Contributions to national donor-advised funds outpaced overall giving by a wide margin again last year, a new report finds, deepening the influence on charitable giving of a relatively small number of organizations.
Donations to the sponsors of these funds — including organizations spun off from commercial financial-service companies — grew 15.1 percent in fiscal 2016, according to the report. Giving to community foundations, by contrast, increased only 4 percent.
Both these figures top 2016’s 1.4 percent increase in overall charitable contributions, as reported by “Giving USA” this summer.
Though nearly 1,000 organizations offer donor-advised funds, the subset of 49 national groups now control two-thirds of all assets housed in these accounts, according to the report. The largest seven alone command nearly $40 billion, or almost half of all donor-advised-fund dollars.
For-Profit Marketing
Such dominance is particularly remarkable given that many of these organizations are new players in charity. Community foundations pioneered the donor-advised fund in the 1930s, but most of the national organizations are stand-alone charities established in the past quarter-century to market the funds to donors across the country. They include Fidelity Charitable Gift Fund, Schwab Charitable Fund, and the nonprofit National Philanthropic Trust, which published the report.
Eileen Heisman, president of the trust, says national charities enjoy many structural advantages that allow for faster growth. Unlike a community foundation or issue-focused charity, “they can go out and take a gift from anybody, anywhere,” she says. Also, big donors often favor larger funds, where their gifts won’t make up the bulk of assets.
“The bigger you are, the easier it is to get bigger,” she says.
Ms. Heisman also notes that donor-advised funds with ties to financial-services firms benefit from that relationship in many ways. Financial advisers often market the accounts as part of an investment portfolio. “To put the marketing dollars of the for-profit sector behind a charitable vehicle like a [donor-advised fund] changed everything.”
Who’s Up?
Fidelity Charitable, the largest donor-advised-fund sponsor, has experienced dramatic swings in its giving recently. Contributions declined in 2016 by about half a billion dollars, to $4.1 billion (though it still maintained its No. 1 ranking on The Chronicle’s Philanthropy 400). It then rebounded to $6.9 billion — about a 70 percent increase — at the close of its 2017 fiscal year in June.
The Goldman Sachs Philanthropy Fund, meanwhile, collected $3.2 billion in donations, a 450 percent increase from its $580 million total in 2015. That windfall boosted the organization from No. 34 in the Philanthropy 400 rankings to No. 3.
Over all, donor-advised funds set record highs in 2016 on every measure, according to the National Philanthropic Trust report, including the aggregate value of assets, contributions to the funds, and grants made from the funds.
Yet growth is slowing. Overall giving to the funds increased 7.6 percent, less than half of the 15.6 average annual increase from 2012 to 2015.
Ms. Heisman says this is inevitable flattening given the go-go years after the Great Recession when funds were relatively small and it was easier to post large percentage gains.
“Monster growth may be behind us, but we’re still in very healthy numbers,” she adds.
Other highlights from the report:
- Contributions to donor-advised funds accounted for 8.3 percent of all giving from individuals in 2016. That’s up only slightly from 2015, but it’s almost double the 4.4 percent recorded in 2010.
- Donor-advised funds awarded $15.8 billion in grants in 2016, a 10.4 percent increase from the previous year. That’s about a third as much as the dollars awarded by foundations in 2016, according to the report.
- Grant making by the funds totaled 20.3 percent of their assets at the year’s start. That payout rate is roughly equal to 2015’s.
- The report for the first time documented the number of donor-advised-fund accounts in every state, the District of Columbia, and two U.S. territories. Among the 50 states, Massachusetts, home to Fidelity Charitable, had the most, with more than 82,600 accounts. Hawaii, at 50, had the fewest.
