Does United Way Compete with Fidelity? An Odd Take on Philanthropy Provokes Real Questions

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United-Way-Pumpkins

Image Source: Dallas Krentzel

Reporting on the Chronicle of Philanthropy’s 26th annual “Philanthropy 400,” a widely circulated AP story is entitled, “United Way loses its ranking as America’s largest charity.” The Chronicle’s lead article about the ranking this year renders the news as, “Fidelity Charitable Knocks United Way Out of Top Place in Ranking of the 400 U.S. Charities That Raise the Most.” A related Chronicle article by the same writers is, “Fidelity Overtakes United Way as New Charity Champion.” The Chronicle offers a total of 13 articles related to their 2016 “Philanthropy 400” report.

The two Chronicle articles above use racing imagery to describe the “neck and neck” competition through the years to be the “king of the hill.” Fidelity Charitable jumped so far ahead this year that it easily beat the 2015 Philanthropy 400 “photo finish.” But who knew they were in a race? Even as we consider the situation, headlines and all, we find ourselves comparing apples and oranges.

Fidelity Charitable is an independent public charity that has helped donors support more than 219,000 nonprofit organizations with more than $23 billion in grants. Established in 1991, Fidelity Charitable launched the first national donor-advised fund program. The mission of the organization is to further the American tradition of philanthropy by providing programs that make charitable giving simple, effective and accessible.

Fidelity Charitable, also called the Fidelity Gift Fund, does not “fundraise”; along with other investment companies holding donations, it provides a relatively passive but helpful vehicle for holding money and administratively facilitating the grants process. This is attractive to many donors for a variety of reasons. Under its model, donors find their own recipients and set their own priorities. It’s a low touch method of intermediation that provides an immediate tax break for potentially years of gifts.

The Associated Press mentions one particular advantage that Fidelity and others offering donor-advised funds bring to philanthropy: “They’re efficient at processing non-cash donations such as real estate, securities, even bitcoins. Fidelity says about two-thirds of its contributed dollars last year were non-cash assets. By some calculations, donor-advised funds could soon account for 10 percent of all giving from individual Americans.” As we mentioned: helpful, attentive to donor interests, and a light touch.

United Ways, on the other hand, very definitely fundraise, complete with publicly set local goals. United Ways see part of their value-add in directing the donor dollar, even going so far as establishing their own priorities for local giving. This is a high-touch method of intermediation, one whose receipts have declined by a third over the past 25 years. That’s no surprise, considering the ease with which nonprofits can be researched and gifts given these days, along with the workplace and corporate changes affecting the success of the United Way model. The organization has attempted to block this decline in various ways over that period by reinventing itself—creating funding agendas for communities and increasing its focus on large donors—but it is leaking for reasons probably more associated with an epochal shift than with focus or capacity.

If one were to compare these two models, you do see one method of acting as intermediary to donor dollars as emergent and the other as fading, but even then, one ought to count all such donor-advised fund hosts, including Schwab Charitable, which is 4th on the list; Vanguard, which is 11th; and even perhaps the Silicon Valley Community Foundation (10th on the list) where 79 percent of the money is held in donor-advised funds. Pit them against the United Way, and perhaps other workplace solicitation campaigns like the Combined Federal Campaign, which has been experiencing its own relatively precipitous dive, and the race, if there were one, would have finished long ago. If you did not know that, you haven’t been paying attention.

Now, add to that inconsonance the fact that these two types of intermediaries are on the same list as organizations like Harvard and Doctors Without Borders, which raise money for one specific institution’s work. Is it useful to define the complexity of the nonprofit world with a one-dimensional ranking—at least as far as the headlines go?

In another awkward fit, the two Chronicle of Philanthropy articles under these winners-and-losers headlines remind us that widespread death and misery help move a charity up the Philanthropy 400 ladder (or, rather, in a charity’s presumed strivings to be “king of the hill”): “Growth has been spurred in part by a series of major humanitarian disasters, including the 2010 Haiti earthquake, the 2011 Asian tsunami, and the Syrian refugee crisis.” MSF doctors ranked 73rd this year, “down” from 69th in 2015—shame on them! Instead of taking pride in their fundraising department, Doctors Without Borders are more likely coming to terms with PTSD this year.

