Tag Archives: Philanthropy 400

Wall Street 9, Charity 0

The news last week was stunning, but at the same time utterly unsurprising: When The Chronicle of Philanthropy compiled its annual Philanthropy 400 list of the nonprofit organizations that had raised the most money in the United States last year, the top dog was not United Way or the Salvation Army, but Fidelity Charitable.

The finding sparked a series of stories around the country: The New Yorker,  The Washington Post , The San Francisco Chronicle, The American Prospect, and National Public Radio, to name a few. Journalists are gob-smacked by the idea that an affiliate of a financial services firm could claim the title of top charity – and that it did so by the hefty margin of $900 million over United Way Worldwide. (Last year Fidelity’s take rose 20%; United Way’s dropped 4%.)

But those of you who have been reading my rants about the commercial donor-advised fund industry have seen this coming for five years. It’s like watching the sea levels rise from climate change. We’ve long known what was going to happen. Now, the evidence is incontrovertible. I take some grim satisfaction in the news, but mostly I feel despair. Continue reading

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Tsunami

[Note: This post was published as an op-ed in the Chronicle of Philanthropy on October 28, 2014.]

Each fall the Chronicle of Philanthropy publishes its “Philanthropy 400,” a list of the nonprofit organizations that raised the most money in the previous year. Last week’s publication of the 2014 Philanthropy 400 created a stir by sadly confirming what many of us have feared for the last several years: an inexorable takeover of the charitable sector by Wall Street.

Three of the top 10 fundraising organizations on the list are donor-advised funds (DAFs) affiliated with financial firms: Fidelity (No. 2), Schwab (No. 4), and Vanguard (No.10). A fourth organization in the top 10, the Silicon Valley Community Foundation, is also primarily a sponsor of donor-advised funds. Money is flowing into advised funds, rather than to nonprofits that provide actual services. This accelerating trend of warehousing philanthropic dollars is a deeply troubling trend for American philanthropy. Continue reading

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Donor-Advised Funds: By the Numbers

Last week I participated in a terrific debate about donor-advised funds with my good friend Stuart Comstock-Gay, the president of the Vermont Community Foundation. (Thank you, Planned Giving Council of New Hampshire and Vermont, for inviting us!)

Stu and I found a lot of common ground, as well as several areas where we cordially agreed to disagree. Stu made the case for donor-advised funds, saying that their flexibility and low entry point encourage charitable giving and democratize philanthropy — private foundations for the average person. He also emphasized their efficiency. I brought out my concerns (familiar to readers of this column) that donor-advised funds were attracting money that otherwise would be going to actual charities. I also pointed out that money goes into donor-advised funds more readily than it comes out, and I described the unethical financial incentives that are driving the growth at commercial gift funds such as Fidelity.

In preparing for the debate I came up with some numbers that I think illustrate the challenges posed by donor-advised funds. (Because we were meeting right across the river from Dartmouth College, by far the largest fundraising operation in Northern New England, I make references to Dartmouth in a few places.)

The numbers:

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Wall Street Muscles In

I really wish I’d been wrong in my earlier warnings about the growth of commercial donor-advised funds. But the latest Philanthropy 400 rankings from the Chronicle of Philanthropy indicate that the Wall Street acquisition of the nonprofit sector is, if anything, ahead of schedule.

It turns out that for the second year in a row, the second-largest “philanthropy” in terms of funds raised in the U.S. is an entity called Fidelity Charitable. Fidelity Charitable’s growth rate was an astonishing 89% over the year before, and with donations of $3.2 billion, it is positioned to overtake United Way Worldwide (that is, the combined United Ways of the entire country), which only grew 1% and raised $3.9 billion.

How is something named Fidelity considered a charity at all, let alone one that is poised to become the nation’s largest? Here’s a history lesson. Continue reading

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