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5 Reasons Every Advisor Should Use Giving Funds

by Mark Mersman  |  August 13, 2012  |  Type: Strategies

If you're a professional advisor or know someone who is, you'll want to read and share this great article on the benefits of using NCF Giving Funds.

It’s no secret that mutual funds catapulted stock market investing. Mutual funds provided an easier way for the average consumer to participate in and manage their stock investing. They served as a catalyst for the stock market boom of the 80s and 90s. And many will argue that donor-advised funds like the Giving Fund at the National Christian Foundation (NCF) are having the same effect on charitable giving, making it easier for all types of givers to get involved and take action. As an advisor, are you getting in on the opportunity, or standing on the sidelines?

Donor-advised funds are not new. In fact, they’ve been around in some form since 1931. Today, they are the fastest growing charitable giving vehicle in the United States, and their rampant growth over the past decade should have advisors taking notice. 

Since NCF's inception over 30 years ago, thousands of individuals and families have used their Giving Funds to support the causes closest to their heart. Since 1982, NCF has received over $4.8 billion in contributions from these generous givers and granted $3.3 billion to more than 30,000 churches, ministries, and charities. 

 If you are an advisor wondering whether or not this is a worthy endeavor for you, here are five good reasons why you should consider incorporating Giving Funds into your practice:

1. They provide huge tax benefits

If you aren’t familiar with how a donor-advised fund like the NCF Giving Fund works, consider the following example:

Jon and Susan are your clients. They have $500,000 in IRA accounts with you and another $500,000 in non-qualified accounts with you, diversified between stocks and bonds. Each year, Jon and Susan donate $10,000 to three different charities. They do so by writing checks from their checking account. 

Let’s suppose Jon and Susan choose to set up a Giving Fund. Rather than writing a check to their Fund, they could transfer one of their highly appreciated stock positions into it instead. Let’s suppose there is a $5,000 cost basis, and Jon and Susan transfer $10,000 worth of stock. Once the positions are transferred to the Giving Fund, they can liquidate the position without a taxable consequence. In fact, they’ll receive an immediate tax deduction of the $10,000 market value of the stock. They can freely recommend grants to their respective charities with this liquid $10,000 in their Fund. 

Meanwhile, instead of writing a check to their charities, they write a check to purchase $10,000 worth of the same stock they just transferred. What happened here? From a financial standpoint, they have the exact same amount of holdings, except they’ve wiped away the embedded capital gains they were facing. They’ll receive the same amount of tax deductibility as they normally would for their $10,000 charitable contributions, except they are now in a much better tax position.

2. They'll simplify your client's life

The average charitable giver might support three to five charities throughout a year. Tax time becomes cumbersome as your clients track down receipts and paperwork. With a Giving Fund, all of the deductibility aspects are handled on the front end, and they can make their charitable grants online by pointing and clicking.

3. They're easy and free 

Most advisors who dream of being involved in the charitable planning arena have experienced the pain of going through multiple appointments, explaining elaborate schematics of CRTs, CRATs, and CRUTs, and dealing with attorneys. More often than not, the complexity of the planning turns a client off and ignites their procrastination fire. 

Giving Funds are the easiest accounts to set up, they involve very little paperwork, and there are no major legal hoops to jump through (i.e. you don’t need attorney involvement). They can be set up without any upfront costs although there is an ongoing administrative cost. Essentially, they are as easy to open as a bank account.

4. They change the conversation

Want to be different? Then do something different. Having a charitable conversation with your clients and potential customers will differentiate you from every other advisor with whom they’ve ever met. Stop talking products and investment solutions. Talk about things based on values like charitable giving. Sure, there is a huge tax benefit, and you’ll make their life easier, but when the conversation shifts from investments to charitable giving, you’ll see a different side to your client. And they’ll see a different side to you. 

 5. They help you carve a niche

When clients and potential customers begin to see you as a charitable giving advisor, the word will spread. When churches, charities, accountants, and attorneys hear about the work you do in the charitable giving arena, they’ll be clamoring to have you at their next function or introduce you to their clients and givers. It doesn’t happen overnight. It starts with you having a conversation with your charitable-minded clients. Introducing Giving Funds into your practice can be a great way to enhancey our relationships and further differentiate you from your competition. Best of all, your clients will thank you for it.


Mark Mersman is CMO of the Wealthnetic collection of companies and may be reached by email at mmersman@wealthnetic.net or online at www.wealthnetic.net. Wealthnetic subsidiaries include Portformulas, a formulaic trending money manager; USA Financial, a broker-dealer and registered investment advisor; AnnuAssure, an insurance and annuity wholesaler; and Plug-N-Run, a cross-platform marketing and technology firm.

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