Interviewing The Affluent: Unpacking Philanthropic Values And Motivations

Interviewing The Affluent: Unpacking Philanthropic Values And Motivations

Part One
Article posted in Practice on 25 August 1999| comments
audience: National Publication | last updated: 18 May 2011


Have you integrated the discussion of philanthropy into your client interviews? If so, have you developed a systematic approach to helping them explore the motivations that lead to charitable acts? In this and next week's editions of Gift Planner's Digest, Scott Fithian and Paul Schervish share their "values-based" approach to gift planning with "Interviewing the Affluent: Unpacking Philanthropic Values and Motivations."

by Scott C. Fithian & Paul G. Schervish

Ask 1,000 people if they have excess wealth. Most will say they have none. If excess wealth provides the planning resources for philanthropy, then the need for self-awareness regarding excess wealth is of paramount importance. This presentation will explore techniques for interviewing the affluent and helping them to "unpack" their values and motivations at each of the three planning pyramid levels. Traversing this pyramid will lead to effectiveness and significance at each level both for you and for those you counsel.

It is important to establish what we mean when referring to the interview process. In this context, interview refers to the process of gathering information either through a personal interview, written survey, or both.

What Is The Context In Which Interviewing The Affluent Becomes An Important Factor In Determining Success?

Most people find the estate planning process quite difficult.

There are many reasons, not the least of which is that it is hard work. Everything about it seems complex and hard to understand. The process itself takes enormous time and patience. It deals with subjects many don't want to confront. It's confusing and frustrating. It often requires giving away assets--forever. And if all these weren't enough to create planning roadblocks, it costs money--often a significant amount.

On top of these, perhaps the greatest obstacle of all is the fact that most people feel they have little or no control over the process. Because they don't understand it, and they can't control it, most choose to avoid it altogether.

The following sections highlight our observations regarding the estate planning process and industry trends.

Observations Regarding Society

We are experiencing a rapid expansion of wealth throughout the United States and the world.

Over the past few decades, an unprecedented expansion of wealth has occurred. This rapid and immense growth has changed the context in which individuals and families view wealth and the relationship between their own wealth and how they define significance in life. Unlike any other time in history, the subject of wealth has become "mainstream."

The numbers of "upper-affluent" are increasing dramatically.

In addition to a general expansion of wealth, we are seeing a burgeoning expansion of upper-affluence. Whether earned from employment, entrepreneurial ventures or passive investments, new groups of affluent individuals and families are cropping up every day.

There is an inclination among the wealthy to explore the significance of death and taxes.

Many wealth holders are pondering their innermost feelings as they relate to their financial success. We find more and more people asking themselves, "In the light of my death, who am I? How do I find true meaning in my life, and what is the legacy I want to leave behind?"

More than ever before, people abhor tax, especially estate tax. Many have a grand inclination to make their final tax payment to something other than government.

Observations Regarding Clients

Observations about the estate planning process and the context in which it is practiced explain why, all too often, your clients find themselves in a state of planning paralysis.

Clients want more control.

Clients clearly want to gain greater control over the planning process. It is only when they feel in control that they have the confidence to take full advantage of recommended strategies. Unfortunately, the arcane nature of estate planning essentially prohibits your clients from assuming control. They often lack the necessary perspective or context within which to identify their true objectives. Furthermore, the technical aspects and jargon confuse them. For the most part, they believe they are incapable of directing the process.

Clients have not examined three key questions in estate planning.

When confronted with financial and estate planning decisions, three primary areas of concern must be addressed, in priority order:

1) How will the decision affect me? (financial independence for self and spouse)

2) How will it impact my heirs? (family legacy)

3) What effect will it have on society? (social capital legacy)

The vast majority of your clients cannot answer these three questions. They may instinctively have a vague idea regarding some of the issues, but most have not consciously explored the answers. Consequently, they have no idea what they can accomplish through the estate planning process.

Clients tend to "cling" to wealth.

Most of your clients do not know how much they will need to achieve and maintain financial independence for life. Therefore, they tend to "cling" to their wealth. Regardless of how much wealth your clients have (the reality); they often feel they need more (the perception). This incongruity, coupled with a general sense of insecurity, impedes and often derails the planning process.

