A Fidelity Charitable–led effort to spur giving from donor-advised funds is getting mixed results and could face significant change.
In 2013, Fidelity spearheaded a consortium of nonprofits and sponsors of donor-advised funds that aimed to accelerate giving from the accounts. The group developed a widget through which visitors to charity websites could directly tap their donor-advised accounts and make gifts to the group.
The technology, DAF Direct, was promoted as seamless giving and a tool that would lead to more gifts from donor-advised funds. The funds are often disparaged for warehousing charitable gifts, and critics are urging Congress to require the funds — whose aggregate value now tops $110 billion — to pay out a share of assets annually.
When DAF Direct was released, backers said they expected more account sponsors would join with Fidelity in the effort. “This is truly a gift to the philanthropic community and will assist us all,” said Ken Berger, then president of Charity Navigator, one of the nonprofits involved, in a press statement.
But in the five years since, few sponsors of donor-advised funds have signed on. Only four participate currently. One of those, the Greater Kansas City Community Foundation, is seeking to withdraw, according to spokesperson Leanne Breiby.
“It just wasn’t working for us,” Breiby says. “It never got traction with our donors or nonprofits.”
The remaining sponsors with Fidelity are Schwab Charitable Gift Fund — an original participant in DAF Direct — and BNY Mellon Charitable Gift Fund, which joined in 2016.
The National Philanthropic Trust — a donor-advised-fund sponsor that raised more in contributions in 2017 than all its peers save Fidelity and Schwab — is not involved. “We thought it was a good idea, but we couldn’t make the technology work easily,” says Eileen Heisman, the group’s president.
Fidelity Charitable confirmed that changes will be made to DAF Direct, but did not provide any additional detail. The organizaton said however than an update in the near future was likely.
‘Slow Road’
Fidelity has acknowledged that DAF Direct has not performed as hoped. In 2015, two years after the widget was offered free to all charities, then president Amy Danforth acknowledged, “It’s been a slow road.”
Fidelity Charitable said it could not provide data regarding the number of charities using DAF Direct or the dollars donated through it. But in 2015, roughly two years after the widget was introduced, it reported that 1,251 charities were using it. Only 2,250 grants totaling about $2 million had been processed through it.
Pan-Mass Challenge, a charity cancer bike-athon that was part of the consortium that helped develop DAF Direct, says the widget has contributed to a fourfold increase in giving to the organization via donor-advised funds. This year, it will raise about $3.5 million from Fidelity donors alone.
“The easier you make it for donors to give, the better we all are,” says Michele Sommer, the group’s chief financial officer.
Carlos Byrne, an officer with BNY Mellon Charitable Gift Fund, says many charities are reluctant to embrace and promote donor-advised-fund giving wholeheartedly, thanks in part to negative media attention about it.
“They tend to shy away from putting anything about donor-advised funds on their websites,” he says.
Several groups contacted by the Chronicle about DAF Direct declined to discuss their experience with the widget or provide data about donations. In a prepared statement, Karen Grant, vice president for development for Cradles to Crayons, said: “Since its creation, the DAF Direct widget has been a tool that we have consistently included on our donation pages in all our markets through three website redesigns.”
Ray Madoff, a Boston College Law School scholar and advocate for regulation of donor-advised funds, says she is surprised that DAF Direct isn’t growing faster. “I would have thought it would have been more like PayPal,” she says.
She notes that holders of donor-advised funds are typically more affluent than other donors and may be less likely to give online. Also, while Fidelity and other sponsors want to encourage giving, their promotion and marketing are focused on attracting money to the accounts, which increases the assets they are paid to manage.
“Their financial bottom line is not tied to grants being made,” Madoff says. “If it was, you might see a more aggressive DAF Direct effort.”
