Pamela Norley, President, Fidelity Charitable

The Rise of Donor Advised Funds

April 11, 2018 – More than 60 donors, senior foundation executives, financial service professionals, and philanthropic advisors gathered for The Center’s Conversations on Philanthropy series with Pamela Norley, President, Fidelity Charitable. The discussion focused on the rise of donor advised funds (DAFs) and the opportunities they present to donors for their giving.

Over the last 25 years, Fidelity Charitable has grown to become the largest public charity in the country and the second largest grantmaking institution in the United States. In 2017 alone, more than $4.5 billion in charitable gifts were made from 180,000 Fidelity accounts to 127,000 different nonprofits. This reflects the growing popularity of DAFs, a philanthropic vehicle that allows donors to make different types of charitable contributions, receive an immediate tax benefit, and then recommend grants from the fund over time.

The DAF sector, created in 1931 and long populated by community foundations such as the California Community Foundation and The Jewish Community Foundation of Los Angeles, was disrupted by national donor advised funds associated with financial institutions, beginning with Fidelity Charitable in 1991.  Norley said, “There are 1.5 million charities out there, all of these different giving models, and people are using credit cards and checkbooks and other means to give. The vision of our chairman was to make giving simple and easy so that you have the ability to invest the contribution, be able to give it out in small increments with a single source of record keeping and also, importantly, to vet the different charities.” According to Fidelity’s internal research, about 80 percent of clients that establish a donor advised fund with them already know where they would like to give.

Some have criticized the funds as “warehousing wealth” since they do not have a strict payout requirement of 5 percent. Norley noted that Fidelity Charitable’s DAFs have average annual payout rates between 20 and 30 percent. They also have an independent board of trustees that nudge donors to direct their charitable gifts. If the donor still doesn’t direct the gift in a set period of time, the account is closed and the board of trustees grants out those funds within 12 months.

“One of the things that’s so unique about philanthropy is that it is very personal,” Norley noted. “I’ve learned that you really have to have passion for giving. It’s not what your friend wants you to do, it’s not maybe what your family wants you to do, but it’s what you really care about.”

The firm helps these donors to vet those gifts by ensuring they meet a set of minimum requirements, for instance, that they are a registered 501(c)(3) nonprofit organization and that they are not under any criminal investigation.

For donors who are at different points on their giving journeys, the ease and ubiquity of donor advised funds presents an interesting choice: should they establish a foundation, continue to give through their checkbook or use a donor advised fund?

A primary objective for Norley since taking the helm in 2016 is increasing donor impact for those who want more guidance in their giving. Key to this has been building a team of experienced nonprofit and philanthropy experts to advise donors with practicable insights about how to affect changes on the ground. “That’s why we’re here,” Norley said. “We’re trying to drive impact in the community and in the country and in the world. That’s what fires us up every day.”

You can watch a video from the Conversation at the following link:

The Center on Philanthropy & Public Policy promotes more effective philanthropy and strengthens the nonprofit sector through research that informs philanthropic decision-making and public policy to advance community problem solving. The Center is a part of the USC Sol Price School of Public Policy, which works to improve the quality of life for people and their communities, here and abroad.

For more information:
Please contact Nicholas Williams, Associate Director, The Center on Philanthropy & Public Policy at [email protected] or (213) 740-8557.