People in Kalamazoo County (and across the country) are worried about the current bear market. When your clients reach out about their concerns, providing reassurance can help them prioritize what's most important and set up smart strategies as they—and our community—weather uncertainty.
Earlier this year, Bankrate and Psych Central released the Money and Mental Health study. Not surprisingly, a large number of people surveyed in the research reported that money has a negative impact on their mental health. Survey results varied across generations: financial concerns psychologically impact 48 percent of Millennials, 46 percent of Generation X, and 40 percent of Generation Z. Needless to say, every generation will feel the sting of any bear market, including (and especially) Baby Boomers.
At the moment, economic conditions can feel awful. As a professional advisor, your ability to address client concerns can help provide reassurance and keep the moment in perspective. Keep in mind that your approach should vary based on your client and their priorities: some people feel better if they can gain an understanding of the factors that created the unpleasant mix of inflation, rising interest rates and a bear market in the first place. Others are comforted knowing they are not alone as they ride the emotional rollercoaster. For those who are charitably inclined, challenging economic times might actually serve as an inspiration to become more intentional about charitable giving priorities. What's more, not all donors will reduce their donations.
Here are three messages worth sharing as bear market conditions hang on into the fourth quarter:
“Consider how our community is feeling the pinch of inflation.”
Did you know that Kalamazoo Community Foundation received over $8 million in grant requests in the first grantmaking round of 2022? This is nearly double the amount we have received in recent years, which shows how the need for charitable giving has risen in our county within the last year alone.
At a time when community needs are rising, KZCF is dedicated to staying on top of the issues that are critically important to quality of life at any given time. Families with low or moderate household incomes can be especially vulnerable to high inflation. It's important to remind your clients that when everyone can access what they need to thrive, we all share in the benefits of a stronger Kalamazoo County. The team at the community foundation is deeply committed to helping your clients zero in on nonprofits that require their support to continue providing access to vitally needed programs and services.
One of the best options for addressing current and future community needs? Our Love Where You Live Greatest Needs Fund. This fund mobilizes resources where they are urgently needed while also investing in long-term, transformative change that sustains our community. Learn more about the LWYL Greatest Needs Fund.
“Not all stocks are down.”
Giving appreciated stock to a donor-advised fund or another type of fund at the community foundation is always a tax-savvy alternative to giving cash, regardless of the economic situation. Your clients may feel disappointed that their portfolios have hit a rough patch, but this does not mean that there aren’t still plenty of opportunities to avoid capital gains tax on stocks held for more than a year. (Take a look at the historical share price of Apple, for example, and imagine the capital gains tax liability for clients who’ve held the stock for several years.)
“Don’t forget about the Qualified Charitable Distribution.”
We mention this tool a lot because it is such a financially-savvy way for your clients to support the charities they care about. If your client has reached the age of 70 1/2, the client may be eligible to make annual distributions of up to $100,000 per spouse from IRAs directly to an unrestricted or field-of-interest fund at Kalamazoo Community Foundation.
QCD transfers count toward satisfying clients’ Required Minimum Distributions, so they can support nonprofits in our area without needing to pay income tax on those funds. Because these gifted assets are no longer part of a client’s estate, QCD transfers can prevent their loved ones from incurring estate taxes.
What’s more, the QCD may get a boost if the EARN Act becomes law; proposed bipartisan legislation would expand the QCD rules to allow a one-time, $50,000 QCD to a split-interest trust such as a charitable remainder trust.
We know that your clients may have additional concerns about the market and how it impacts their philanthropy. Please feel free to reach out to Donor Relations Officer Cindy Trout to discuss ways your clients can prepare themselves and the community for economic challenges.