Recent research conducted by Vanguard Charitable, Fidelity Charitable and Schwab Charitable finds that a growing number of individuals are using donor-advised funds (DAFs) and are giving more through these organizations—pointing to an area for great engagement between financial advisors and clients.
Fidelity Charitable manages about $12 billion worth of donor-advised funds. Its 104,000 donors have some 64,000 charitable accounts and made an average of eight grants in 2013, up from seven in 2012; the average value of the grants topped $4,015, a year-over-year jump of 6%. Plus, the number of gifts that surpassed $1 million accounted for nearly a quarter of the $2.1 billion granted through the organization.
Fidelity Charitable, which was started 23 years ago, says most donations were shared with philanthropic organizations as grants over a 10-year period: Its research finds that over 90% of contributions made between 1996 and 2000 were distributed as grants to charities by late 2010.
“Having a dedicated account for charitable giving has helped many donors integrate philanthropy into their total financial picture, fundamentally changing their approach to charitable giving,” said Amy Danforth, president of Fidelity Charitable, in a statement.
The organization says there is growth in both volume of grants and the amount granted on an annual basis via donor-advised finds. In fact, grant volume tripled to nearly 519,000 in 2013 from about 168,000 in 2004.
Most of the grant dollars go to educational organizations, 34%, followed by religious groups, 16%. On average, about 60% of grant dollars are shared with non-profit organizations in the recommending donor’s home state.
Research assembled by Vanguard Charitable says 61% of donors are strategic about giving, while 73% of donors are involved with the charities they support. The organization says it grants 20.3% of assets to charity annually, though giving levels vary based on the individual strategies and goals of donors.
“Donors may prefer to give regularly in equal amounts to their favorite charities, or perhaps they do not give in one year, in order to recommend a large grant for a major project in the following year,” the organization explained in its latest DAF report.
The compound annual growth rate of dollars granted through Vanguard Charitable is 22.1%. The rate for dollars granted from accounts with a baby boomer and Gen X/millennial donor is more than double that: 44.9%.
“More than 55% of donors say [they] use a DAF for the majority of their giving, and 90% of donors are involved in more than one type of philanthropy, including donating financial assets,” the Vanguard Charitable report noted. The organization has supported some 142,400 charities in the past decade.
Schwab Charitable says that individuals gave $822 million to 34,500-plus charities for the 12 months ended June 30, a nearly 40% jump from the prior 12-month period. The organization has $6.4 billion in assets under management, and its clients have granted 45% of contributed into these accounts to charities since the group’s inception.
“Our donors have absorbed the new tax policies that took effect in 2013, and they are encouraged by an improving economy and a strong stock market. As a result, they are increasing their giving and supporting a wide range of causes,” said Kim Laughton, president of Schwab Charitable, in a statement.
“Their donor-advised accounts give them a great way to unlock the value of their investments to give to their favorite charities, reduce their taxes and manage their giving simply and easily in one place,” Laughton added.
Schwab Charitable expanded the investment options available to donors by adding a new Income Index Pool in August, bringing the total number of investment pools to 14.
To date, Schwab Charitable has received over $9.8 billion in contributions and has facilitated over $4.4 billion in grants to charities on behalf of donors; the number of Schwab Charitable accounts grew 17% in the 12 months ending June 30.