Charitable giving in clients’ financial plans, firms’ business plans

Financial Planners


On this week’s special episode of the Financial Planning Podcast, Thomas Pontius dishes out charitable planning advice while breaking down why helping clients give back feels so good. 

Pontius, a financial planner with Kayne Anderson Rudnick, stops by the podcast this week for part one of a three-part podcast series Financial Planning is launching in partnership with St. Jude Children’s Research Hospital. 

Financial Planner Thomas Pontius

Kayne Anderson Rudnick

The weekly series is focused on charitable giving and the role wealth managers play in helping the people they work with make an impact. Visit stjude.org/advisor to learn how you can help your clients maximize their impact today. 

During his conversation with FP Podcast host and lead editorial producer Justin L. Mack, Pontius explains how his passion for taxes got him into the business, how that same passion supports him today when doing charitable planning; and why approaching the conversation with clients opens the door to a deeper level of understanding.

Listen to the new episode — as well as to all future and past episodes — by subscribing to the FP Podcast on Apple, Spotify or wherever you get podcasts.

Transcript:

Justin L. Mack (00:02):
Good morning, good afternoon and good evening. Welcome to the Financial Planning Podcast. I’m your host Justin L. Mack, wealthtech editor with Financial Planning. And it is my pleasure to introduce this week’s guest, Thomas Pontius, certified financial planner with Kayne Anderson Rudnick. Thomas, thank you so much for joining us this week on a special edition of the Financial Planning Podcast. 

Thomas Pontius (00:24):
Thanks for having me, Justin. It’s a pleasure to be here. 

Justin L. Mack (00:26):
Absolutely. Now this week’s show is part one of a three-part podcast series Financial planning is rolling out in the month of May in partnership with St. Jude Children’s Research Hospital. The series will look at the places where charitable giving and the wealth management industry intersect and bring you conversations about how planners can provide clear pathways to help their clients give back. Thomas, who joined the KAR team in 2021, previously worked as a wealth planner for Wells Fargo Private Bank, providing tax and estate planning advice to high net worth and ultrahigh net worth clients. Prior to Wells Fargo, Thomas worked as a tax accountant for EY and Andersen (Tax) in their private client services groups doing tax compliance and consulting for individuals, trusts, partnerships, corporations and estates. And the relationships forged between advisors and clients at KAR is something that is extremely important to our guest today. We’ll get into how charitable giving fits into those relationships, the business and emotional benefits of doing so and much more on today’s show. But first, Thomas, as the listeners get prepared to get to know you over the next 20 to 30 minutes, let’s start, at the start. <laughs> There’s really no better place. So tell us a little bit about how you got into this industry. What attracted you to the world of financial services and being a CFP? 

Thomas Pontius (01:41):
Yeah, absolutely. So when I started in college, I had gone in as an accounting major and just off the bat I had just been interested in finance and stocks and things like that. I started doing internships. I had first interned with an insurance company that did some investing on behalf of their clients. And that’s not something that really drove me into something that I necessarily wanted to do. I was doing a lot of cold calling there, kind of cutting my teeth at a pretty young age at that point. But where I really got interested in the planning side is about my junior year of college. I had taken a winter internship with a mom and pop shop in South Philadelphia. I went to school in Philadelphia. And during that period is where I really started to become interested on the tax planning side. I had taken a tax class in college too, and it was something that I enjoyed. Which, it sounds crazy to think that somebody could actually enjoy doing taxes. But I think that the history of taxes is actually very fascinating and ultimately that brought me out to Los Angeles where I started working as an associate for Andersen at that time. And the rest is kind of history. It’s such a parallel to planning because it’s the truth that the two things guaranteed in life are death and taxes. So it always brings up a lot of unique opportunities with clients to talk to them about opportunities that they have from a tax perspective. 

Justin L. Mack (03:12):
Absolutely. And hey, won’t throw shade your way at enjoying doing taxes. I know especially around the springtime, that’s on everybody’s mind. Good, bad or otherwise, and we need folks like you who are excited about doing taxes, especially for clients when that time comes around.

