One In Four Financial Advisors Expects Clients Will Increase Charitable Giving To Offset Predicted Tax Hikes

Twice the Number of Advisors Expect Usage of Donor-Advised Funds To Increase Compared to Private Foundations

Boston, July 21, 2010 — The Fidelity^® Charitable Gift Fund ("Gift Fund") today released findings from new research showing that the majority of financial advisors (87 percent) expect income taxes to increase for most of their clients in the next 12 to 18 months, with one in four (26 percent) predicting their clients will increase charitable giving in order to offset tax hikes. An additional 48 percent of advisors expect their clients to maintain their level of giving, despite ongoing market uncertainty and an overall decline in U.S. charitable giving¹ in 2009.

The 2010 Fidelity^® Charitable Gift Fund "Advice & Giving" survey, which gathered responses from more than 500 financial advisors about their approach to providing charitable planning advice, also found that only half (52 percent) proactively offer charitable planning advice, although 63 percent believe clients would be interested in it. In addition, 82 percent feel that a donor-advised fund, such as the Gift Fund, is a valuable option for their clients.

"Today, more than ever, high-net-worth investors are looking to their advisors for comprehensive financial planning advice and tax strategies," said Sarah C. Libbey, president, Fidelity^® Charitable Gift Fund, the nation's largest donor-advised fund program and the third largest public charity². "By integrating charitable planning within a wealth management offering, advisors have the potential to deepen existing client relationships, and open up multi-generational planning opportunities."

Giving Too Personal?

The Gift Fund's Advice & Giving survey reveals that one of the primary reasons advisors do not proactively offer charitable planning advice is because they see philanthropy as a client's personal decision (44 percent). Other reasons advisors cited for not being proactive is because clients have not requested help in the area (52 percent) and they do not feel qualified or knowledgeable enough on the topic (31 percent).

"We hesitated to offer advice around charitable giving when we started our practice because we felt it was too personal of a topic," said Christopher M. Begg, CFA, founding principal, East Coast Asset Management. "However, we have found that proactively discussing charitable planning strategies, vehicles and tax implications has not only served to strengthen our relationships, it has also been an effective avenue to grow our practice. Clients now ask us to manage their charitable assets just as we advise them on their broader investment portfolios."

According to the survey, two-thirds (65 percent) of advisors who incorporate charitable planning advice into their practices say it is an important aspect of their client relationships. Advisors said that the No. 1 benefit of offering advice on charitable planning to their clients is that it's a relationship builder (80 percent). Other top benefits are that it positions the advisor as a broad financial expert (72 percent), keeps assets under the advisor's management (61 percent) and leads to a multi-generational relationship (56 percent).

Advisors Reveal Donor-Advised Funds Usage Is on the Rise

When asked which giving vehicle they expect to see increase in use over the next five years, twice the number of advisors said donor-advised funds (39 percent) compared to private foundations (20 percent).

"While they can be used in tandem, a donor-advised fund offers several advantages over a private foundation, including donor anonymity, fewer administrative burdens, lower costs and greater tax advantages," said Libbey. "Because the choice of charitable vehicle is based on each individual's — or family's — personal circumstance, advisors play an important role in helping them choose the vehicle for their distinct needs."

The ability to help simplify giving was the No. 1 reason why advisors thought donor-advised funds' usage would increase (75 percent). This was followed by ease of administration (74 percent) and favorable tax treatment (58 percent). Advisors who are knowledgeable about donor-advised funds said they are suitable for clients who seek an immediate tax deduction but prefer time to decide where to disburse grants (65 percent). They also said that donor-advised funds are good for those who have reached a certain asset level (60 percent) and those who want to keep and access all of their charitable records in one place (42 percent).

Advisors Are Active Charitable Givers, Yet Most Still Write Checks

More than three quarters (78 percent) of advisors consider themselves active charitable givers and 68 percent of advisors said that personal charitable giving habits influence how comfortable they are giving charitable planning advice to clients.

Advisors surveyed reveal that they contribute, on average, $13,000 per year to charitable causes — primarily through checkbook giving vs. other giving vehicles such as community foundations, private foundations or donor-advised funds.

"Advisors are generous in giving back to their communities and causes," said Libbey. "We have found that those who have their own donor-advised funds are the biggest advocates of these vehicles and tend to recommend them to their clients."

Tools for Strengthening a Charitable Planning Practice

Forty percent of advisors who indicated that they are not proactive in giving advice on charitable planning said they would be motivated to do so with "a better understanding of how to introduce the topic to clients." To help get the conversation started, the Gift Fund said it offers three tips:

1. Help clients who are inclined to give to view charitable giving as a financial strategy as much as a personal value. While most investors are primarily motivated to donate to charity to support their favorite causes, tax considerations play a key role as well. Donors may already have made the personal choice of where to give, but often need the expertise of an advisor to help maximize the tax advantages and estate planning impact of their gifts; and to find additional resources for meeting their charitable commitments. Don't wait for clients to ask.
2. Show your clients which assets make the most sense to give and why. Appreciated securities, private C- and S-Corp stock, restricted stock, limited partnership interests, and other privately held assets may be an effective and tax-efficient method of giving, and may be eligible donations for a donor-advised fund.
3. Be prepared to help recommend the right giving vehicle. Options for charitable giving are increasingly numerous and complex. With so much information readily available today, many clients are likely to have heard of a donor-advised fund, private foundation or charitable remainder trust. Clients will still look to their advisor to help them evaluate which vehicle is best for their needs. The Gift Fund can help advisors assess the appropriate vehicle and assets to donate, with 16 Charitable Planning specialists located nationwide to meet with advisors and their clients.

In addition to helping advisors with charitable planning conversations, the Gift Fund offers the Charitable Investment Advisor Program. This program allows qualified independent advisors to provide investment management services for the charitable assets held in their client's donor-advised fund (known as a "Giving Account^®"), allowing advisors to continue what they do best — manage assets.

The Gift Fund also gives advisors the ability to manage their clients' charitable giving as part of their overall financial plan online through its Giving Account^® Access Center. Through this platform, advisors can view Giving Account information with a single log-in, transact on the client's behalf (facilitate contributions, recommend grants and investment pool reallocations, and so on) and generate Giving Account activity reports.

About the Advice and Giving Study

The Advice and Giving survey was conducted online by Harris Interactive for Fidelity Investments on behalf of the Gift Fund between May 21 and 26, 2010, among 503 producing financial advisors. The advisors are part of the Harris Interactive Financial Advisor Intermediary Panel and represent advisors from a variety of channels, including national wirehouses, regional brokerages, independents, insurance and bank broker-dealer firms and registered investment advisory firms. The results of this survey may not be representative of all financial advisors meeting the same criteria as those surveyed for this poll.

About the Fidelity^® Charitable Gift Fund

The Fidelity^® Charitable Gift Fund was established by Fidelity Investments^® in 1991. The mission of the Gift Fund is to further the American tradition of philanthropy by providing programs that make charitable giving simple and effective. Since its inception, the Gift Fund has helped more than 56,000 donors recommend more than $10 billion in grants to over 136,000 nonprofit organizations, with the Giving Account^®, its donor-advised fund program.