The recession has hurt philanthropic organisations but wealth managers are looking to provide advisory services to clients looking to make donations, figures in the industry say.

Thanksgiving is over and Christmas lights are going up, but charities who could use a gift from Santa are bracing themselves for a lump of coal from Scrooge.

While the recession has put philanthropy in a tailspin this year,  the downturn has, paradoxically, created new opportunities for wealth managers who counsel high net worth clients with philanthropic interests.

“We’re seeing a real shift,” said Betsy Brill, president of Strategic Philanthropy, a Chicago-based firm that advises donors and wealth managers. “Clients are looking significantly more to financial advisors now. Philanthropic donors don’t have the same level of confidence in their giving, nor do they have the same resources. They need to be smarter and more strategic because they have less to give away, and they need help doing that.”

“Donors are re-defining what they want to do,” said Paul Tramontano, chief executive of Constellation Wealth Advisors in New York. “They’re slimming down and focusing on what is most important to them. They want to know how they can get more for less, and it’s a real opportunity for advisers to step in and add more value.”

To be sure, the financial crisis and the recession have had a profound impact on philanthropy.

Stock gifts to The Children’s Aid Society in New York dropped 68 per cent for the fiscal year ending 30 June, compared to the previous year, said Patricia Grayson, assistant executive director for development for the charity.

Gifts to charitable foundations this year are likely to be down by more than 10 per cent from 2008, according to the New York-based Foundation Center.

And nearly one-third of non-profits are in danger of closing in the next several years, said Phil Cubeta, professor of philanthropy at The American College in Bryn Mawr, Pa.

High net worth donors have also been hit hard by a decline in the value of their assets.

“Before, they would give to a number of charities,” said Nancy Pellegrino, regional president in the Pacific Northwest for BNY Mellon Wealth Management. “Now they’re cutting back to the one, two or three that they feel most passionate about.”

Joel Yudenfreund, a family and business adviser for Citi Private Bank based in Palm Beach, Fla., agreed.

“Wealthy families have become more targeted with their giving,” Mr. Yudenfreund said. “They used to support a lot of charities and now they want to see their dollars have an impact in a more strategic manner.”

This need for more strategic giving, said Cary Grace, national philanthropic management executive for Bank of America Merrill Lynch, “is leading clients to seek out more advice from financial advisers.”

For example, some donors are reconsidering the lifespan of their foundations, said Ms. Brill.

“Many foundations were created with the assumption of perpetuity,” she explained. “But with the changed landscape and a drop in assets, the foundations need the money now. A conversation about the lifespan of the vehicle is critical, because it doesn’t have to be forever.”

Indeed, Mr Yudenfreund said he is seeing more “spend-down foundations” that are using funds now and limiting their lifespan to a pre-determined number of years.

Other wealth managers are recommending the use of a charitable lead trust to take advantage of the current low interest rate environment.

Donor-advised funds are also becoming more popular.

According to Bank of America’s most recent study of high net worth philanthropy, conducted by the Center of Philanthropy at Indiana University, more than 20 per cent of high net worth donors surveyed now use donor-advised funds, and another 20 per cent said they would consider using the funds in the next three years.

“They’re cost effective,” Mr. Tramontano said. “Rather than start their own foundation, high net worth families can give to a donor-advised fund and leave the administrative costs to others.”

In the wake of declines in stock prices, ultra high net worth donors are now giving more non-traditional assets to charities such as real estate, oil and gas timberland and art, said Gillian Howell, national private philanthropy executive for Bank of America Merrill Lynch.

“That’s how a lot of wealth was created, and there’s been a lot of appreciation of those assets,” Ms Howell said.

And Ms Grayson of The Children’s Aid Society said she’s seeing more deferred giving by donors in the form of planned gifts, a bequeathment in a will and annuities.

Donors may also want to redesign their giving strategy and direct donations to areas in non-profits that need more support during difficult economic times, such as general operations, Ms Brill said.

Being able to offer clients cutting edge philanthropic advice can pay big dividends, experts say.

“It’s an opportunity to deepen relationships with clients and serve the next generation,” Ms Brill said.

“With the needs in this area greater than ever,” said Mr Cubeta, “it gives financial advisors an opportunity to be more credible than others.”

Wealth managers can also use their philanthropic expertise to put like-minded donors together, said Ms Howell.

“Donors love connecting with their peers,” she noted, “and that’s something an adviser can help facilitate.”

But financial advisors also need to do their homework, experts cautioned.

“Advisers are recognizing they have to increase their know-how and resources when it comes to charitable planning,” Ms Brill said. “Discussions about heirs and taxes are no longer enough.”

Ms. Grayson said advisors needed to be aware of such ratings and watchdog services as www.charitiynavigator.org  and the Better Business Bureau’s foundation rankings.

“The more they can scrutinize a charity, the better off they’ll be,” she said.

The current demand for philanthropic expertise can be a double-edged sword, Patricia Angus, founder and chief executive of Angus Advisory Group warned.

“It’s an opportunity if advisors can do it right and add value,” Ms. Angus said. “But if they don’t do it right, they can be dismissed very quickly.”