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Philanthropy

Charitable giving as a topic an Investment Adviser raises with clients as part of estate and financial planning — a 3-step conversation the workbook sets out: start it, time it well, then follow up.

In plain language

Philanthropy is not only a personal choice a client makes on their own. The workbook treats it as something an Investment Adviser should actively raise, because giving intentions affect how an estate and financial plan should be built.

The workbook frames the conversation as a way to strengthen the client relationship and to learn more about a client's values and passions, not merely as a tax-planning add-on.

How it works

The workbook sets out a 3-step approach for an adviser: (1) starting the conversation — the workbook's own sample opening simply asks whether the client wants to talk about supporting causes they care about, once the core financial plan is already secure; (2) timing it right — the workbook lists specific moments that naturally invite the topic, including a liquidity event such as the sale of a business or an inheritance, while drafting or revisiting a Will, a life event such as retirement, marriage, or the birth of a child or grandchild, or simply during an annual client meeting; and (3) following up — the workbook notes that philanthropy easily "falls to the bottom of a busy person's to-do list," so once genuine interest is expressed, the adviser is expected to return with concrete resources and next steps, not leave it as a one-off conversation.

A worked example

Illustrative scenario, following the workbook's own sample conversation (Box 6.1). Mr Choudhary has just sold his business for Rs 4,00,00,000, a clear liquidity event. His adviser uses this moment, per step 2 of the workbook's timing guidance, to ask whether he would like to talk about supporting causes he cares about, now that his core retirement plan is fully funded.

Mr Choudhary is intrigued but non-committal. Rather than dropping the subject, the adviser makes a note to follow up (step 3) at the next scheduled review with concrete options — a donor-advised structure, a specific charitable trust — rather than waiting for Mr Choudhary to raise it again himself.

Why NISM asks about it

Chapter 6 (Miscellaneous aspects of Retirement Planning), section 6.4, "Concept of Philanthropy," sets out the adviser's 3-step approach and Box 6.1's sample client conversation. Expect a question on the events the workbook lists as good moments to raise philanthropy, such as a liquidity event or drafting a Will.

Common exam traps

  • Philanthropy is presented as a relationship-building conversation, not primarily a tax-saving pitch. A question framing it purely as a deduction strategy is missing the workbook's actual emphasis.
  • The workbook expects the adviser to initiate this conversation, not simply wait for the client to bring it up.
  • Follow-up is a named, distinct step — raising the topic once and not returning to it falls short of what the workbook describes.
  • A liquidity event, a Will revision, a life event, or an annual review are all workbook-named openings — not the only possible ones, but the ones likely to be tested.

Check yourself

  1. 1.Which of the following is consistent with the workbook's guidance on how an Investment Adviser should approach philanthropy with clients?

    1. a)It should be raised only with rich and wealthy clients, since giving is limited to them
    2. b)The adviser can open the topic once the client's financial objectives have been met, by asking about personal and family values; even if the client has not thought about it, the door is opened for advice and resources when they are ready
    3. c)The adviser should wait for the client to raise it, because speaking about values is a serious and awkward conversation
    4. d)The topic should be raised only at the annual client meeting, which is the one occasion the workbook permits
    Show the answer

    Answer: (b) The adviser can open the topic once the client's financial objectives have been met, by asking about personal and family values; even if the client has not thought about it, the door is opened for advice and resources when they are ready

    The workbook's sample conversation (Box 6.1) opens: "I'm pleased with what we've accomplished together in preparing you for retirement. We've met your financial objectives ... Now is when we like to talk a bit about your personal and family values. If you're passionate about particular social or environmental causes, my team can help you address those values through a charitable giving plan." It then says: "Even if clients haven't given the topic much thought, advisers are at least opening the door to further discussion and providing them with advice and resources when they're ready."

    Option A is wrong — "The urge to do for others is not only limited to rich and wealthy, now many small income earners wish to contribute to their society."

    Option C is wrong — "Speaking with someone about their values does not have to be a serious, awkward conversation. In fact, it can be quite interesting. It is also an important opportunity to learn more about clients." The workbook calls communicating about values "a meaningful way to strengthen client relationships."

    Option D is wrong — the annual client meeting is only one of four natural moments. The others are "A liquidity event, such as the sale of a business or an inheritance", "Whilst drafting or revisiting a will", and "A life event, such as retirement, marriage or the birth of children or grandchildren".

    The three steps in order: starting the conversation → timing it right → following up.

  2. 2.According to section 6.1 of the workbook, an Investment Adviser will not make retirement recommendations until they understand which four things about the client?

    1. a)The cost, expected return, risk and tax efficiency of the products the client already holds
    2. b)The corpus required, the monthly saving required, the inflation rate and the return assumed
    3. c)Whether the client has had a liquidity event, is drafting a will, has had a life event, or is due for an annual meeting
    4. d)The client's expected time horizon, level of experience with investments, goals, and tolerance for investment risk
    Show the answer

    Answer: (d) The client's expected time horizon, level of experience with investments, goals, and tolerance for investment risk

    The workbook: "An investment adviser will not make recommendations until they understand the client's expected time horizon, their level of experience with investments, their goals, and their tolerance for investment risk." It adds that the adviser "will also want to understand the need for guaranteed income and get a thorough understanding of all the current resources such as assets, liabilities, and current and future sources of income", and "will want to know where all the client investments are so that the investment portfolio, as a whole, will make sense."

    Option A is wrong — cost, return, risk and tax efficiency are the four factors for evaluating a retirement benefit product in the pre-retirement phase (section 6.3), not the prerequisites for advising the client.

    Option B is wrong — these are the inputs to the retirement calculations of section 6.2 (corpus, PMT, inflation, return). They come after the adviser understands the client.

    Option C is wrong — these are the workbook's natural moments for a philanthropy conversation (section 6.4).

    Why it matters: the list of what an adviser can advise on — when to take employer benefits, pension distribution choices, whether an annuity or a reverse mortgage suits, withdrawal rates, how much should be in guaranteed investments — all depends on first knowing horizon, experience, goals and risk tolerance.

Where this is taught

Free preparation for NISM Series X-B

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