Fidelity, Schwab charitable units see jump in giving to address pandemic


Two dominant sponsors of donor-advised funds say they have experienced a big increase in grants from the vehicles over the last couple months to address the coronavirus pandemic.

Fidelity Charitable announced Wednesday that donors recommended $236 million in grants from their DAFs to support 9,600 nonprofit organizations that are responding to the COVID-19 outbreak. That is part of the $2.5 billion in total grants from DAFs so far this year, an 18% gain from the same time last year.

As of April 8, Fidelity Charitable donors had recommended more than $100 million in grants from their DAFs to about 4,500 nonprofits providing pandemic relief. The organization challenged them to double the amount by #GivingTuesday this week.

“We were thrilled and humbled with these results,” said Amy Pirozzolo, head of donor engagement at Fidelity Charitable. “It really shows the generosity of donors and the value of DAFs.”

Schwab Charitable has seen similiar activity.

From about the middle of February through May 5, $680 million has been granted from Schwab Charitable DAFs. About $114 million specifically was earmarked for COVID-19 relief, although the total going to pandemic-related charitable activities could be higher, said Kim Laughton, president of Schwab Charitable.

Like Fidelity Charitable and several financial planning organizations, Schwab Charitable also had been encouraging donors to tap their DAFs and provided ideas on where to target the donations for pandemic relief.

“We’re really pleased that our donors have stepped up the way they have,” Laughton said. “It’s a combination of them wanting to address these critical needs and Schwab Charitable encouraging them to do so with resources and ideas.”

The two organizations sponsor many of the donor advised funds in existence. As of last June, Fidelity Charitable had $31 billion in assets and housed about 138,000 accounts. Schwab Charitable has about $17 billion in assets and sponsors around 70,000 DAFs.  

Smaller DAFs also are experiencing a surge in giving during the pandemic. American Endowment Foundation donors have increased their grants by 41% over the past six weeks compared to a year ago, said Ken Nopar, the organization’s senior philanthropic advisor.

The popularity of donor advised funds has soared over recent years. Investors can make big contributions to DAFs – often combining several years of charitable giving into one amount — that exceed the standard deduction, giving them a tax break. They can then distribute grants whenever they want.

That has led to criticism of DAFs. Skeptics say money can sit in the accounts for years. There is no requirement that a certain percentage of a DAF be distributed annually, the way there is with traditional foundations.

Ray Madoff, a professor at Boston College Law School, agrees that DAFs can be put toward good causes. But she said regular payouts should be required.

“The question is whether the timing of these distributions should be left entirely in the discretion of DAF holders or whether we should have rules that either incentivize payouts (by deferring some benefits until the time of payout), or require that they occur within a reasonable period of time,” Madoff, director of the Forum on Philanthropy and the Public Good, wrote in an email. “Since proponents cheer payouts from DAFs, shouldn’t they also support regulation to encourage these payouts?”

Both Fidelity and Schwab say the support going to charities from DAFs during the pandemic answers the criticism that they can be inert storage tanks for money that has already produced tax benefits.

Donors “are actively using their accounts,” Pirozzolo said. “We’re seeing that in the outpouring” for coronavirus relief.

“We’re seeing that DAFs are a critical tool to help people give during difficult times,” Laughton said.

Written by Investors Wallets

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