Big financial service companies are stepping into a growing philanthropic market, offering donors charitable funds in competition with community foundations, the San Francisco Chronicle reports.
As the thriving economy sends stock prices soaring, companies such as Charles Schwab, Fidelity Investments and Vanguard are marketing charitable endowment funds as a convenient, tax-efficient giving option.
Fidelity’s Charitable Gift Fund — the nation’s oldest and largest for-profit fund – grew to $2.2 billion in assets from 21,000 donors last year, making it the third-largest charitable fundraiser in the U.S.
Charitable funds are similar to foundations, but without the same intense scrutiny from tax authorities. Minimum contributions to the funds vary. The funds handle all paperwork and send out donations in the form of checks, the Chronicle reports.
Instead of limiting their focus to local charities, donors may contribute to virtually any charity in the world that is registered in the U.S.
While cash or securities donations to charitable funds are immediately tax-deductible, donors can wait years to decide to make grants to beneficiaries.
If the mutual funds are successful in the meantime, the original donation will continue to grow.
In return for these services, for-profit funds charge fees of up to 1 percent of fund assets annually.
While some fear these for-profit funds are drawing contributions away from community foundations, Sterling Speirn, president of the Peninsula Community Foundation, says community foundations actually will benefit from increased competition.
For example, he says, heavy marketing campaigns have stimulated interest in charitable giving to all kinds of funds.