So just shifting gears into the topic at hand, charitable giving. Let’s talk a little bit about why it’s even something that an advisor would want their clients in their book of business to be doing. Reason I ask is that there seems to be a lot of ROI, for lack of a better term, especially in this business, for working with charitably minded folks. A recent Fidelity study finds that advisors who offer charitable giving and charitable planning opportunities have six times the median assets, three times the median organic growth and more money per new investor than advisors who do not. So this is obviously something about giving back, but we also see that there are some business benefits to it. Why do you think that is? Why do you believe that advisors who work with these charitably minded folks are seeing such success just throughout their firms and throughout their practices?

Thomas Pontius (04:12):
I think one, it is when you offer that level of planning and something that tends to be a little more niche like that, it shows that your firm can really be very comprehensive in the advice that they’re giving. So I think that’s a big piece where clients want to go to one spot where they can have all the services kind of provided to them instead of having multiple different financial advisors where they might even be getting contradicting advice in some situations like that. Having it all in one house and being able to cover topics like that, I think is very important for clients, especially in that net worth range where they can be very charitably inclined. Either on an annual basis or if it’s something that they want to do at death. So I think in that sense, that’s something that they appreciate a lot is just to have that advice all in one place. 

Justin L. Mack (05:02):
Definitely. And like you said, especially for those folks, high net worth, the ultrahigh net worth folks who are able to be charitably inclined and do so maybe more flexibly or maybe to see something that they want to be able to help with and immediately go to their advisor and know that, like you said, they can provide that service right there. They don’t have to go to a bunch of different places, try a bunch of different things, do a bunch of different research if they do work with an advisor who has that information and has those connections to help them get that rolling. Something else I want to talk about as far as the ROI of working with charitably minded clients is loyalty and something we talk about a lot at Financial Planning. I know the industry is thinking about it, their mind is on it … the great wealth transfer and trying to drive greater client loyalty and connectedness between advisor and client.

(05:51)
It sounds like a cliche because I’ve talked to a lot of people and they say it, but it is true. The real. not transactional relationships that are gold in the industry right now because we know that’s going to help advisors work with next generation clients long term and just keep them a very important part of those families lives. Or those corporations that they might be working with folks who want to give. 

So tell me a little bit about that because you mentioned being able to provide that additional asset or that additional value add as far as charitable planning opportunities. What can you learn when you’re working with clients who are also charitably giving? The reason I ask that question is we talk about opportunities to get to know people on a deeper level. And once you find out what people want to support, I think that’s a great opportunity to see what they’re really all about and what they’re really passionate about. Is that something you seen or you’ve experienced yourself? 

Thomas Pontius (06:46):
Yeah, I think it’s a great point. In this business, deepening the relationship is a term that often gets used. How much value are you driving for that client? How well do you know your clients? Like you said, is that relationship more transactional? Is it, okay, well what’s the return that my advisor is getting me this year? Or is it much deeper than that? And I think that’s something that charitable planning allows for is for you not to just have a quarterly performance conversation, but as you’re going through the year, and yes, you’re talking about performance, but you’re also talking about are we making a charitable donation using qualified charitable distributions from required minimum distributions? As we’re getting to the end of the year, are we having conversations about additional charitable giving? What does that look like in terms of your itemized deductions from a tax perspective? 

(07:38)
So I think it’s just another conversation that you’re having that then opens the doors to understanding your clients at a much deeper level. And again, charitable giving is something that is just very it … it’s emotional to a lot of clients. And again, getting to know your clients on that level I think makes their relationship much stickier. And I think it allows you to understand your client really at much more than that transactional level that you were talking about. It’s not just charitable giving as well. There’s so many different aspects where those different touchpoints I think really create a well-rounded holistic relationship and help you to get to know your client at a much deeper level. And again, I think charitable planning is one of the planning topics that really is meaningful to a lot of clients, and I think that’s why it builds that retention to the relationship. 

Justin L. Mack (08:39):
Fantastic. And also have to ask from a personal level, as an advisor, as a planner, as someone who is excited about doing taxes … but is it nice to have an opportunity to switch things up and have those kinds of emotional conversations with clients? Because I imagine, again, opportunities to do that in a way that actually makes sense and is natural to the relationship you’ve forged with your client may be hard to come by. Like you mentioned, you’re talking about something that is naturally emotional, I’m sure there’s more opportunities to do that as an advisor. How do you benefit on a personal level when you get to have those conversations find their way into your workday? 

