NAVIGATING PHILANTHROPIC PLANNING WITH CLIENTS DURING ECONOMIC UNCERTAINTY
By Karen Goodfriend, KK Wealth Advisors, LLC
Think back a year ago and recall the great sense of uncertainty as we faced a crisis of confidence in the financial system, recession and the possibility of an economic depression. Since a worst case seemed imaginable, clients often turned their attention to how to protect themselves if an extreme economic scenario were to occur. Fortunately, our economy is now on a more positive path and it is easier for clients to plan for their future.
As a financial advisor guiding clients through this time, I observed fearful behavior and a mindset of hunkering down until economic conditions stabilized. Philanthropy was not necessarily their overriding focus while worrying about their own situations and the future of our economy. These high levels of emotion have subsided and people are more able to calmly and objectively reassess. Clients now feel more confident moving forward with their goals including those related to philanthropy.
As professional advisors, many of our clients have enough wealth to give some amount in some manner, whether through current giving or through their estates. However, with the economic turmoil in the past year and the remaining uncertainty going forward, it can be a challenge to calibrate and reassess what makes sense individually. As advisors, we can help.
I hear clients and individuals expressing these types of concerns:
- What important career and lifestyle goals can I realistically achieve? Perhaps I need to work longer than I envisioned. Some are asking: is this an opportunity to pursue an alternate career path that I like more?
- If the economy recovers slowly, and it affects my employment or business, and my investments, how will I be impacted personally?
- How much can I afford to give to family and charity and remain financially secure?
Many of the clients advised by our professional community are fortunate to be well-positioned financially to weather these economic times, even if they needed to dial back some of their earlier expectations. At the same time, there are nonprofit organizations and individuals in our community that are severely impacted and need such support more than ever. Often, such clients want to help, especially if they feel confident they have the means. And that's where we come in: by initiating the conversation, and guiding a review and reassessment of their individual situations. We help them understand how much, when and the methods they can employ to give.
Here are some thoughts to consider when having these conversations with clients:
- Individuals gain visibility of how they are positioned by developing a personal financial roadmap. In my experience, the process is most effective when the potential outcomes of uncertain scenarios, such as higher tax rates, inflation, and pace of economic recovery and investment returns are addressed so they can make plans that deal with these unknowns.
- Recent economic events have pointed out the importance of prudent fiscal behavior individually and for our society. With lessons learned leading to better financial habits, many are positioned to make gifts having improved their financial course. Parents may express the importance of teaching children to help the community and want to continue making gifts, even if it means cutting back themselves.
- Many in Silicon Valley continue to hold appreciated stock, which is tax advantageous to donate. Clients may be reluctant to gift their stock thinking the price may rise in the future and result in a larger gift. Professional advisors can offer a balanced view by discussing the potential risk of the stock declining along with the advantages of waiting if the stock were to rise. If the client does not want to take that risk, they may consider moving forward with the donation.
- Finally, if it's not clear that a client can afford making gifts in the immediate future, we can help them see specific scenarios where it could be feasible in their future, including the naming of a specific charity, such as Silicon Valley Community Foundation, in the estate plan.
Karen R. Goodfriend
Karen Goodfriend is a Principal with KK Wealth Advisors, LLC, a firm she co-founded in 2006 located in Los Altos, California, where she provides personalized service to high net worth clients. She has developed a local and national reputation for her work with clients in the Silicon Valley who have achieved sudden wealth.
Karen serves as member of the Silicon Valley Community Foundation’s Professional Advisor League. Other professional activities include having served as Chair for the State Personal Financial Planning Committee of the California Society of CPAs. Karen serves on the Personal Financial Planning Executive Committee and Financial Literacy Commission and previously on the Personal Financial Specialist Credential Committee for the American Institute of Certified Public Accountants, or AICPA.
Karen became a CPA over 20 years ago and since earned two financial planning credentials, Personal Financial Specialist, or PFS, which is issued by AICPA and Certified Financial Planner, or CFP®. She earned her bachelor’s degree in Economics from UC Santa Barbara and her MBA degree from UCLA. Previously, she held senior management and partner positions at national and local accounting firms as well a financial planning and investment advisory firm. Karen has been selected by Worth Magazine for its annual list of Best Financial Advisers five times consecutively.
