High net worth clients do not all look the same! There are many characteristics of different types of high net worth clients, how they typically hold their assets and the most appropriate gift planning strategy for each type. It is important to customize your approach for business owners, executives, doctors, dentists, engineers, retirees, lawyers and more. How they hold their assets will influence how high net worth people tend to give.
High Net Worth Trends.
By 2026, women will hold half the wealth. Because their life expectancy is higher, they often inherit twice - once from parents, second time from spouse.
Philanthropy can become a "child" for people who don't want to leave their kids all their money. It is important to note that two thirds of high net worth individuals made it themselves. Often, they are are grateful to the community that helped build their wealth.
Executives of publicly traded companies
Executives tend to be very busy. They often accumulate portfolios with large stock options in their companies. They are not necessarily aware of charitable tax giving rules. Their portfolios tend to be heavy in one stock. If they feel there is still upside in that stock, they might want to donate their securities now and immediately repurchase. Another strategy is to donate losing stocks which will strengthen their portfolio overall. Expiring stock options are also a great option for executives.
Professional corporations - Dentists and Doctors
On retirement Dentists sell their practices. They typically have a holding company. Doctors don't tend to sell their practice but they may also have a holding company.
These medical professionals tend to end up with a lot of money in corporations. Money from the corporation has tax benefits to a charity. In addition, by reducing the value of the corporation through donations and tax-free withdrawls. These means that the value of the corporation at death is less which reduces estate taxes. Not all accountants do give advice on how to withdraw assets as tax efficiently as possible.
Similar to Doctors and Dentists, business owners often have holding companies. A great time to connect with them is when they sell their business. Bear in mind that when a business owner is selling their company, it is a very busy time for the donor. In that situation, a donor advised fund is a good way for a business owner to "park" their money and decide later how to spend the fund.
Business owners tend to set up donor advised funds so they can give year over year. In addition, business owners particularly like private foundations because they like a hands-on approach to their philanthropy and greater control over how the money is managed.
Lawyers are allowed to incorporate but many don't. They like to set up partnerships. Ironically, many lawyers do not have wills. They are too busy putting their clients needs first. This is an opportunity for charities to encourage them to make their own will.
Lots of retirees have accumulated significant RRSPs. As a result, they have to convert money in their plan at 71. Many have more in their RRSP then they need at age 71. Some are taking their RRIF plan income and turning over to charity.
In addition, it is important for retirees to be sure that they are using the tax credit as donations in year of death and year preceeding. It may be tax beneficial to accelerate some of this giving to give it in their lifetime.
Engineers tend to be very analytical. They do best when they have a comprehensive plan and can see the impact of their gift. They need to see their net worth on paper as well as the financial impact of their gift.
Each profession has its own situation. It's worth noting that each person is an individual so any strategy needs to bear this in mind. By thinking about the background of any person's profession and working status, you can be better able to work effectively with that person to help them maximize their giving.
This article was written over lunch. Any errors are a result of slow typing skills by editor Ann Rosenfield and are no reflection on Jo-Anne's wisdom.
Thanks to the CAGP Foundation for making this important session free!
Jo-Anne Ryan is Vice President, Philanthropy at TD Wealth. She develops strategies to help clients incorporate philanthropy in their overall financial and estate plans. She has also led TD’s research efforts around Women and Philanthropy since 2014. She is the architect and Executive Director of the Private Giving Foundation, the first donor advised fund to be launched by a financial institution in Canada. Jo-Anne is a member of CAGP’s government relations committee. She is a member of the Estate Planning Council of Toronto and an active volunteer on several gift planning committees for charities. She is also the Vice Chair of the Board for Bishops University Foundation and is a member of the advisory board at Carleton University for its Masters in Philanthropy and Non-profit Leadership program – the only one of its kind in Canada. You can reach her at firstname.lastname@example.org or 416.308.6735
CAGP is a national association that inspires and educates the people involved in strategic charitable gift planning. We advocate for a beneficial tax and legislative environment that strengthens philanthropic giving, create a networking environment with like-minded professionals and experts, and provide access to outstanding learning opportunities and professional development.
A national, nonprofit organization established in 1993, we are the only Canadian professional association that brings together charitable fundraisers and professional advisors. Through a commitment to a stringent Code of Ethics, continual learning and networking, and a willingness to share, our members help each other grow and develop as professionals in their respective fields.