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Fidelity Charitable’s Annual Giving Report Identifies Opportunities for Advisors

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Fidelity Charitable, the second largest charitable donor after the Gates Foundation, has just released its fourth annual Giving Report, which analyzes the givers and receivers of the billions of dollars the donor-advised fund has collected and dispensed.

Since its inception 25 years ago, Fidelity Charitable has distributed more than $21 billion in grants to over 219,000 nonprofit organizations. In 2015, more than 80,000 accounts gave a total $3.1 billion to charities.  Each donor made about nine grants averaging $4,200 each, but more than 60% of Fidelity Charitable gifts ranged from $50,000 to over $1 million.

Here are some of the more interesting findings from the report and gleaned from a conversation with Fidelity Charitable President Amy Danforth.

Dominance of Noncash Contributions

Close to two-thirds of the contributions to Fidelity Charitable’s Giving Accounts in 2015 were noncash assets – primarily publicly traded securities but  also nonpublicly traded assets such as real estate, S corporate or C corporate shares and oil and gas interests. That’s up 18% from the previous year. 

Such noncash donations have a notable tax advantage over the more traditional cash contributions. Donors not only get the usual immediate tax deduction for the charitable contribution but also a lower capital gains rate on the appreciation of those assets so long as they were held for over a year — a 20% rate for those in the top 39.6% income tax bracket and 15% for donors in most lower brackets. As a result, donors can give that much more to the charities of their choice.

“We have become a capital appreciation harvesting machine,” Amy Danforth, president of Fidelity Charitable told ThinkAdvisor. “Our donors tell us they would not be giving away these assets except that it’s so easy.”

Indeed, 60% of Fidelity Charitable’ s donors have given appreciated assets compared to 20% of the general donor population, said Danforth. Since its inception 25 years ago, Fidelity Charitable has converted $3 billion of nonpublicly traded assets into dollars available for charitable grants.

Giving is Largely Local, Self-Directed and Often Part of a Legacy Plan

Half of the grant dollars distributed by Fidelity Charitable support charities in donors’ home states and almost 85% of the beneficiaries of Fidelity Charitable received donations from four or fewer accounts, indicating that they were not the big charities that are household names like Doctors Without Borders of the American Red Cross.

“It’s very personal, very local,” said Danforth, like the local women’s shelter or food bank or university endowment. “From the charity’s perspective, everyone has the opportunity to raise money.” Not surprisingly, most of the donors are self-directed. “Seventy-eight percent of the time donors tell us they know where they want the money to go,” said Danforth. But 42% of giving decisions were shared with others, primarily other household members, as opposed to just 28% for affluent donors overall. And 88% of grant recommendations from donors were done online through Fidelity Charitable’ s website or through DAF Direct, a free online tool nonprofits can add to their own websites.

Fidelity Charitable Donors Differ From Other Donors

Close to half (42%) of Fidelity Charitable donors have set up a charitable legacy vehicle compared to 15% of affluent donors overall, to continue their giving during retirement (55% are 61 or older).

Twenty-six percent of the dollar value of grants made through Fidelity Charitable in 2015 went to education, followed by society benefit (18%) and religion (16%). Nationally, religion is the leading sector receiving the most charitable donations.

Seventy-one percent of Fidelity Charitable donors give more than $10,000 per year, and 85% give to six or more charities. In comparison, about half of affluent donors give more than $10,000, and just 36% give to six or more charities.

Opportunities for Advisors

This growing commitment to charitable giving represents an opportunity for financial advisors, according to Danforth.

“There’s a real gap in the wealth advisor space,” said Danforth. “Ninety-eight percent of high-net-worth people are charitable, philanthropic, but only 14% talk to their advisors about giving and how it fits into their wealth plan.”

It clearly does fit into those plans because charitable giving reduces clients’ taxes. Moreover, through donor-advised funds like Fidelity Charitable, donors get that tax benefit when they contribute funds or assets, before they are even distributed, plus the ability to donate more as assets grow.

Advisors working with clients on their philanthropic efforts also benefit by providing a “unique value add” to serve clients who are “aging out” of their book and bring other, often younger, clients on board. 

“Today’s advisor would really benefit by including charitable planning in their practice. The trend toward giving back – spend some, save some, share some – is really where the future is,” said Danforth. “In a competitive landscape of financial services it’s a differentiator that provides tax minimization strategies as well as a way to have more personal conversations about what your client wants to achieve.”

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