November 12, 2013
High-net-worth investors and their financial advisors are not looking at the benefits of charitable donation in the same way, according to a study by U.S. Trust and The Philanthropic Initiative. While wealthy donors consider the tax benefits of contributing to charitable organizations when planning their financial goals, reducing their tax liability is not the motivating factor.
The study found that while 88 percent of advisors feel philanthropic discussions are important to have with their clients, only 47 percent of the clients thought advisors were good at discussing personal charitable goals. Advisors tend to the raise the question of philanthropy from technical perspectives, focusing on tax consideration and other financial benefits to the client.
However, high-net-worth individuals are not as concerned with the technical perspectives as their advisors believe them to be. When asked if tax benefits were a motivating factor for giving, 46 percent of financial advisors responded that they believed it was. Only 10 percent of wealthy individuals felt the same way about their giving. The study suggests that charity is a very personal experience for many investors and they want to know that their money is making a difference to the organization that is receiving it.
What's the message for nonprofits?
While it's uplifting to hear that receiving a tax break is not the primary thing influencing people to donate, nonprofits can get more than a warm and fuzzy feeling from the study's results. Wealthy investors that are not motivated by tax breaks are likely more apt to be concerned with how their donations are being utilized. Regardless of the cause a nonprofit serves, it is rarely the only organization contributing to it.
To make their organization more appealing, nonprofit leaders should make sure that their finances are in order and the group is able to focus on its mission. Enlisting the help of financial consultants to help navigate complexities such as unemployment insurance, fundraising and fraud protection can make a nonprofit more appealing. Nonprofit groups that are working to save money and focusing on the goals of the organization may seem like the better choice when a wealthy individual is looking to make a financial contribution.
Content presented by First Nonprofit Group, a leading provider of financial consulting services for 501(c)(3) nonprofit employers.
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