Financial planning, like any other profession, changes over time as consumer trends shift. That’s why we work to understand what the younger generation values and the kinds of services they would benefit from the most.

For example, millennials and Generation Z are more concerned about charitable giving than previous generations. Yet, it’s important that your younger clients have a robust financial plan in place that allows them to work towards their philanthropic goals while also securing their own future.

Read on to learn how we could help your clients achieve this.

88% of wealthy young people donate to charity

New research suggests that charitable giving is a growing trend in the younger generations, with many individuals keen to have a positive effect on the world.

Indeed, UK Fundraising reports that 88% of wealthy under-35s – those with assets of £100,000 or more – already donate to charity.

Additionally, 38% of those young people donated more than £2,000 last year. In comparison, only 5% of over-55s donated the same amount.

Also, despite the current cost of living crisis, 63% of wealthy under-35s said they would consider increasing their charitable contributions in the future, compared with just 13% of over-55s.

If your clients fall into this group and want to make significant charitable donations, they might need the support of a financial planner. There are several ways we can help them achieve their philanthropic goals while also maintaining financial stability.

A financial planner can help your clients determine what they can afford to donate

One of the risks of philanthropy for young people is that they donate too much of their wealth and don’t leave enough to contribute to savings and investments for the future. This could mean that they’re not able to achieve their desired lifestyle in retirement and reach other financial goals.

We can help your clients create a comprehensive budget, so they can continue meeting their financial obligations while also giving to charity.

More importantly, we’ll discuss their desired lifestyle in retirement and determine what this is likely to cost. We can then use cashflow planning to help them decide how much they need to contribute to their pensions, other savings, and investments to fund their ideal retirement.

We’ll factor in their philanthropic ambitions too, so they can donate to charity sustainably while also saving for the future and reaching other financial targets.

We can help clients explore ethical investing options

Ethical investing is another way that your clients can potentially use their wealth to support positive changes in the world.

They might decide to invest in companies or funds with a good “environmental, social, and governance” (ESG) score. These investments are assessed based on three criteria:

• Environmental – This considers whether the business helps protect the environment by producing “green” products such as renewable energy. It also looks at the effect that a company has on the environment and whether it takes measures to reduce that damage, such as if it has sought to reduce carbon emissions in its supply chain.
• Social – This assesses the social effect that a business has on its employees and the surrounding community. This might include how well employees are paid and whether they’re afforded the necessary worker’s rights. Companies might also score well if they support local charities.
• Governance – This considers how ethically the company is run. For example, does the board consider diversity when filling high-level management roles? Is there a concerted effort to avoid conflicts of interest?

As well as ESG investments, your clients might be interested in “impact investing”. This is the practice of investing in companies that are solving specific problems. For example, they might invest in a business that’s developing new technology to clean up pollution from rivers.

We can help your clients explore different ethical investing options. That way, they can support causes that are important to them while also building wealth for the future.

Your clients could benefit from the tax advantages of charitable giving

Giving to charity also brings some tax benefits. We can help your clients understand these advantages, so they can maximise the wealth they donate and potentially reduce their own tax bill.

One way to do this is by using “Gift Aid” when making charitable donations.

When your client donates to a charity, the organisation can claim 20% tax relief through Gift Aid. If your client is a higher- or additional-rate taxpayer, paying 40% or 45%, they can claim an additional 20% or 25% tax relief for themselves.

For example, if they donate £1,000, the charity can claim an additional £250 – 20% of the total £1,250 donation. If your client is a higher-rate taxpayer, they can claim back the remaining 20%, meaning they reduce the Income Tax they pay by £250.

As a result, the charity receives a higher donation, and your client reduces the Income Tax they pay.

Bear in mind that your client must confirm that they’re giving Gift Aid when they make the donation. Additionally, they must have paid at least as much tax in the current tax year as they’re claiming back.

As they get older, we may also help your clients benefit from the tax advantages of charitable giving when creating an estate plan.

This is because gifts to charity fall outside of their estate for Inheritance Tax (IHT) purposes. Additionally, if they gift at least 10% of their entire estate to charity in their will, the rate of IHT their family pays falls from 40% to 36%.

Your clients could take advantage of this to potentially reduce the IHT their family pays and pass more wealth to the next generation.

However, the rules surrounding IHT can be very complex, and any mistakes could be costly. As such, your clients may benefit from professional advice if they want to use charitable giving to mitigate IHT.

Get in touch

If your clients have philanthropic goals, we can help them maximise the positive changes they bring about with their wealth.

They can contact us at hello@ardentuk.com or call or WhatsApp on 01904 655 330. As an award-winning financial advice company with advisers included in the 2024 VouchedFor Top Rated Guide, you can be sure that we’re a bona fide company providing excellent advice and high-quality service.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning, cashflow planning, tax planning or will writing.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.