6 minute read
In the realm of financial advising, it's crucial to stay ahead of the curve by offering innovative strategies that align with clients' financial goals and aspirations. Donor Advised Funds (DAFs) have emerged as a powerful tool that financial advisors can utilize to effectively address client taxes, while also attracting and retaining clients seeking a comprehensive and impactful approach to wealth management.
Understanding the Essence of Donor Advised Funds
At its core, a Donor Advised Fund is a philanthropic vehicle that allows individuals, families, and organizations to contribute assets, such as cash or securities, with the intention of supporting charitable causes. DAFs offer a unique combination of immediate tax benefits, asset management flexibility, and the ability to create a lasting legacy of giving.
How Do You Incorporate DAFs Into Your Financial Planning
Tax Efficiency: A valuable advantage of DAFs lies in their ability to address client taxes in a meaningful way. When clients contribute to a DAF, they can claim an immediate tax deduction for the value of their contribution. This deduction could substantially reduce their taxable income, providing relief for individuals burdened by high tax liabilities.
Tailored Investment Strategy: DAFs empower financial advisors to manage the assets within the fund. This presents an opportunity to design an investment strategy that aligns with the client's risk tolerance, financial goals, and timeline for charitable giving. Advisors can optimize the growth of the fund, ensuring that clients and their families have the resources to support their chosen causes effectively.
Simplified Giving Process: With the Dunham Donor Advised Fund, clients can give back to their communities or abroad, offering a streamlined approach. Advisors can assist clients in making contributions to the fund, which can then be distributed to multiple charitable organizations over time. This simplifies the giving process, allowing clients to focus on their philanthropic endeavors without administrative burdens.
Comprehensive Financial Planning: By introducing DAFs into their offerings, financial advisors can expand their services beyond traditional wealth management. You can help your clients integrate their philanthropic goals with their overall financial strategy, creating a comprehensive plan that addresses both short-term financial objectives and long-term philanthropic aspirations.
Attracting and Retaining Clients with DAFs
Clients today are seeking more than just investment advice; they are looking for holistic wealth management. They want comprehensive solutions that reflect their values and life goals. By introducing DAFs as part of your services, financial advisors can demonstrate their commitment to holistic wealth management, fostering trust and loyalty.
High net-worth individuals are often concerned about managing their tax liabilities effectively. Positioning DAFs as a possible solution to address client taxes not only showcases advisors' knowledge in tax planning but also provides clients with a tangible way to potentially mitigate their tax burden.
DAFs allow financial advisors to collaborate closely with clients in developing personalized charitable giving strategies. Advisors can help clients identify causes that align with their passions and values, fostering a deeper sense of connection and engagement.
Clients are increasingly interested in leaving a positive impact on the world, both during their lifetime and beyond. DAFs enable advisors to assist clients in creating a philanthropic legacy that extends to future generations. This can foster meaningful and enduring relationships and ultimately build a lasting legacy with clients and their families.
Implementing DAF Strategies Effectively
To fully capitalize on the benefits of the Dunham Donor Advised Fund and attract and retain clients effectively, financial advisors can reach out to our Business Development Team at 858.964.0500. Our team is ready to assist in:
1. Education and Communication: Educate clients about the advantages of DAFs, explaining how they work, the immediate tax benefits they offer, and the potential for strategic philanthropy. Clear and concise communication is key to ensuring clients understand the value of this approach.
2. Customized Planning: Work closely with clients to develop personalized DAF strategies that align with their financial goals and charitable interests. Crafting a customized plan demonstrates the advisor's commitment to tailoring solutions to each client's unique situation.
3. Collaborative Approach: Engage clients in meaningful conversations about their philanthropic aspirations. By involving clients in the decision-making process, advisors can strengthen the advisor-client relationship and create a sense of ownership over the giving strategy.
Final Thoughts
Donor Advised Funds offer financial advisors a strategic solution to address client taxes while enhancing client relationships. By leveraging the immediate tax benefits, investment flexibility, and opportunities for philanthropic legacy-building, advisors can position themselves as comprehensive wealth managers who provide tangible value to clients seeking a holistic approach to their financial future. Integrating DAF strategies into advisory services can lead to deeper client engagement, increased client retention, and the fulfillment of clients' desire to make a meaningful impact on the world.
Disclosure:
This communication is general in nature and provided for educational and informational purposes only. It should not be considered or relied upon as legal, tax or investment advice or an investment recommendation, or as a substitute for legal or tax counsel. Any investment products or services named herein are for illustrative purposes only and should not be considered an offer to buy or sell, or an investment recommendation for, any specific security, strategy or investment product or service. Always consult a qualified professional or your own independent financial professional for personalized advice or investment recommendations tailored to your specific goals, individual situation, and risk tolerance.
IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.
A donor advised fund (“DAF”) is a separately identified account that is maintained and operated by a section 501(c)(3) organization and is not a registered investment company.
The Dunham DAF is powered by University Impact (“UI”), a registered 501(c)(3) nonprofit in the United States who manages the charitable aspects of the Dunham DAF.
UI charges fees to the Dunham DAF for administrative services in accordance with the Fee Schedule as outlined in Appendix A of the UI Donor Advised Fund Agreement (“Agreement”). Accounts are required to maintain a $1,000 minimum balance and are subject to support investment fees as explained in the Agreement. A list of current fees and initial gift minimums is available upon request. UI reserves the right to change its fee or minimum policies at any time. There may be additional fees charged by the Financial Advisor that are separate from UI's administrative and impact investment fees.
Contributions to the Dunham DAF are irrevocable contributions made to UI, a public charity.
Assets contributed to the Dunham DAF (once liquidated, if applicable) will be invested in the Dunham Asset Allocation Program sponsored by Dunham & Associates Investment Counsel, Inc., a Registered Investment Adviser and Broker/ Dealer. Member FINRA/ SIPC. Dunham Trust Company and Dunham & Associates Investment Counsel, Inc. are affiliated entities.
All financial decisions and investments involve risk, including possible loss of principal. The market value of the Dunham Donor Advised Fund is not guaranteed by UI and may fluctuate depending upon investment results. Investors should carefully consider a fund’s investment goals, risks, sales charges and expenses before investing. The prospectus contains this and other information. Please read the prospectus carefully before investing or sending money.
Investment allocations may be changed according to Dunham’s standard policies and procedures. UI may hold up to 5% of the Dunham DAF assets in non-interest bearing cash at any time.
As the Program Sponsor, Dunham charges each donor a single service program fee (“Program Fee”) not exceeding 0.25%.
In addition, a Financial Advisor may charge a client/donor an asset-based advisory fee (“Advisory Fee”) as specified in the Advisory Agreement. Detailed advisory and expense fee information about the Dunham Asset Allocation Program is available in the Wrap Fee Program Brochure available upon request.
As investment adviser to the Dunham Funds, Dunham receives the investment advisory compensation described in the Dunham Funds’ prospectuses and such fees are borne by all shareholders in the Dunham Funds, including the donor.
Dunham & Associates Investment Counsel, Inc. is a Registered Investment Adviser and Broker/Dealer. Member FINRA / SIPC.
Advisory services and securities offered through Dunham & Associates Investment Counsel, Inc. Trust services offered through Dunham Trust Company, an affiliated Nevada Trust Company.