Few families have thought about what an "appropriate" inheritance means to them.

Most clients have not determined an appropriate and specific family legacy or inheritance for their heirs. In fact, most assume their heirs simply will receive what is left after taxes and other costs are paid. Few families have ever considered attempting to identify exactly how much they want to leave heirs, and why.

The concept of Social Capital has complicated the planning formula.

Most people are "philanthropic infants," meaning they lack the necessary experience to place charitable giving within an appropriate context. Because their experience is limited, objectives in this area tend to be the least well developed. The term "social capital" implies a choice between gift and tax. It does not, however, prejudge the "better" choice. When given a choice between tax and charitable gift, our experience suggests that most clients choose the latter. However, that decision is purely the client's to make.

The concept of social capital expands the definition of wealth, further complicating the planning formula. When exposed to the notion of social capital, many individuals decide that they actually have a responsibility to assure the proper allocation of their financial and social capital. Unfortunately, most don't know how to make those choices.

Observations Regarding Advisors

If the conditions under which clients enter the planning process seem awkward, the context in which advisors guide them through it is equally ungainly.

Planning recommendations often reflect biases of the primary advisor.

Advisors often have their own agendas or vested interest. Each discipline may be inclined to approach planning from a relatively narrow perspective. For example, insurance agents and investment brokers may be seeking opportunities for product sales. Attorneys may have a bias related to probate. Charities may have their organizations' interests foremost at heart.

Our experience suggests that few advisors fully and objectively identify their clients' values and goals as a basis for planning. Whatever serves the best interest of the client should always serve as the driving force for the process. In too many instances, that is not the case.

Advisors have difficulty motivating clients to pursue complex solutions.

Advisors may be troubled by a perceived conflict of interest in recommending sophisticated solutions. Attorneys, for example, may be reluctant to recommend strategies that require extensive documents. Insurance agents, too, may feel they are "suspect" if they recommend solutions that include a sale. Even if advisors do recommend an unconventional or complex solution, they may lack the ability to motivate the client to take action. Although technically proficient, they may be less comfortable in the art of motivation.

Professional advisors most often deal with implied rather than explicit objectives.

The most common motivation for planning one's estate is a desire not to pay the tax. The typical advisor believes this desire not to pay tax is synonymous with the desire to give more to heirs. Therefore, advisors often make erroneous assumptions regarding client motivation, failing to differentiate implied from explicit objectives.

Many technically competent professionals lack the necessary skills to assist clients in the subjective process of developing concise statements of values and objectives. They lack the systematic approach that can clarify clients' core values relative to the growth, use, preservation and distribution of wealth.

Identifying those core values and objectives is critical to achieving maximum planning results with your clients.

Most advisors need help converting social capital potential into philanthropy.

By their own admission, advisors typically are not comfortable eliciting charitable objectives from clients, particularly those clients who are inexperienced in the realm of philanthropy. Additionally, most advisors place little to no value on social capital. Their entire planning focus is on their clients' financial capital (financial independence and family legacy), often to the exclusion of social capital (gift or tax).

Advisors need to recognize and work with the value of the "whole" dollar, not just the part their clients will be allowed to keep or pass on to heirs.

Teamwork is too often absent.

Advisors all too frequently operate in a manner designed to protect their "fiefdom." Typically, once an advisor has a client, he or she wants to control the relationship and keep other advisors at bay. This is not in the best interest of the client. The most effective plans include the input, perceptions and professional expertise provided by members of multidisciplinary professional teams.

Often estate planning is a process of "fishing" for strategies rather than developing objectives.

Most professional advisors are more comfortable discussing specific strategies than developing objectives. In communicating the benefits and features of particular planning techniques, advisors demonstrate skill and expertise, promoting their level of knowledge to the client. But technically executing strategies right is not necessarily executing the right strategies. Too often, the "cart" of impressive strategies precedes the "horse" of well-articulated objectives.

Market Structure And Changes In Perception

The economic environment in which planning occurs is changing radically. Those who can anticipate the trends and adjust the way they conduct business accordingly are destined to thrive and prosper.

The financial service industry is jockeying for market position.

