By Felix Milton, Philip J Milton & Company
After recently undertaking an audit of my own charitable gifting practices, I have realised that this is an area that Financial Planners are immensely privileged to be able to discuss with their clients.
We often have an intimate understanding of our client’s spending habits and can see whether their earnings are sufficient to cover all their spending or not. If we can tell our clients that they are likely spending too much in one area to their detriment, should we not be able to encourage our clients to do better with the resources at their disposal?
Now, whilst this may be a controversial statement, as fundamentally clients can use their own money as they please, there are some benefits to giving that go far beyond simply helping charity:
1. Giving Improves our own quality of life!
Firstly, giving improves our own quality of life! A study undertaken in 2008 by Harvard Business School professor Michael Norton found that giving money to someone else lifted participants’ happiness more that spending it on themselves (despite participants’ prediction that spending on themselves would make them happier).
When financial planners have the discussion with their clients about their goals and aspirations, it may be worth adding in this piece of information, to see whether it’s something a client perhaps hasn’t considered before!
2. Giving can reduce the amount of tax you pay
We also need to remind clients that if you gift with Gift Aid, you effectively can decide where some of your tax revenue goes. We will all come across clients who want to mitigate as much tax as possible, so why not encourage them to do so in a way that helps charity? Additionally, Higher and Additional Rate Taxpayers (which are more often than not our clients) can claim additional relief on their contributions.
3. The wealthy can make a big difference
Finally, due to the very nature of our work, we are likely to encounter individuals with more wealth than the average for society.
A recent study undertaken by Lord O’Donnell via the Law Family Commission on Civil Society found that among the top 1% of earners in the UK, the richest 1,700 people made 2/3rds of the donations from this group, as well as typically only donating 0.2% of their income as opposed to the average of 0.8% throughout the population.
Financial Planners are likely to communicate with this group more than often and as such, could encourage a healthier attitude towards charitable giving, which benefits not only the individual, but society as a whole.