Philanthropy expert explains what providing this kind of service to high net worth Canadians actually entails
Charitable giving is on the decline amongst Canadians overall, but one cohort is demonstrating a larger commitment to philanthropy. A recent report from the Fraser Institute highlighted a steady decline in the number of Canadian donors, with only 16.8 per cent of tax filers donating to charity in 2023, that’s down from 21.9 per cent in 2013. Total charitable donations, however, have risen over that same period from $8.6 billion to $12.8 billion. Those who are giving are giving more, reflecting a trend towards larger donations from fewer donors.
In their own analysis of declining philanthropy, the Fraser Institute notes that the cost of living is playing a significant role. They note that one in five Canadians have skipped a bill in the past year to afford groceries. Not only are fewer Canadians donating their money or time, but the growing need among the poorest Canadians has placed a strain on many charities helping to alleviate the burdens of poverty.
Danielle Robinson has seen this decline in donations firsthand, the National Director, Philanthropic Advisory Services at BMO Private Wealth notes that the pressure on most Canadians pocket books has resulted in tighter budgets and less capacity for giving. She notes, though, that high net worth Canadians have now made donating a more proactive and planful part of their lives. She explained that as these Canadians step up to support more charitable causes, their advisors can upskill to offer them a more comprehensive means of achieving their philanthropic goals.
“Financial institutions and investment advisors are incorporating philanthropy into those financial plans,” Robinson says. “They're speaking to their clients perhaps in a bit of a more proactive and planful way to build a total financial plan that includes philanthropy.”
Robinson stresses the fact that philanthropy is deeply personal for clients, and their motivations will be rooted to individual values. She notes, though, that the tax advantages of philanthropy are rarely one of the core motivating factors. Advisors working with these clients can use their personal interests as a point of connection, rather than just leading with lowering tax bills. She notes that philanthropy can open the door to much wider financial planning conversations, because it touches on values, legacy, and how clients want to use their wealth in the long-term.
There are best practices to follow as advisors build philanthropy plans for their clients. Robinson notes that donating appreciated securities, for example, can come with significant advantages as it avoids incurring a capital gains tax bill for the donor. She notes that using donor advised funds and private family foundations can also help with the creation of lasting legacies of giving built around a family’s core values.
Administering these vehicles and giving strategies takes some skill and knowledge. Robinson believes that investments can be made at the dealer level to offer more philanthropic advisory services. Those services can then help advisors show their clients a financial plan that goes well past the question of their own retirement, into the legacy they will leave for their communities. Advisors can show how this approach can help with tax mitigation as well, especially when clients undergo liquidity events such as the sale of a business or the receipt of an inheritance.
For advisors who want to open these conversations with clients, Robinson suggests connecting over questions of values and motivations. Advisors can ask clients if they already sit on any boards or if they volunteer their time, if they have liquidity events on the horizon or if they are carrying goals for longer-term legacy. She stresses that this work takes a long time, and that it builds along with an advisor’s relationship to the client.
Robinson believes that firms have an opportunity and a responsibility to invest in their philanthropy planning. She notes that Canada has become a more disconnected place and that individuals are less tied in to their communities than they were in the past. That is only getting harder as more Canadians face challenges around the cost of living.
“If you're looking at sort of the totality of your offering, philanthropy makes good sense,” Robinson says. “Not only from a wealth management perspective, but also in giving back to your community, ensuring that whatever your passion point is within community is being looked after and being stewarded.”