Thomas Pontius (09:14):
Yeah, absolutely. And the charitable giving conversation can sometimes be a little morbid. Especially if it’s something that ‘s a gift that’s being left at the passing of a client or something like that. So really being able to go into that conversation and have it be positive. Yes, you’ve created all of this wealth over your lifetime. Do you have charitable intent at the end during your life? Is there a gift that you want to make during your life and you want to see the benefits of making that gift during your life? Or do you want to leave a certain proportion of your estate to a charity at the end of your life? What is your relationship with that charity? Why is it that charity that drives you? All of those conversations, I think for me, add a lot of personal benefit knowing that that client is probably after these conversations and after putting into place any types of charitable trusts. Or whether it’s something even as simple as a donor advised fund or something like that for a client where they can be doing that on an annual basis or leaving it all at their passing. 

(10:20)
To me I think that, one, builds a ton of value and makes me feel good that this client’s sleeping better at night knowing that their plan is in place, helping give them considerations to think through about what charity and why it is meaningful to them. Those conversations are really much better and heartwarming, especially being accompanied by the ultimate conversation of what are we doing with your wealth when you pass. So again, I think it takes what is often looked at as a morbid and dark conversation and really brings a lot of light to it, which is very rewarding from my perspective. 

Justin L. Mack (10:58):
Awesome. And to kind of follow up on that, any advice for advisors who maybe haven’t had that conversation yet? Maybe they’re getting ready to have it for the first time, or they’re ready to shift their practice in a direction that allows them to work with charitably minded individuals and provide those services as well? So they’re going into this for the first time. Anything you can help ’em out with as they’re getting ready to have that sometimes tough but ultimately rewarding conversation? 

Thomas Pontius (11:21):
Yeah, I think that the first thing that I do as an advisor, especially with new clients, is I’m going to go through a tax return. Again, that’s what I know and I just go to the schedule and I see, okay, are they taking the standard deduction? Are they itemizing? And if they’re itemizing, what amount are they giving on a charitable basis? And if I see that they are itemizing and they either are not using charitable deductions to itemize, then my next question is, have you considered that? But if they are, I ask them if they do it on an annual basis or things like that. You know what and why those charities specifically. So I think that helps open up the conversation. The other place that I look is estate documents. I understand who’s in the will in trust and things like that. 

(12:04)
And a lot of times you’ll see clients that they have certain charities listed in their trusts as beneficiaries once they pass. And so I think that’s a way to open up the conversation and just talk about one, the quantitative tax benefits … what could it possibly do for you from that perspective. But then two, dive into why are you doing charitable giving in the first place. What’s really driving you to do that? And for some clients it is the tax benefits that kind of drive why they do it in some circumstances. But for many other clients, you just never know what type of relationship that they ever had with the charity. Maybe at some point they were a beneficiary of that charity and they are really dead set regardless of any type of tax benefit on giving back to them now where they’re at in life. 

(12:49)
It’s a different conversation that takes away from just the performance conversation and it helps you to get to know your client at a much deeper level. So to those advisors, I would say don’t be scared of that conversation. Go in there confidently. Have some backup with it as to why you’re asking the question. But again, I think it’s a great question to be asking and should be asked because I think at this point, most advisors are probably looking at that as an opportunity from a tax planning standpoint and a charitable planning standpoint. 

Justin L. Mack (13:22):
Great advice. And with that, we’re actually going to take a quick break and enjoy a word from our sponsors. But when we return, we’ll have more with Thomas Pontius of Kayne Anderson, Rudnick. Stay locked. We’ll be right back after this break from our sponsor. 

And welcome back to the Financial Planning Podcast. I am your host Justin Mack, and we’re diving right back into our special conversation this week with Thomas Pontius of Kayne Anderson Rudnick, part one of a three-part series that we’re doing this month in partnership with St. Jude Children’s Research Hospital. Now, Thomas, we talked a little bit in the first half of the show, or actually quite a bit, about the importance of working with folks who are charitably minded, how to work that into your practice, the business and personal benefits of that. So let’s get a little bit technical here in part two of the show. And we do have a tax pro on our hands, so a great opportunity to jump into some of that technical know-how that advisors can use. 

