Schwab Charitable Beats U.S. Giving Trend

Schwab’s donor-advised fund hits record while philanthropic giving declines nationally.

By Ed Prince

Reversing years of growth, philanthropic giving in the United States declined last year, a result of the market downturn that affected donors large and small. But not all donors are tightening their philanthropic belts. Giving was up at Schwab Charitable, the nonprofit donor-advised fund manager, which reported its participants gave more than $5 billion to charity for the first time in fiscal 2023 (ended June 30, 2023).

“We are thrilled at the results that we saw,” says Fred Kaynor, managing director of relationship management, Marketing and Strategic Partnerships, at Schwab Charitable. He noted that Schwab donors made a record 1 million-plus grants to over 120,000 charities.

Overall, total U.S. charitable giving declined 3.4% (10.5% after adjusting for inflation) to an estimated $499.3 billion, according to “Giving USA 2023: The Annual Report on Philanthropy for the Year 2022,” published by the Indiana University Lilly School of Family Philanthropy. Giving by individuals declined 6.4% in 2022. Although it increased among foundations (2.5%) and corporations (3.4%), giving by these sources still declined 5% or more after adjusting for inflation.

So how did Schwab Charitable donors increase their giving despite the downturn? The answer is the nature of donor-advised funds, Kaynor says.

“People contribute to their Schwab Charitable donor-advised fund account when they have the resources to do so,” he says. “So, whether that’s a wealth event — a large inheritance or taking a company public — whatever it is,” those resources are then already in the account and designed for giving.

Americans with donor-advised funds had deep pockets to access last year. According to the National Philanthropic Trust’s “2022 Donor-Advised Fund Report,” total contributions to donor-advised funds hit a record $72.7 billion across 1,285,801 accounts in fiscal 2021.

Getting the word out

In addition to detailing Schwab Charitable’s FY 2023 report, Kaynor touted a new section of the organization’s website developed by the National Center for Family Philanthropy. The page offers a series of guidebooks, road maps and videos to help donors involve family members in planning for “meaningful, effective philanthropy together.”

The Schwab Charitable website tools are available to any financial advisor regardless of whether they are affiliated with a Schwab Charitable account.

Financial advisors have an important role to play in helping families set up and operate donor advised funds, says NCFP President and CEO Nicholas Tedesco. As a trusted advisor, a financial advisor is “uniquely positioned to ask critical questions of wealth holders, of individuals and families, around the purpose of that wealth, around the intention of that wealth, around the need of the community, and the opportunity to deploy that wealth to meet those needs,” he says.

$12 trillion tsunami of giving on the way

Financial advisors need to be ready to assist family philanthropy because a tidal wave of intergenerational wealth transfer — and charitable giving — is coming, says Kaynor, pointing to a 2022 report by Cerulli Associates.

The Boston-based research, analytics and consulting firm projects that wealth transferred through 2045 will total $84.4 trillion; $72.6 trillion in assets will be transferred to heirs, while $11.9 trillion will be donated to charities.

Kaynor says that there are “varying degrees of familiarity and comfort” with charitable planning among advisors, but Schwab Charitable offers help, including the Family Philanthropy tools, to make it easy for professionals to assist families with donor advised funds.

The guide, a modular resource, provides “a step-by-step process to walk through with their clients — a process for building a charitable plan, really from scratch,” he says. Advisors can help clients input certain data variables, such as “what they want to give, where they want to give, how much they want to give, what vehicles they choose to use, be it a private foundation and a donor advised fund, a remainder trust, a combination thereof, and the charities that they want to support,” he says.

“It’s a very turnkey resource,” says Kaynor, explaining that advisors can “sit down with families and go through these questions and produce a plan on their behalf, which is entirely actionable and really comprehensive.”

Building relationships with families

Both Kaynor and Tedesco say the Family Philanthropy guide can help financial advisors build relationships with their clients.

“Charitable planning is a way for these firms to really differentiate their practice in a way that aligns with priorities among these clients,” Kaynor says. “And it ultimately helps them to extend and broaden these client relationships … across multiple generations.”

Both men say the primary goal of donor families is very much to make a difference, not score a tax break for themselves. However, donor-advised fund owners do qualify at the time of the contribution for a fair-market-value tax deduction and can potentially avoid capital gains, notes Kaynor. In some cases, this means that up to 20% more would be available to grant to charities, he says.  “If they’re donating non-cash assets, we liquidate them for them,” he adds.

Families focus more on social issues

Tedesco says family philanthropy has evolved over the years to support more social justice causes. According to a 2020 NCFP report, from 1990 to 2009, 63% of family foundations reported they had a geographical focus, and 53% listed a focus on issues. From 2010 on, 82% reported a focus on issues, and 46% had a geographical focus.

“I think it’s due to, in many ways, the events of the past three years, beginning with the pandemic and the awareness that brought around inequities across health, and many other measures,” Tedesco says. “And it translated that into conversations on the racial justice movement and greater awareness around inequality that is persistent in the United States and elsewhere. Which then, in many ways, led into a conversation on democracy and global conflict and many other events of the past three years.”

Kaynor adds that the beauty with a donor-advised fund “is in its ability to allow these donors to give where the need is greatest, not only to those charities that they support on a regular basis, but on an episodic basis where crises occur, disasters occur or there are some additional charities that they would like to support.”

In a four-decade career in journalism, Ed Prince has served as an editor with many of New Jersey’s leading newspapers, including the Star-Ledger, Asbury Park Press and Home News Tribune.









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