New research by the Charities Aid Foundation (CAF) reveals that only around a third of high-net-worth (HNW) donors (36%) have discussed the tax efficiency of their giving with their financial adviser in the past two years.
This means that almost two-thirds of HNW giving could be happening without professional financial advice.
With the vast majority (86%) of HNW individuals donating to charity – totalling around £8bn annually – this suggests some donors may not be utilising the tax incentives available for charitable giving.
The research, which features in CAF’s latest report, The Philanthropy Advantage: How Advisers Can Empower Client Giving, found that wealthy individuals are much more likely to donate than the rest of the public (86% vs. 50%), and for many it is an important part of their lives. Yet, only 7% feel confident in their knowledge of charitable giving, and around half (48%) say they know only a little bit, or nothing at all.
Many financial advisers risk not meeting their clients’ needs. Just 36% of advisers believe it is important to discuss philanthropy with clients, contrasting with 60% of HNW individuals who believe it important to discuss the topic with their adviser. However, when it is discussed, the vast majority of HNW individuals (93%) say that they found it beneficial.
Most advisers admit they wait for clients to raise the topic rather than initiating it themselves, with 58% saying the topic rarely comes up, and 15% who say it is never mentioned.
Even those clients who have not discussed charitable giving with their advisers would welcome the discussion, with three quarters (76%) of individuals saying they are open to, or excited about, their advisers raising a range of giving-related topics, including causes they are passionate about, the tax benefits of giving and how to ensure a charity is legitimate.
Previous CAF research estimated that if all HNW individuals donated just 1% of their investable assets, they would collectively give an estimated annual total of £19.8bn. This would mean an extra £12 billion to charities from HNW individuals. Currently, HNW individuals give around 0.4% of their investable assets to good causes.
Mark Greer, Managing Director at the Charities Aid Foundation (CAF) said: “There is considerable untapped potential for philanthropy in the UK.
“Leading professional advisers appreciate the importance of philanthropy to their clients. But there is still work to be done, with only a third of the sector acknowledging this. As we continue to navigate the greatest ever transfer of wealth alongside an ever-growing spectrum of impact capital, there is significant potential for more substantial conversations on this topic between HNW individuals and their trusted advisers.
“We would like to see the FCA set out a plan for how all regulated financial advisers will receive training on philanthropy. Working alongside charities, donors and government, professional advisers can be part of a collaborative effort to reinvigorate the UK’s culture of generosity and better serve their clients.”
Download the full report here.