So there have been updates to allowable and standard deduction and charitable giving deductions with the Tax Cuts and Jobs Act of 2018, as folks know. But maybe they haven’t gotten into the weeds and actually picked that apart yet. So what do advisors need to know? What’s important with those changes and how can they work it into what they’re doing already with their clients? 

Thomas Pontius (14:36):
So theTax Cuts and Jobs Act act essentially doubles the standard deduction. And in that sense, it makes it harder to get over that limitation, which at that point in 2018 went up to about $24,000. It’s since been increased on an annual basis, like it typically has. And so now getting over that amount with your one year state and local taxes and your personal property taxes and things like that, that’s capped at $10,000. So now you’re still making up another $14,000 in mortgage interest deduction on the first $750,000. And then the charitable deductions typically are the three. There’s medical expenses, qualified medical expenses in there as well, but that has a very high limitation to get over and you don’t commonly see that. So you’re really putting the weight of getting over that level on the charitable deductions, which sometimes need to be as high as 6, 7, 8 to $10,000 a year to really break over that standard deduction. 

(15:38)
Now, there are certain circumstances where you can get the benefit of the standard deduction, but also get the benefit of your charitable contributions as well. And that’s for clients who fall into taking required minimum distributions. So older clients where now the required minimum distribution age is now 73, they have to take out certain amounts from their IRAs. But they can also do something called a qualified charitable distribution up to $100,000. It used to just be set at $100,000, but now what you can do is you can take your required minimum distribution, but give some of that to charity. And that’s not counted as income for your ordinary income tax purposes. But you also, on top of that, can take the standard deduction if you feel that you’re not going to get over that amount. 

(16:33)
So there should be some conversation with your CPA and some sort of analysis of where you’re getting the most benefit. If you fall into that situation where you are taking required minimum distributions and you can do qualified charitable distributions and also get the benefit of this heightened standard deduction, you should be doing that. So again, the Tax Cuts and Jobs Act has made it a little more difficult to get over that standard deduction amount. But sometimes there’s a way around that. And another way that has been very helpful for clients is this concept of charitable bunching. And so really what that is, if you are looking at making a gift in a certain year, but you’re falling into this range where you know might not get that much of a benefit from a year over year. Let’s say it was $5,000 a year for five years and you’re just getting over the standard deduction. What you could do is bunch that five year gift into one gift $25,000, you could put that into a donor advised fund and release it out at $5,000 at a time. 

(17:34)
And you still get the benefit in the first year for that $25,000 gift. Of course, subject to the limitations of AGI with charitable contributions. However, you’re now getting the benefit of the standard deduction in the years later when you’ve gotten the heightened amounts of the itemized deductions in year one. So there there’s ways around that heightened standard deduction amount. Of course there is the sunset of the provisions from the Tax Cuts and Jobs Act starting tax year 2026. So unless there is other legislation put in place, we could see that standard deduction level come back down and make it a little easier on clients as well to be doing their charitable giving. 

Justin L. Mack (18:16):
All right. Absolutely. And again, we’ll have to stay tuned. Of course, Financial Planning is keeping an eye on that and we’ll be continuing that coverage and like you said, see how things change and what advisors will need to know as things continue to shift. Anything else that comes to mind as far as potential challenges when working with folks who are charitably inclined that maybe advisors don’t think about until they start working with more individuals who want to give? Things that don’t come up until you’ve had that first conversation and then years later when you have this as a regular thing and then you realize that, oh yeah, here’s some things that I learned along the way. Anything stand out to you as far as advice that you would share as far as other challenges, hurdles to clear as you’re working with folks who want to give? 

Thomas Pontius (18:57):
Yeah, and I think one of the things that’s really come to my attention has been, one, why are clients looking for a financial advisor? And some of that time that they are looking for somebody new is because they’ve had some sort of income recognition event. They sold a business or they inherited a bunch of money. And going back to specifically with (the example of) they sold their business. In that situation, they’re going to have a very large income tax event in that year. And so before it was often a conversation about, okay, how are we going to reinvest these assets? What is that going to look like? I think that is a perfect opportunity to talk about charitable planning because you have such a higher limitation now on how much you can donate, and you have cash proceeds from the sale of the business in most cases. 

