New Fidelity Report Sees Rise in Donor-Advised Funds

Fidelity Charitable Trust reported a 17% growth in its donor-advised funds over the last four years. As one of the largest DAF managers in the country, its findings may be indicative of larger trends.

giving-report-2013-150x150Alongside the welcome news that charitable giving in the U.S. increased by 3.5% this past year (with total donations reaching $316.23 billion despite a still shaky economy), Fidelity Charitable Trust has also released some equally encouraging news on the growth of donor-advised funds. For those not yet familiar with this tool, donor-advised funds (DAFs) are charitable giving vehicles managed by non-profits to facilitate a donor’s philanthropy.

According to Fidelity’s newest Charitable Giving Report, DAFs grew by 17% between 2007 and 2011. The report looks only at donor-advised funds established through Fidelity (known as Giving Accounts), but with 57,000 donor accounts connected to 94,000 donors, Fidelity’s clients represent a large portion of the DAF market, and their behavior can be indicative of larger trends.

In 2012 alone, Fidelity Giving Accounts granted out $1.6 billion to 77,000 nonprofits. Most donors made an average of 7.9 grants. Although the average grant size was a more modest $3800, over half of the $1.6 billion distributed last year was for grants of $50,000 and above. Moreover, donors have become more generous with unrestricted grants, as unrestricted grants jumped from 37% to 42% of Fidelity’s total distributions. International giving has also increased, both through U.S. intermediary organizations and through direct grants to foreign organizations. Intermediary organizations received $9 million from Fidelity Giving Accounts last year, a fourfold increase from 2011, and direct international grants more than doubled to $4.3 million.

The increasing popularity of DAFs, the report suggests, is closely aligned to the general movements towards strategic philanthropy. DAFs offer a more systematic form of giving, allowing individuals and families to plan and maximize their philanthropy without the complications of managing a full-blown private foundation. Some donors do indeed use their DAFs like private foundations, making grants to a number of different charities, while others used their DAFs like an endowment to benefit specific charities or establish their family legacy.

Looking more closely at donors themselves, the reported noted that the average donor age was 62 and the average age at which donors initially set up their Giving Account was 54. 80% of donors are 51 years old or older. The skew towards older ages is most likely due to the fact that most individuals don’t begin to think about charitable planning and legacy planning in a “more thoughtful and forward-looking manner” until they’ve achieved more stability in their lives.

Cash and credit continued to be the most popular forms of donations, but appreciated securities (gains on stocks held for at least a 12-month period) remained an untapped source of revenue for nonprofits. Directly donating appreciated securities is seen as a wise funding option because they can be more tax-efficient–no capital gains tax are applied–but the practice has not yet picked up among donors.

As one of the largest DAF managers in the industry, these figures from Fidelity remain a useful resource to those tracking giving trends across the nation. To view the full report, with details on sector-specific funding and account longevity, click here.