Nearly 30 years ago, Nicola Wealth Management Ltd. (Nicola Wealth) founder John Nicola embarked on a mission to cultivate a culture of giving that aligns with the financial goals of individuals and business owners. Established in 1996, the Nicola Wealth Private Giving Foundation (NWPGF) is one of the firm’s key initiatives, bringing together generous, like-minded people with a shared purpose of making a positive impact on the world.

“Our goal is to empower individuals and families to create meaningful change through Donor Advised Funds, enabling them to support the causes they care about and fostering a world of shared opportunity and well-being,” says Teresa Virani, executive director of philanthropy for Nicola Wealth.

Understanding Donor Advised Funds

The NWPGF provides a dynamic platform that enables this goal. Through it, donors can establish Donor Advised Funds (DAF), which function as mini foundations without the expenses and complexity that come with establishing their own private foundation. Through a DAF, funds are dispersed to the registered charities of the donor’s choice, while the remaining funds grow to create an endowment effect.

NWPGF manages DAFs, aligning clients’ financial planning and philanthropic goals with their personal strategic charitable impact. Advisors leverage DAF benefits along with robust knowledge of the Canadian tax landscape to help donors grow their wealth and their communities.

“Philanthropic giving can magnify the value of an estate because of the tax relief it creates; however, this is often not intuitive,” says Sophia Ito, wealth advisor and client relationship manager at Nicola Wealth.

Imagine a client who aims to give $5,000 per year in long-term support for a specific charitable organization. This client could take the traditional route and write a $5,000 cheque annually. Alternatively, they could, with the help of a financial advisor, consider creating a Donor Advised Fund with a much larger gift—say, $25,000—composed of eligible investments. This will generate an immediate donation tax receipt. “That gift will fulfill the $5,000 commitment over the next five years,” Ito explains. “During that period, the growth of that asset remains tax-protected while allowing the opportunity to grow the DAF with additional gifts.”

Charitable giving as a tax planning tool

Charitable giving can be used effectively as a tax planning tool for both individuals and corporations. The call to action often comes at the end of the calendar year, prompting donors to rush to meet season giving deadlines that may or may not align with the business’ fiscal year end. “The opportunity for a more thoughtful way of giving that aligns with the business owner’s tax planning could also help charitable organizations year-round,” Ito says.

Donors should also consider the impact of giving during their lifetime to tie in with their overall estate planning, making it more effective and efficient.

It is also worth considering the tax effectiveness of making donations of eligible investments, such as individual stocks/securities, certain private company shares, bonds or mutual funds, rather than gifts of cash. This approach could alleviate the capital gains triggered. “A donor could then use the cash itself to repurchase those investments and reset the cost base,” Ito adds.

Giving is good for business

“Philanthropy is always good,” Ito says. “It shows that the company is doinggood for the community. Giving elevates the business’s profile, bringing community members together as a win-win for everyone.”

Nicola Wealth is deeply rooted in giving back, beginning with John Nicola’s “Share the Pie” philosophy. “Sharing the pie means sharing in the successes of the business with clients, staff and the greater community,” Nicola says. “If you take care of those three audiences, you never have to worry as a shareholder.”

Embracing this mindset, the company has integrated giving into its operations, increasing charitable donations to a percentage of revenue. Between 2016 and 2023 Nicola Wealth disbursed $13.5M to over 300 organizations and supported 1,000+ staff volunteer hours.

“Sharing the Pie is the cornerstone of how we operate and how we show up in the community,” Virani says. “We believe in being an active member in our communities, with a focus on advancing social, economic and health equity for people to live their best possible lives.”

Discover the Nicola Wealth Private Giving Foundation at nicolawealth.com/private-giving-foundation

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This material is distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Please speak to your Nicola Wealth Advisor regarding your unique situation. Nicola Wealth Management Ltd. (Nicola Wealth) is registered as a Portfolio Manager, Exempt Market Dealer, and Investment Fund Manager with the required securities commissions.