The insurance agency system that historically supported career agents for major life insurance companies is struggling, as agencies find it increasingly difficult to cost-effectively recruit and train productive agents. Many companies have already abandoned the traditional agency system, and many more are sure to follow.

Insurance producer groups and independent broker dealers have emerged as an effective alternative to single company affiliations. At the same time, many producer groups are finding it more and more difficult to compete in a market dominated by billion dollar financial service companies. They lack the necessary brand name recognition.

Banks are selling insurance and investments and will dominate the bottom of the market by virtue of their systematic access to customers. They also are gearing up with full service offerings to approach the affluent marketplace.

Brokerage houses are offering broader services to entice affluent clients to use them as one-stop shopping resources, with a range of banking, insurance, investment management and trust administration services. Brokers are recognizing the need to acquire planning expertise that adds value to their middleman function for affluent clients, while they lose market share to no-load funds and discount brokers at the lower, price-sensitive end of the market.

Both insurance and investment specialists are searching for that market "niche" which affords them financial security amidst ferocious competition and unprecedented restructuring in financial service markets.

Nonprofits are losing the charitable gift planning monopoly.

Charitable organizations used to provide the vast majority of gift planning advice occurring throughout the country. Increasingly, "allied professionals" are assuming this role. It is becoming generally recognized that charities have not been without their own conflicts of interest and biases in recommending charitable gift solutions to their donors.

As conventional estate planning professionals merge into the role formerly dominated by planned giving technicians, a new, client-centered estate planning industry is emerging. Capable, qualified independent advisors are now readily available to provide the technical consultation previously offered primarily by nonprofit in-house staff. Robust software makes it relatively easy to run standard gift illustrations and comparative gift strategy analyses. More and more advisors are putting their hats in this ring every day.

Donor-centered philanthropy is becoming an accepted standard.

Donor-centered philanthropy has been purported to be a fund raising "norm" for many years. However, it is only recently that fund raising professionals have begun to more consciously practice a "donor-first" methodology. More and more are realizing the advantage of viewing donors' philanthropy in a more "holistic" way, understanding that most will give to more than one organization. Many are working collaboratively with other Nonprofits in their community to help donors maximize their giving potential.

Financial advisors are being viewed with less distrust.

The nonprofit world is beginning to recognize that financial advisors can be among their closest allies, increasingly viewing the professionals who advise their donors as viable--and valuable--conduits for major planned gifts.

All professionals are seeking a higher level of collaboration.

Attorneys, accountants, insurance agents, investment brokers, trust officers, and nonprofit development professionals are beginning to recognize and take advantage of the benefits of collaboration. Their perception of the value of one another is changing. They are beginning to see a world where everyone needs to interact effectively to accomplish common objectives for the good of their clients and donors.

The "social capital" concept is catching on.

Increasingly, clients and their advisors are beginning to realize that the "whole dollar" has value, not just that portion of a family's wealth that is consumed or passed on to heirs. What is left--the social capital--will pass involuntarily as taxes or voluntarily as charitable gifts (or taxes, if that is the client's choice).

In short, the concept of social capital and its intrinsic value to society are ideas that are rapidly coming of age!

The Pyramid Of Life And Planning: A Hierarchy Of Planning Values

The planning process is driven by three intrinsic objectives: 1) the need for financial independence; 2) the desire to leave a family legacy; and 3) the desire to have a positive impact on society through a social capital legacy or, more simply, to make a difference. These objectives are more often at work unconsciously than they are consciously. Even though they may not be expressly understood and articulated, they often are applied intuitively to financial decisions.

Because most people have not clearly defined these important objectives, the planning process is often frustrated by indecision. This leads to planning paralysis. Instinctively, your clients may try to evaluate a proposed idea based upon how the idea may affect these three objectives. Yet, because their objectives are vague, perhaps even nonexistent, they make no decision at all.

Financial Independence (Heart)

Your client's first and most basic planning objective is to achieve and maintain financial independence. Simply stated, your clients achieve financial independence when they have accumulated and preserved all they would ever need to maintain their desired lifestyle. Generally expressed as a unique combination of annual income and minimum resource base, financial independence answers the question, "What do I need from my wealth for the rest of my life?"

