The $5.4 trillion conversation you’re not having with your clients

Judith Fiander

There’s a quiet revolution building in Australian wealth management, and advisers sit at the centre of it.

Over the next two decades an estimated $5.4 trillion will change hands across Australian generations, a figure that dwarfs the previous Productivity Commission estimate of $3.5 trillion, updated in JB Were’s landmark Bequest Report to reflect surging asset values and an ageing population. This isn’t an abstract demographic statistic predicting a generational wealth transfer to come in the future. It is something that is happening in your clients’ lives right now. Whether it is in the form of inheritances received, business sales completed, or a retirement with a large superannuation balance, for many of your clients it is the culmination of lifetime of work and family.

And yet, if the evidence from T. Rowe Price’s recent study of US-based high-net-worth investors and their advisers is any guide, most advisers are not having conversations with their clients about what it means.

The gap no one talks about

Rowe Price’s research found that while 92 per cent of advisers who engaged clients in charitable giving conversations reported positive business outcomes (such as more referrals, stronger retention and deeper trust) the vast majority still only discuss the topic once or twice a year. Thirty-five percent of clients said they were waiting for their adviser to raise it. The charitable conversation is sitting there, ready to happen, with both parties waiting for the other to begin.

In Australia, the disconnect is particularly striking given our wealth position. The UBS Global Wealth Report shows we rank second globally on median wealth per adult, suggesting our wealth is more broadly distributed than in many other wealthy nations. And yet our charitable giving as a proportion of income remains modest relative to our international peers. The JB Were Bequest Report highlights that Private Ancillary Funds (PAFs) – one of Australia’s primary structured giving vehicles – number just over 2,300 today, despite the fact that nearly 100,000 Australian households hold net assets above $10 million. The gap between wealth and structured, purposeful giving is vast and it is one of the most significant opportunities in Australian financial advice.

What clients actually want

One of the most noticeable findings from the T. Rowe Price research is how personal charitable giving is for investors. When asked to describe it in their own words, investors chose phrases such as “helping others,” “making a difference,” and “kindness”. They used values-driven language, not financial or technical reasoning. For younger high-net-worth investors under 50, the desire to teach values to their children and build a meaningful legacy ranked far above tax benefits as a motivation. Nearly one in four investors said personal connection to a cause was their primary driver of giving.

This matters enormously for how advisers should frame the conversation as philanthropy is not, at its core, a tax minimisation strategy – though the tax benefits are real and material. It is however an expression of identity, about how clients want to be known, and how they want their families and legacies to be shaped. The JB Were report captures this through the concept of the “full family balance sheet”; the idea that true family wealth encompasses human, intellectual, social, spiritual and financial capital, not just assets on a spreadsheet.

The tax case is compelling too

Of course, the financial implications matter. And structured giving, whether via a PAF or a giving fund in a Public Ancillary Fund such as the APS Foundation, offers a significant tax benefit.

A client who establishes a giving fund receives an immediate tax deduction for their contribution, which can then be used immediately or spread flexibly over up to five years. The funds are invested and earnings are tax-free, with distributions made to eligible charities each year. This effectively separates the timing of when the donation is made and the tax deduction banked, from the decision of which charities to support.

The contribution goes in now; but the giving decision can be thoughtful, considered and strategic over time. This structure is particularly valuable for clients navigating a high-income year such as the sale of a business, a significant capital gain, or a bumper year of income, where bringing forward deductible giving delivers real tax savings at precisely the moment they’re most valuable.

Consider a client who sells a business and faces a substantial taxable gain. Establishing a giving fund in the same financial year allows them to take an immediate deduction, reduce their tax liability meaningfully, and then spend the next several years thinking carefully and joyfully about which causes and organisations they want to support. The financial planning and the values conversation become one.

And with the end of the financial year now approaching, timing matters: a giving fund within the APS Foundation can be established in just one business day with a starting contribution from $40,000. There is still time, this financial year, for clients to act, and to act in a way that is both financially and personally meaningful.

The business case for advisers

The T. Rowe Price data makes the commercial logic plain. Advisers who incorporate charitable giving conversations into their practice report enhanced trust with clients (67 per cent), improved satisfaction (65 per cent), better retention (54 per cent), and perhaps most valuably, strengthened relationships with the next generation (40 per cent).

That last point deserves emphasis. As the $5.4 trillion intergenerational transfer accelerates, the adult children now receiving or anticipating significant wealth are, according to T. Rowe Price’s research, the most values-motivated and guidance-seeking investor segment of all.

Younger high-net-worth investors are more likely to want their adviser to proactively raise philanthropy, more likely to involve their families in giving decisions, and critically, 100 per cent said their family would be more likely to continue with an adviser who was actively involved in philanthropic planning.

One of the most important questions an adviser can ask their client is “beyond your family, what do you want your wealth to stand for?” Engaging this cohort now through the lens of purpose and structured giving is how an advisory relationship survives and deepens across a wealth transfer, and how an adviser moves from a financial manager to a trusted family adviser.

There is also a straightforward referral reality. Ninety-two per cent of clients who work with their adviser on charitable giving say they are more likely to refer others, meaning the giving conversation becomes a material driver of new business.

Starting the conversation

The research suggests many advisers feel uncertain about raising philanthropy, either because they are unsure of their role beyond investment management, or concerned about intruding on something personal. But the research shows this fear is unfounded and that clients welcome the opportunity to talk about what really matters to them.

The approach can be something as simple as “Are there causes or communities you’ve always wanted to support?”. From that question the conversation about structured giving, the tax efficiency, the flexibility, the family engagement potential, flows naturally. There’s certainly no need to be a technical philanthropy expert, any more so than you need to be an estate planning lawyer. The value lies in recognising when giving is important to a client and ensuring it becomes part of the broader advice conversation.

Australia is sitting on an extraordinary confluence of wealth, demographic change and civic opportunity. The assets are there. The values are there. The vehicles to give (PAFs and giving funds) are there and accessible. What’s missing, far too often, is simply the conversation.

Advisers who start having it now won’t just be doing right by their clients. They’ll be building the kind of practice that endures and helping reshape what Australian wealth means for the communities that surround it.

By Judith Fiander, CEO