Interview with Claire Costello: The Philanthropic Conversation Survey Findings

Listen to the interview here

by Randy A. Fox & Claire Costello

Randy Fox: Hi, this is Randy Fox. Today I am privileged once again to be with Claire Costello who is a director of philanthropic services for US Trust company in New York. Our subject today is the current survey done by US Trust and the Philanthropic Initiative on the philanthropic conversation. This is a repeat of a survey that was done a few years back and an update and today we want to talk about the improvements and the disconnect. Claire, welcome. Thanks for being here, and I’m just going to kind of let you run with the subject, then throw in whatever I can throw in to throw you off your course.

Claire Costello: Good luck with that. Thanks, Randy. Happy to be with you as always. Good day to all of you listening in. I’m happy to once again be able to share with you the recent findings from our study. As Randy said, this study was undertaken in partnership with the Philanthropic Initiative out of Boston. It is indeed a refreshment of the Senate. It was first undertook in 2013, which really drills down and does a 360 analysis of the conversations that are being had, or in some cases not being had between traditional advisors and their high net worth consumers. Now, let me just give you one minute of methodology for those who are not familiar with the research.

Claire Costello: We pull a random selection of traditional advisors, which we defined to be accountants, the attorneys and wealth or financial advisors who have average books of business of clients with $3 million and above in investible assets. Then for a counterpoint view, we look to consumers of those services, so not necessarily the clients of those particular advisors, but a cohort of consumers of those types of traditional services that also fit that threshold of having $3 million or above in investible assets. We asked a series of questions that mirror each other to counterbalance to the varying perceptions as between advisors and their consumers or clients.

Claire Costello: What we first looked at is the overall importance of the philanthropic conversation between advisors and their clients. That is really the crux of this research. The findings that we found in 2018 again, an update to the original 2013 study, affirms that advisors are increasingly recognizing that these conversations are critically important to their clients, and to the advisor-client relationship. In particular, we learned that over half of advisors 53% say that it’s very important, and another 38% say that it’s somewhat important, totaling 91% to have this conversation. The percent that say it’s very important has risen considerably from 46 to 53% since we did the study in 2013.

Claire Costello: Over two thirds of the high net worth consumer share this view, that having a philanthropic conversation with your advisor is important. The biggest increase since 2013 is among those consumers saying that it is very important to do so. The majority of clients say that it’s very important, others say that it’s somewhat important, but overall, both between advisors and consumers the importance and the recognition of the importance of this conversation has gone up significantly. Now, because advisors see the philanthropic conversation being so important they make it their practice to engage with their clients about this charitable activity.

Claire Costello: 80% of advisers make it their practice or report, but they make their practice to ask their high net worth clients about philanthropy. This compares to 71% in 2013, so it’s gone up nine percentage points since we originally undertook the study. There are some varying degrees to which the type of advisor feels compelled to have this conversation. Leading the pack, our wealth advisors come in at 88%, who make it their regular practice. The attorneys indicates at the rate of 79% that they make it their practice, and 73% for tax accountants and advisors. I should interrupt myself and say that all of this information, the full report as well as an executive summaries are available to you on our website as is all our research, and that website is www.ustrust.com/philanthropy.

Claire Costello: Moving on. Not only are more advisors having a philanthropic conversation as we just saw, but more having it with more of their clients, which is again a multiplier effect in terms of the frequency, the centerpiece, the emphasis, if you will, on this conversation. 44% of advisors say they discuss philanthropy with most, if not all of their clients. Another 50% discussed with some of their clients and only 8% really report that they don’t discuss this with any of their clients. At the same time we see a corresponding increase in reported conversations from clients. 67% of clients report that they’ve discussed philanthropy with their advisors.

Claire Costello: This compares favorably to 55% back in 2013. So far advisors and consumers are really walking in step around this conversation in terms of its importance, its frequency and so forth. By the way, there’s one caveat there in that, advisors say they typically initiate the conversation 39% say always, or usually it’s them. However, clients all to report that they don’t care who initiates, but really if you drill down on it’s them the client. If you want to split hairs about who’s actually initiating the conversation, client say that it’s they that are doing so, advisors say that it’s they that are doing so, but at the end of the day, as long as the conversation is being had, your clients are pleased.

Claire Costello: When we look at, when they start the philanthropic conversation, this is always a finding that tends to make advisors feel a little bit shall we say, uncomfortable or surprised at a minimum. That clients want to have this discussion with their advisors very early in the relationship. Oftentimes we see advisors waiting until they have a more detailed knowledge of a client’s financial picture, or they have a detailed knowledge of a client’s personal life, or even what they’re volunteering or civic life look like. That’s not what your clients want you to do. Indeed, the vast majority of clients want you to have this conversation as a meaningful goals based, life goals, what’s the wealth for kind of conversation, values based conversation inside the first few meetings.

Claire Costello: In particular, 29% would like to discuss this at the very first meeting, so somewhere between 25 and 30% want this at the very first meeting. Another 29% want it within the first two meetings, and then in the aggregate over 95% want it heard inside the first three meetings. There’s no reason to wait. You can use those early meetings as listening sessions to better get to know your clients. I’ve often said, you may have heard me say before that, regardless of how expert you are at your particular trade, be it tax accounting, or wealth advising, or a legal counseling, unless you have this background information it’s prerequisite to knowing how then to perform your craft and your skill set within the circumstances that your client provides.

Claire Costello: If you do not have this background information, what’s the wealth for, what are their priorities and so on. You can’t properly perform your skills no matter how expert. Lookin