Some of the media outlets that picked this story up knew enough to alter the frame. The San Francisco Chronicle titled its piece, “How new breed [sic] of charities is changing the face of giving,” and it does a good job of wrestling with the donor-advised funds payout question that’s front and center with many philanthropic observers. The payouts at donor-advised funds are between 16 and 20 percent, which is good compared to most foundations’ institutional payouts but undoubtedly far less than the United Ways’. Should that, and the fact that the payout of individual donor-advised funds cannot be tracked, concern us? Probably so; we’re seeing this form of intermediated giving grow more and more preeminent. Do we know that the doubled giving to and from an intermediary does not inflate giving numbers? Not exactly. There are important questions here with which we need to wrestle.

Finally, a tax-exempt designation has only to do with an organization’s relationship with the IRS, not society. To compare Fidelity Charitable with the United Way, or MSF, or many others on the list is like pitting Pope Francis against Kim Kardashian in a popularity contest. Both are popular figures, but their aims are infinitely far apart. Making these distinctions is necessary to help us make sense of the profound shifts we are watching so we can take the right kinds of action.

  • Michal Nortness

    I know next to nothing about the other giving organizations mentioned, but I would add that United Way seems to be declining (especially in rural areas like the one in which I run a small, struggling literacy coucncil.) due to the cost of their money in admin. costs, staff time for reporting and writing proposals, ‘command performances’ at every event UW has, and a bullying attitude toward its ‘member agencies’. really frustrating. maddening, in fact.

  • stacy palmer

    Thanks Ruth and Jim for all the attention you provided to the release of The Chronicle’s Philanthropy 400 rankings.

    To clarify questions that have been raised about our approach: For the past 26 years, we have ranked all 501(c)(3) charities that solicit the public by the amount they raise from private sources. Our goal has always been to help charity officials — and indeed all Americans — better understand how very different types of organizations – Harvard, Feeding America, the Nature Conservancy, compare. Th corporate-sponsored donor-advised funds like Fidelity and Schwab are now part of that world – with
    their designation as charitable entities that raise money from the individuals, just like the other organizations on our list.

    It’s this diversity of fundraising organizations that makes our rankings so valuable; readers can see
    changes in the makeup of who’s garnering the most donations from individuals, corporations, and foundations. There’s plenty of room to discuss whether these changes are good or bad for philanthropy and society — so thank you for promoting this discussion among NPQ readers and you can see the same kinds of questions being debated among philanthropy.com readers. And you can find out more about The Chronicle of Philanthropy’s methodology at https://www.philanthropy.com/article/How-the-2016-Philanthropy-400/238166

    — Stacy Palmer, Editor, The Chronicle of Philanthropy

  • Rob Mitchell

    I’ve invited to debate Al Cantor, Ray Madoff, Bob Hartsook, or any other opponent of Donor Advised Funds, at any venue, at any time, and with any moderator on the subject of the contribution of DAFs. So far, none have responded because they have no data to support their position. The offer is still open.

    • Actually, Rob, as you may recall I participated in a debate on the subject on your web radio show, I believe last November. That is: I debated you on your very own show, about a year ago. Either you have a very short memory, or I didn’t make much of an impression.

      I have also debated the subject publicly with Eugene Steurle of the Urban Institute at the International Conference of the Association of Fundraising Professionals Conference in Baltimore in March 2015; with Howard Husock of the Manhattan Institute at a CASE conference in NYC in June 2015; and with Joanne Florino of the Philanthropy Roundtable and Attorney Victoria Bjorklund at the October 2015 Donor-Advised Fund Conference in Washington DC sponsored by the Boston College Law School’s Forum on Philanthropy and the Public Good. (I was joined on my side by Professor Roger Colinvaux of Catholic University.)

      I can promise you that I haven’t been playing hard to get. But I will add that, though Eugene, Howard, Joanne, and Victoria offered strongly contrasting opinions to my own on the subject, they were utterly respectful of my point of view. Our debates were very civil. They didn’t accuse me of not having data to support my opinions. They simply chose to interpret the data differently, to introduce other evidence, and to emphasize different aspects of the argument. By contrast, your dismissive tone — here and elsewhere — is not one that would encourage an open and respectful debate.

  • Paul Guba

    I suspected that was the case Alan. Living in New Jersey there are several 501(c)(3) charities run by hedge fund managers and investment lawyers. They seem more concerned with retaining assets they distributing them. This came to my attention when several of these ran large donation campaigns after Super Storm Sandy and didn’t immediately distribute funds to those in need. All the while holding 100’s of millions in reserve. The cultural vision is still one of accumulation and retention of assets.