By strategically providing services that align clients' philanthropic and financial goals, firms will increase the retention of assets and keep pace with the competition.
With a growing competition and consolidation in the financial advisors and wealth management space, there is greater pressure to retain clients and differentiate your product offerings. A strategic diversification of services to support holistic client goals will result in stronger client relationships, which increases the retention of assets within the firm's ecosystem.
An explanation of sticky assets and how to grow them.
“Stickiness” refers to a resistance to change. Sticky assets are those assets that firms—including broker dealers, registered investment advisors (RIAs), wealth managers, and asset managers—can retain over the long-term.
Assets under management is a key indicator of success and growth of a financial institution. For that reason, firms must consider how to grow sticky assets in the most efficient ways.
Protecting the client relationship.
Though it goes without saying, clients are the backbone of any company’s success.
Deep relationships and a sense of community help advisors retain clients. The strength of relationships indicates a level of loyalty that keeps clients, and their assets, in-house. Clients whose needs are proactively met are less likely to look elsewhere to meet them, and this longevity of a client relationship is tied to the assets managed by the firm over time.
However, many advisory firms have not yet captured a key component of financial wellbeing: philanthropy. As charitable giving becomes increasingly intertwined with a client’s other financial goals, there is an opportunity for firms to provide in-house charitable services in a personal and customized fashion.
Introducing the DAF offering.
Donor-advised funds (DAFs) are comparable to any other investment vehicle, but serve the purpose of charitable impact. A DAF can be managed by advisors on behalf of their clients to simultaneously meet financial and philanthropic needs.
What few wealth management advisories have considered is that by offering DAFs, any assets within the fund are still under management of the firm. As tax-optimized giving vehicles, DAFs are a convenient and inexpensive alternative to private foundations and other charitable services. Once a client contributes to an account, those assets can be invested and grow within the firm’s ecosystem prior to granting to non-profit organizations.
The power of giving.
The motivation underlying a client’s philanthropic needs cannot be underestimated.
Despite, or perhaps due to, the economic impact of the pandemic, people are more charitable than ever. Donor-advised funds saw a 29% increase in the first half of 2020 compared to 2019. People across geography and financial backgrounds are pursuing opportunities to be generous with their wealth. With assets in DAFs exceeding $140 billion, the question is not if your firm should offer them—it’s how soon.
Within the donor-advised fund space, the majority of accounts are offered through popular commercial providers such as Schwab, Vanguard, and Fidelity. As DAFs grow in popularity, altruistic clients may pursue charitable options outside of your firm if they lack opportunities in-house.
“Firms make the same money on managing donor-advised fund assets as they do with other accounts. Plus, when you incorporate charitable giving, it’s so personal that it fosters a next level of intimacy with that client, which translates to stickiness and a broader share of wallet,” says Cor Hoekstra, CEO of Amicus.io.
New technology like DAF 2.0 by Amicus.io offers a streamlined, integrated alternative to a tool that historically required manual administration. Advisors can now guide their clients’ philanthropic journeys with ease, increasing the “stickiness” of existing assets in the name of charitable giving.