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Fidelity Charitable: Why Clients Use Donor-Advised Funds

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Fidelity Charitable issued in June a report that analyzes how its donor-advised fund account holders use DAFs to support their favorite charities.

According to a survey conducted early this year, 62% of 1,042 Fidelity Charitable donors said they used a DAF to sustain giving in retirement. Twenty-seven percent said they used the vehicle to capitalize on a wealth event, and 24% said it was to do good after receiving a year-end bonus.

Donors also liked several features of DAFs that enabled them to increase their charitable impact:

  • 73% said they could give more money to charity by leveraging tax benefits.

  • 76% noted they could grow charitable dollars with tax-free investment options.

  • 68% said their DAF gave them time to research the charitable causes and organizations they wanted to support.

According to Fidelity, nearly all DAF donors also use other giving methods. For example, 91% of respondents said they gave directly, 9% gave through community foundations and 6% through private foundations.

The survey found that on average, donors reported using a DAF for about two-thirds of their household’s charitable giving.

Advisor, Donor Conversations

According to Fidelity, high-net-worth donors—those with average DAF account balances of $250,000 or more—were more likely to engage family in giving.

Eighty-three percent of respondents who had an advisor had discussed charitable giving with them. However, 87% said these charitable planning conversations had primarily focused on giving methods, and 84% said tax benefits had been the chief topic of discussion.

The survey found that women were not only more likely to talk to advisors about charitable planning, but also more likely to engage in deeper conversations.

“Most donors are financially and emotionally invested in philanthropy throughout their lifetime,” Fidelity Charitable’s head of fundraising, Chris Carnal, said in a statement.

“There is an opportunity for advisors to more deeply engage with their clients by expanding their conversations to include clients’ motivations for giving, their long-term giving goals, and how they would like to involve family in their philanthropy.”

Grant Making Accelerates

Fidelity Charitable also said its donor-recommended grant making had tripled in the past 10 years to more than $2.5 billion.

As a result, it said, citing a recent Foundation Center report, it has become the second-biggest grant maker in the U.S., lagging only the Bill & Melinda Gates Foundation. The Gates Foundation granted $3.3 billion in fiscal 2013, it said.

The number of charities supported by Fidelity DAF grants has doubled over the last decade to more than 97,000 last year, according to the statement. Doctors Without Borders, which has long been popular among donors, in 2014 became the charity supported by the most DAFs for the first time.

Average activity within individual DAFs has risen significantly over the past decade, according to Fidelity, with donors recommending eight grants on average in 2014, up from five in 2005.—Michael Fischer