Doing good is getting better

Speaking at the 3rd annual ‘Doing Well by Doing Good’ Conference, Hudson said high impact and enduring philanthropic initiatives demand the same care and diligence as an investment policy sale.

“The philanthropic policy statement is a strategic plan that creates more enduring philanthropic legacies,” said Hudson. “You start off (by) understanding a client’s motivation to give, and you articulate a philanthropic vision for them.”

Advisors need to work on measuring the social return on investment (ROI). “Often times when people make financial investments it’s difficult to quantify it.” Clients need to see results of their investment, she added.

A good way to understand a client’s vision is to get them to talk to about philanthropy. “Begin with asking them what motivates them to give, find out why they give,” said Hudson. “You’ll be surprised how people will talk.”

It’s not peppering them with questions, but a dialogue that helps advisors understand their clients’ core values, their focus, and how much money they want to invest. “It could be as simple as, if you could change the world what would you like to do?” The idea is to ask open-ended questions and get them to warm up to the subject. Something like “if they won the lottery what would they do with the money?”

Clients of all wealth levels are concerned about how effectively and efficiently the philanthropic investment is used. “They want to see their philanthropic investment at work, as well as leaving sustainable legacies to future generations.”

These clients are increasingly seeking professional advice to help them invest for impact. An advisor’s work is “about leveraging their capital, bringing them the highest return on their dollar.”

A lot of entrepreneur clients want their children to understand that they’re privileged, but not entitled. “So a lot of the work we’re doing is around understanding family dynamics, and sharing and ensuring that the second generation understands financial issues as well as legacy issues.”

A huge part of the work that advisors do is preserving family wealth and making sure there’s capital for generations to come, said Hudson.

Educating the next generation, therefore, is an important part of an advisor’s work “because we know that in the next two decades we’ll see the greatest wealth transfer.” It is paramount for an advisor to draw the second and third generation into their practice in order to retain the capital. “All members of the family (must) become full partners in philanthropic decisions as well as financial decisions.”

Hudson likens charitable giving to investing. “When you invest, you want a return on your investment; it’s the same when you’re looking at social ROI.” Social ROI, she said, is intangible but advisors can play a role in helping their clients measure it.

The more involved clients become in sustainable giving, the more they need advice. “And the more you’re able to advise them, the more they see you as a trusted advisor,” said Hudson.

Clients want options, but they will only turn to those they really trust. Many high-net worth clients have reservations about private giving foundations or family foundations. Advisors need to be able to offer alternatives. “It (takes) a lot of research; and calling the charities, calling the private giving foundation to understand how they can help the client.”

Canadians are becoming more active about giving. It is, therefore, important that advisors seek ways to expand their services so that they can help out, said Hudson. “Wealth management firms and advisors will need to understand a wide array of issues related to philanthropy in order to provide relevant solutions.”