Why Philanthropic Giving Looks Different for Young Professionals Today—and How Financial Advisors Can Help

What motivates someone to give? Often, donors have a personal connection to an organization or cause, or simply the desire to give back. One could be inspired by the tax benefits or religious values. Often, philanthropy is tied to a cause that has personally impacted us. Despite the many different reasons to give, we’re seeing a noticeable decline in the frequency of giving, especially among younger generations.

As a member of a young philanthropy group for a community foundation, I’ve seen this challenge firsthand. Comprised of professionals between ages 25 and 35, our group was created with the goal of engaging young professionals to encourage future giving. In our first meetings, where we discussed appropriate fundraisers, we kept coming back to a common theme: many of our peers simply aren’t in a financial position to give significantly right now. With the goal to encourage future giving, the question became: how do we engage our peers meaningfully and respectfully? How do we reignite a culture of giving in our generation?

For charitable foundations, inspiring giving requires thoughtful strategy and acknowledging the unique factors impacting this demographic. Young professionals are often navigating financial independence or supporting a young family. Many foundations find success in gaining the interest of young professionals by creating events that offer experiences or value in return for donations. Right now, volunteering time and effort often feels more achievable for the younger population on tighter budgets, and that’s okay. Foundations are looking to re-engage young professionals toward rebuilding a sense of community that has somehow been lost over the years. As we know, building community inspires the desire to help.

The Role of Advisors: Understanding the “Why” Behind the Wealth

As advisors, knowing our client’s financial background is our responsibility, but getting to know them personally is what makes it easier to suggest the right opportunity in a meaningful and customized way.

We are on the cusp of the largest intergenerational transfer of wealth in history. In some cases, the transfer has already started. Baby boomers are set to leave behind large sums of money to the next generations. Collectively, over the course of the next 20 years, children and grandchildren are set to receive trillions of dollars. This moment arrives at a time when many young people are open about the challenges they face due to the rising cost of living. As wealth is transferred, many who previously struggled may suddenly find themselves with an excess of capital—and a desire to give back. As the transfer of wealth ensues, it offers individuals the opportunity to give when they previously wouldn’t feel financially able.

As advisors, we can play a key role in helping clients navigate this shift. With clients who are interested in financial giving, we have a unique opportunity to use our industry knowledge to educate them on how they can enhance their future giving. Products such as life insurance, when used correctly, can enhance a structured financial gift to create a larger impact without increasing the cost to the donor.

Life Insurance: A Strategic Tool for Young Philanthropists

Life insurance can be an affordable and tax efficient way to make a significant philanthropic impact as a young donor. It is a product priced on risk, with the main risk factors being age and health. In some cases, the cost of insurance for a young adult can be a fraction of the size as compared to the death benefit.

There are two primary ways to structure charitable giving through life insurance:

1. Naming a charity as the beneficiary of a policy. The donor’s estate will receive a tax receipt equal to the value of the death benefit donation upon death.
2. Assign a charity as the owner and irrevocable beneficiary. The donor continues to pay the premiums, which qualify for tax credits during their lifetime.

Depending on the charity’s policies, donors can be recognized in their lifetime or after they pass away. With life insurance products, suddenly it becomes easy to consider being a million-dollar donor for a fraction of that amount in actual cost. As advisors, suggesting creative options for donating is how we add value.

Listening First, Advising Second

It is key to take the time to get to know our clients and learn what is important to them. Being someone who listens is just as important as being someone that gives advice. While there’s frequent talk about young professionals as an untapped market for philanthropic giving, it’s important to acknowledge why many aren’t giving right now. Today, young professionals have the internet at their disposal and many causes to stand behind. That’s why charities need to focus on building genuine connections that grow into reasons for donating.

Reigniting a focus on giving through financial planning starts with getting to know our clients and what is going on in their lives. It is not about telling clients what to do with their money, but rather about helping them use it more efficiently. For young professionals, philanthropic giving with life insurance is a tax efficient way to donate large sums of money at a low cost. However, this strategy is rarely discussed. Being part of these conversations with our clients can strengthen our relationships. For advisors with clients who are ready to donate, it is fulfilling to take part in these decisions. We can help clients in more ways than simply growing their savings, if that is what they are looking for. Let’s not shy away from starting the conversation.

About the Author

Ali Cooper is an associate advisor at Creative Planning Financial Group, specializing in life, disability, and critical illness insurance for individuals and businesses. She assists clients in addressing their estate planning and personal finance concerns using a needs-based approach. Her success is drawn from her client-focused background from working in the food industry. Ali serves on the Baycrest Friends of the Foundation committee, engaging young professionals in supporting Baycrest’s research in brain health and aging. She holds a combined honours degree from the University of King’s College and Dalhousie University.