Family Legacy (Home)

Once financial independence is secured, we can shift the attention to wealth distribution, or what we generally call estate planning. This level of planning determines the "family legacy"--what your clients will leave their heirs. During this phase of the planning process, your clients deliberately and carefully specify an appropriate inheritance amount for each estate beneficiary.

Social Capital Legacy (Culture)

Having achieved financial independence and secured the desired family legacy for heirs, your clients finally have the freedom to consider their "social capital legacy." Social capital legacy represents that portion of the estate not required to maintain financial independence and not designated for family legacy. There are two forms of social capital--voluntary and involuntary. Voluntary social capital is made up of those dollars over which we make a conscious decision to take responsibility. Consisting of either tax or philanthropic contributions, it represents the lasting impact we may have on society by directing our social capital in a manner consistent with our value system. These are self-directed social capital dollars.

Involuntary social capital consists of those dollars that are involuntarily extracted from us under the default plan--tax. This represents the mandatory redistribution of our social capital when we fail to take personal responsibility for wealth distribution. These are government-directed social capital dollars.

In an effective estate plan, each of the three objectives--financial independence, family legacy, and social capital legacy--is carefully examined and specified.

General Rule On Context: The rapid expansion of wealth, increasing numbers of affluent, and an intense desire for personal values to be reflected in planning, all create a context within which interviewing the affluent is not only important, but essential.

What Is The Purpose Of Interviewing The Affluent?

Over the past several years, there has been a tremendous amount of energy and focus placed on the technical aspects of planning. Given the complexity of our tax system, in many ways, this emphasis has been a necessary evil. However, the technical aspects of planning are nothing more than a means to an end. They are not the end itself.

Relative to a personal service like estate or gift planning, the quality your relationships have a tremendous impact on your level of success. Taken alone, this is probably the most important factor in determining success. However, the ultimate factor in determining your success lies somewhere beyond simply having a relationship. It has to do with whether or not you create value. If you create value for those you serve, you will be successful. If you do not create value for those you serve, you will not succeed.

Dan Sullivan, The Strategic Coach?, suggests three basic ingredients that are necessary to create value: relationship, leadership, and creativity. When we apply Dan's model to the planning process, the resulting formula looks like this.

(RLC)E = V

R = Relationship provides confidence through encouragement, support, and clarity.

L = Leadership provides direction, by eliminating dangers, identifying new opportunities, making progress, and achieving success.

C = Creativity provides capabilities through new tools, structures, and systems.

E = Emotion represents the depth at which relationship, leadership, and creativity is applied.

V =Value is created for your donors/clients through helping them achieve a greater sense of effectiveness, significance, and satisfaction at each level of the planning pyramid.

An effective approach to planning begins with the basic objective of adding value. We build relationships by providing our clients the encouragement they need to accomplish their highest dreams and desires. We provide support that is necessary to confront issues such as mortality, family conflicts, and the necessity to relinquish the ownership of their treasure.

We provide leadership by helping our clients eliminate dangers, whether real or perceived. We identify new opportunities and help move them toward those opportunities. Ultimately, we help them find peace in achieving success and making progress.

We apply our creativity by providing new capabilities that enable our clients to more effectively negotiate the planning process. We give them new tools to work with, such as a charitable remainder trust or a family foundation. We initiate new structures, such as a written mission statement to guide the planning process. We introduce new systems, such as a virtual planning team, to assist them in achieving their highest goals.

The value we provide our clients is greatly enhanced by our willingness to risk a journey into their emotions. By taking that risk, we are able to go far beyond merely applying products and services or soliciting a gift. We can help our clients and donors not only maximize the effectiveness and sense of significance they experience at each level of planning, but we can help them realize their greatest sense of significance as a human being. Consider the impact you might have in asking questions such as these: What gives you a sense of satisfaction in life? What has been your contribution toward making the world a better place? What hopes and aspirations do you hold for your children and grandchildren? Not being afraid to ask thoughtful questions about what matters most to your clients will help them reach their highest goals. It will also greatly heighten your own sense of significance and satisfaction in your life's work.

