 200 SEI survey respondents said they do want to raise the percentage of their wealth that they give by 57% – they just don’t have the confidence to pull the trigger. These philanthropically inclined folks holding back because of financial uncertainty need more help from financial advisors. Advisors like Jonathan Fung at Bernstein are doing it, but more can join the ranks.

The payoff for long-term financial plans is twofold. First, larger charitable donations are put to work earlier. We at Excellence in Giving have seen clients move from giving thousands to hundreds of thousands, or hundreds of thousands to millions, because of an advisor’s good work. Second, more than half (57%) of clients surveyed by Fidelity Charitable said that if their advisor discussed charitable strategies, they would then view their wealth manager as a broad financial expert. Who doesn’t want that? And 37% of clients said that charitable discussions led to assets staying with the parent’s advisor because they were now viewed as the family’s advisor. Getting clients confident about their financial plan so they are ready to discuss charitable giving is good for everyone involved.

When it comes to deciding where to give, 48% of SEI’s wealthy respondents said ‘evidence of impact’ was the most important factor. That’s why my cadre of philanthropic advisors keeps doing its best to measure results and identify the best programs. We keep working on platforms in the US like the S&I 100 and IntelligentPhilanthropy.com so that charities’ impact and scalability are easily determined. However, we cannot fool ourselves into thinking that evidenced-based programs and perfect matches between donors’ passions and meaningful causes drive philanthropy’s growth. We need financial advisors to create the ‘confidence to give’ before we provide wealthy families with the ‘confidence on where to give’.

Paul Penley is director of research at the philanthropic advisory firm Excellence in Giving and creator of IntelligentPhilanthropy.com