Each year, Stacy Palmer, the editor of the Chronicle of Philanthropy, compiles a list of the U.S. charities that have raised the most money from private sources. In the twenty-six years that the Philanthropy 400 ranking has been published, one thing has stayed constant: United Way Worldwide is at the top. (The one exception was in 1996, when the Salvation Army briefly displaced it.) But when the results started coming in for this year’s list, which was published on Thursday morning, it became clear that a new No. 1 had emerged—an organization affiliated with Fidelity Investments, called Fidelity Charitable, which has grown to become one of the most influential charities in the world. “I was stunned,” Palmer recalled. The details were especially striking. Fidelity Charitable collected 4.6 billion dollars, a twenty-per-cent increase from the previous year. United Way ranked a distant second, with donations dropping_ _by four per cent, to 3.7 billion dollars. “Not only were they”—Fidelity—“going to be No. 1, but they were going to be No. 1 by a lot,” Palmer remembered realizing.
Fidelity Charitable is part of a new, fast-growing class of charities known as donor-advised funds. These charities, which typically attract wealthier donors, let people set up “giving accounts” with funds that can be written off as charitable contributions. They can decide later—even many years later—where to funnel that money. Meanwhile, it is held in investments, with any gains returning to the fund. Fidelity Charitable is the largest of these, but there are other prominent ones: Schwab Charitable and Vanguard Charitable ranked fourth and eleventh, respectively, on this year’s Philanthropy 400.
Fidelity’s rise to the top of the list represented a momentous shakeup for a list that, for years, didn’t change much at all. Palmer has worked at the Chronicle since it was founded, in 1988, and recalls the days when United Way was a dominant force. The organization was known for collecting money from middle-class donors through workplace giving programs; those contributions would be funnelled to local programs that provided social services like feeding, clothing, and educating the poor. For a long time, these giving programs and their high-profile annual fund-raising drives were a mainstay of white-collar culture. “You were expected, if you were a good employee and you expected to rise through the ranks, to give to United Way,” Palmer said.
United Way is still a huge, influential organization, but its traditional fund-raising methods started becoming obsolete years ago. Employees didn’t like being asked to donate to a single organization that they hadn’t chosen themselves; that annoyance became even more pronounced when the Internet, and then social media, made it easy for people to learn about all kinds of charities, both local and global, not just the high-profile ones. Companies started more-flexible philanthropic programs, often even letting people donate to any charity and matching that contribution. Even United Way now lets workers earmark their donations to be passed through to specific organizations.
There’s been a more profound transformation, too. As wealth has become much more concentrated among the rich, it appears that the kinds of charities preferred by wealthier people are seeing disproportional growth. A report this summer from Indiana University found that, last year, donations to education and arts-and-culture causes grew more than for nearly any other category, with a researcher noting that those categories typically include organizations and institutions supported by wealthy donors. According to the National Philanthropic Trust, meanwhile, the average size of donor-advised funds is nearly three hundred thousand dollars, suggesting that they’re disproportionately popular among the rich. The Chronicle found that the Red Cross, Goodwill Industries International, and the Salvation Army all saw their donations fall last year, along with United Way—which Palmer said might have something to do with those organizations’ dependence on middle-class donors. Contributions to Fidelity Charitable and the other top donor-advised funds had double-digit gains, meanwhile, as did several élite universities, such as Stanford. “As the top one per cent has grown richer and richer, the kinds of cause they care about—colleges, museums—have been doing much better,” Palmer said.
People in philanthropic circles have been noticing the rise of donor-advised funds, in particular, for several years. I wrote about the trend two years ago, when that year’s Philanthropy 400 was released. At that time, Fidelity Charitable was in second place, after United Way, and critics were beginning to raise concerns about what they saw as legal loopholes related to donor-advised funds. While foundations are required to pay out five per cent of their assets every year, donor-advised funds are not bound by such a requirement, which means money can sit in them for years without being put to any good cause. Also, unlike foundations, donor-advised funds aren’t required to report on the ultimate destination of the contributions they collect, which critics feel isn’t transparent enough.
The funds still have their critics but are becoming more accepted. Supporters note that when individuals give directly to charity, they aren’t required to disclose what they’re donating to—why should it be any different when they give through one of these funds? Also, while people can hypothetically get a tax benefit while letting their money sit idle in an account, much of the money in donor-advised funds is being disbursed to other charities: in 2014, the amount granted from the funds represented about eighteen per cent of total assets in them, according to the National Philanthropic Trust.
Pamela Norley, the president of Fidelity Charitable, told me that if clients haven’t made a grant for three years, they get a phone call reminding them of the purpose of the fund. “This is about giving,” she said. “This is about making sure that the charities we care about are getting the funds.” Norley noted that the average Fidelity account holds fifteen thousand dollars—well below the average for donor-advised funds in general, though it’s still a large sum—and said that she wants Fidelity’s fund to be accessible to anyone. In the past, Fidelity required a minimum donation of ten thousand dollars to open a giving account; in 2006, it lowered that to five thousand dollars, and Norley said she’s looking at whether to further adjust that minimum.
Nonetheless, the displacement of United Way, with its traditionally middle-class donors, by Fidelity Charitable, with its wealthier ones, seems to symbolize how the wealth gap in the U.S. is having an influence on all spheres of public life. “Giving follows the economy, and there’s an income gap in this country,” Brian Gallagher, the president of United Way, told me. Some people who have noted this trend find it worrisome because rich people give disproportionately to naming buildings at hospitals or colleges, or to charities that seem flashy and innovative, and not to workaday social-service organizations. But Gallagher made a different point. He said that philanthropy is only partly about raising funds—what’s more important, he said, is its capacity to mobilize communities around important issues. He pointed to the role of nonprofits, and the individuals involved with them, in changing societal perceptions about issues like civil rights, the role of girls in sports, and drunk driving. “Real social change happens when millions of people get involved, average donors get involved, and work collectively on big issues,” he said.