General Rule on Purpose: The purpose of interviewing the affluent is to unearth the natural inclination to identify those things that provide greatest meaning in their lives.

What Are You Trying to Find Out About the Affluent?

Conducting an interview simply expands the process of defining objectives. Traditional objectives are limiting, in that they state only what your client wants to accomplish. Our intent is to go to a deeper level and explain why.

Behind the more obvious objectives upon which your clients typically base their estate plans, lies a series of issues closely tied to their core values. You need to help them identify and address these before we can develop truly effective estate plans. As the process unfolds, your clients will discover and put in writing all the issues and values that really matter to them.

This approach strengthens their convictions about the most effective and/or appropriate uses of wealth. Designing the estate plan becomes easier. Decisions are more readily apparent when made within the context of their well-defined values. This process heightens the congruency between your clients' stated priorities and how they choose the most appropriate and satisfying use(s) of their wealth.

Identify The Motivations For Planning: Why Climb The Pyramid?

One of the most important aspects of estate planning, or family wealth transfer, is establishing a planning focus. What is your client's motivation for planning?

In my experience, the dominant motivation for planning will most likely reflect one of five planning values.

1) Financial Independence Value -- desire to maintain maximum access to financial resources, regardless of the impact on family wealth transfer. This client is most concerned with maintaining a sense of personal or family financial security. Maximizing inheritance for heirs, reducing transfer taxes or making charitable gifts are secondary issues. If your client values financial independence above all other planning values, you should focus on planning strategies that result in maximum control over their financial resources.

2) Tax Effectiveness Value -- desire to transfer financial resources from one generation to another, with a minimum of resources lost to tax. This client is most concerned with reducing the amount of tax paid as the wealth is transferred to the next generation. He or she prefers strategies that reduce tax to strategies that maximize inheritance. If your clients value tax effectiveness, you should focus on strategies that effectively convert taxes into charitable contributions.

3) Maximum Inheritance Value -- desire to maximize the amount of wealth transferred from one generation to another, regardless of how much wealth is lost to tax. To this client, it does not matter how much tax is paid, as long as heirs receive the largest possible share of the wealth. If your client falls in this category, you should focus on strategies that reduce tax and/or transfer assets to charity, but only if the strategies do not reduce the inheritance for heirs.

4) Social Capital Value -- desire to convert taxes into charitable gifts, regardless of how much wealth is transferred to heirs. This client is most concerned about converting potential taxes into charitable contributions, even if those contributions reduce what is transferred to heirs. His or her primary value is social capital. The client is content to have heirs receive what is left after taxes are eliminated and charitable gifts are made. You will want to emphasize social capital planning strategies over conventional planning strategies.

5) Wealth Maximization Value -- desire to convert taxes into charitable gifts, after securing the desired inheritance for heirs. This client wants to maintain control over the distribution of his or her estate. After establishing a minimum acceptable family legacy, you should focus on converting taxes into self-directed charitable contributions. Total control over financial resources is the goal.

Before you begin the planning process, it is essential that you help your client or donor determine which of these values best represents his or her perspective. The differences are subtle, but important. The answer to what motivates the client to plan provides the focus for all future planning decisions.

Unpacking The Pyramid: Understanding The Interrelationships

In seeking to understand the pyramid, it is essential that you understand the relationships between and among the three levels. To a certain extent, the issues of each level are felt across the entire spectrum of the pyramid. Rather than strictly defined borders between each level, there is a gray area where many issues overlap and sometimes conflict.

Financial Independence

How does effectiveness relate to financial independence? The most effective avenues to achieving tax minimization, wealth accumulation, asset protection, and risk management lead to the highest level of financial independence. Each of us seeks to maximize these attributes from the planning process as we strive to reach and maintain our financial independence.

Significance, as it relates to financial independence, may be expressed in many forms. Typically, we aspire to achieve affluence so that we may enjoy special opportunities, such as:

  • The freedom to make choices that enable us to control our lives.

  • Power and influence in society.

  • The ability to help others.

  • Personal and/or family financial security.

  • The ability to start, manage, control, or invest in business.

  • Personal spiritual development.

  • The ability to help create breakthroughs for society's benefit.