(19:51)
So I think that’s a really good opportunity to see that. And I think a lot of times people don’t bring that up immediately in the conversation. And I think sometimes it’s a challenge because I don’t think the business owner’s mind is necessarily there either. But when you can show them the benefits of it and quantify from a tax perspective … you could be saving this or we could be setting up structures that are going to allow for this charitable contribution down the road and this is how much benefit you get from it. I think again, it just adds a ton of value and I think a lot of advisors might miss that opportunity sometimes. 

Justin L. Mack (20:24):
Well said. Well said. And I think, I love what you said too. It takes us back to, well, why are folks hiring a financial planner or a financial advisor for any reason at all? And I think what you explain is just a natural expansion, I guess, of the role the advisor plays in say, the life of that client. However, and I’m sure you would attest to this, we’ve seen the role of the advisor kind of naturally expand, especially over the last three to … well, really the last three years. I think the pandemic has kind of signaled for a lot of people the importance of having some kind of guidance in financial matters and understanding that that guidance might not have anything to do with money at the time. That advisor taking a role that is as much life coach as it is money manager. And opening this conversation and learning more about your clients in this way naturally does that. But I think that is kind of the way we’ve been going as advisors wear a lot of different hats than they used to. And I’m sure you’ve seen your hats change quite a bit over the past few years. 

Thomas Pontius (21:20):
Oh, absolutely. It’s there. TLike you said, it is half being a life coach and half being very technically smart on some of these things. But yeah, I mean I think understanding your client at a deeper level, charitable planning allows you to do that. And again, that makes a relationship, I think not only stickier from the business perspective. But I think more rewarding from the advisor perspective as well. 

Justin L. Mack (21:51):
Absolutely. And speaking of that rewarding aspect of the business, as we close up here on the financial planning podcast this week, we’re going to transition into something that has become kind of a tradition, which is closing with some good vibes. And we’ve talked a lot about the charitable giving conversation. How it intersects with the advisor-client relationship. The benefits from the bottom line to what’s good for the soul. So when you think about all that, and not just on this topic, but overall I just wanted to ask, what do you love most about your job and the work that you do? We’ve heard a lot about what you kind of gained just by being someone who is very passionate about doing taxes. Again, a rare trait. But it sounds like it’s been a trait that has allowed you to really provide great value and comfort and peace of mind to the folks that you work with. Especially around this topic. This really big topic of charitable giving and something that’s not easily understood. It sounds as simple as, hey, I just want to give. But clients understand that it might get a lot trickier than that. Especially when you are one of these high net worth or ultrahigh net worth clients where it isn’t as easy as just I want to give. That’s it. And advisors help with that. So when you think about all the help you can provide, what stands out to you as your favorite thing about the work you do? 

Thomas Pontius (23:05):
Yeah, and I think at the time that you’re giving advice and things like that, it might seem some of these events are never going to happen. I talk to clients a lot about who’s going to pass first and things like that. When those things actually materialize and they happen. And it is a very difficult time for surviving spouses and things like that. But you are oftentimes the first point of contact that they’re going to talk about, so what do we do now? And although that’s a very tough conversation in that moment with somebody who’s obviously going through a grieving process, the amount of value that you can provide to clients in those situations, it’s invaluable to them. And that’s where I really enjoy this side of the business, is being very personally connected to my clients that they see me as that much of a trusted advisor. And I take a lot of pride in the fact that they’re coming to me and asking me these questions and I’m helping provide the best solutions, the most creative solutions, and really helping them enact these solutions to ultimately help them sleep better at night. And that’s really what I love about this business. It is so people-oriented. I love working with people and also at the same time really helping them navigate their financial path. 

Justin L. Mack (24:24):
Fantastic. Well, we hear the passion in your voice, and thank you so much for sharing a little bit of passion with us this week on a special edition of the Financial Planning Podcast. Thomas, thank you so much for your time this week. 

Thomas Pontius (24:36):
Yeah, it was great. Thanks for having me, Justin, and really appreciate the conversation.

Justin L. Mack (24:40):
And I want to thank everyone for listening to the Financial Planning Podcast. This episode was produced by Arizent with audio production by Kevin Parise. Special thanks again to our guest, Thomas Pontius of Kayne Anderson Rudnick. Rate us, review us and subscribe to all of our content at www.financial-planning.com/subscribe. For Financial Planning, I’m Justin Mack. Thanks for listening.



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