  • Becoming a leader among our peers in responsible wealth management and deployment.

Issues such as these shape one's philosophy of wealth.

Family Legacy

Effective family legacy planning has to do with the efficient transfer of wealth between generations.

Effectiveness is accomplished through building a plan that assures maximum efficiency in achieving stated inheritance objectives.

Significance at this level comes from passing "value with values." Here, value relates to a financial legacy--the sense of satisfaction and significance your client gains from an ability to help children and grandchildren gain a financial head start in life--or, in other words, an ability to contribute to the financial independence of succeeding generations.

The term values reflects the desire to transfer family values along with a financial legacy. Many people gain a tremendous sense of satisfaction from knowing they have transferred a strong base of positive values to heirs. Consider the following potential values that your clients may wish to pass along to succeeding generations:

  • Ethical values, such as honesty, justice, and fairness.

  • Personal values, such as modesty, loyalty, and faithfulness.

  • Emotional values, such as compassion, kindness, and generosity.

  • Public values, such as good citizenship, community involvement, care for others.

  • Financial values, such as financial responsibility, frugality, and independence.

  • Spiritual values, such as inner spirituality, faith, religious commitment.

  • Work values, such as effort, punctuality, competence.

  • Physical values, such as health, relaxation, exercise.

  • Cultural values, such as music, art, travel, hobbies.

Social Capital Legacy

Effective social capital planning derives from the manner and efficiency in which your client's social capital is captured and how it is ultimately put to use through gifts or tax. As an aside, most would agree that both are necessary components within our society.

Many people gain a sense of significance from personally directing their social capital. They want to help shape the social, physical or spiritual environment in which they live. They believe they will leave the world a better place by virtue of their contributions during their brief stay on earth. Others are content to benefit society through the payment of tax. It is our job to help our clients determine whether their social capital will be in the form of charitable gifts or tax.

Effectiveness and Significance at Each Level. Financial success and a sense of personal significance are often characterized independent of one another. Some would argue that the first part of life is about achieving financial success, and the second part is about turning that success into a sense of significance. In our experience, an equal capacity for success and significance exists in all phases of life. The very process of working to become "successful" often results in feelings of "significance"--for example, building a business, climbing the corporate ladder, or making wise investment decisions.

In the earlier phase of our life, we strive to achieve financial independence--we strive to succeed. Significance, although it may be present, is a by-product of achieving success. The degree of significance we feel is, at least in part, a function of how effective we perceive ourselves to be.

Once it is clear that financial independence is no longer an issue, our clients and donors may very naturally shift their focus to how they can gain a greater sense of significance, now that success is no longer a concern.

Unpacking the Levels

How do these three levels--financial independence, family legacy, and social capital legacy--interrelate? There are many areas in which they overlap and intersect. It is important to recognize the potential for conflict.

For many people, their net worth becomes a major component of their self worth. Like it or not, we live in a society in which money is a serious factor in "keeping score." As a result, even the most grounded people may experience difficulty letting go of the resources they perceive they need for financial independence, even in the pursuit of significance at a higher level of the planning pyramid.

Most tax "effective" strategies for establishing a family or social capital legacy also require the irrevocable separation of your clients from their money. As a result, achieving a sense of significance at either of these two levels is accomplished only at the expense of the client's sense of significance regarding financial independence. These opposing forces can paralyze the planning process. Because the need for financial independence supercedes any desires regarding family legacy and social capital legacy, when this paralysis occurs, both our clients and we tend to err on the side of independence.

Understanding the relationship of effectiveness and significance at each level is essential to helping your clients navigate their way up this pyramid of planning.

* * * * *

In Part Two of Interviewing The Affluent, the authors will discuss how to conduct an interview, including questionnaires and a checklist. Discussion will also include mission statements, motivations for planning, and other important topics.

Copyright 1998 and 1999. The Legacy Companies, LLC. All rights reserved. For information about these or other services and products, telephone 617-689-0777 or 1-888-645-4591; fax 617-689-3224;

For information about the research findings on wealth and philanthropy produced by the Boston College Social Welfare Institute, see the Institute's website or contact the Institute at (617) 552-4070.

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