Spike in Charitable Donations Creates Advisor Opportunity

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In the first half of this year alone, Schwab and Fidelity clients combined gave a record $1.5 billion to charitable causes, according to reports from both companies.

“People are starting to think more strategically about giving,” says Schwab Charitable President Kim Laughton. “It really started last fall. What’s nice is it’s continuing this year.”

The jump in giving is “heartwarming,” but it also highlights the role of the advisor, says Sarah Libbey, president of Fidelity Charitable: “Advisors really have a lot of influence in helping people with their giving strategies.”

Advisor referrals generated more than 70% of contributions and more than 60% of new charitable accounts established in the first half of the year, according to Fidelity.

More than half of Schwab's affiliated advisory firms with AUM of $25 million or more currently offer charitable planning services, that company says.


The charitable giving increase was spurred last year by widespread concerns about expected tax changes. Nationwide, clients scrambled to complete estate plans before Jan. 1, 2013, when it was anticipated that the high federal estate tax exemption of more than $5.12 million might disappear.

Debates during the presidential elections about possibly lowering or capping allowable charitable deductions further fueled this activity, according to Laughton, prompting some to think of giving sooner rather than later.

Although the estate tax deduction was ultimately preserved, the frenzy got thousands of wealthy individuals to start strategizing about charitable giving.

As a result, gifts to donor-advised funds leapt both in 2012 and in the first half of this year, both firms say. Donor-advised funds allow people to get money out of their estates now through tax-deductible charitable donations, giving clients the flexibility to donate right away and defer until later the decision of which charities will receive the funds.


Donors using Fidelity’s donor-advised fund contributed $879 million for their charitable accounts during the first half of 2013, a 7% increase over last year.

Fidelity clients also recommended more than 214,000 grants to various charities totaling $919 million in the first half of the year, according to the Fidelity statement. That’s a 33% increase in dollars granted over the same period last year, it said.

And donors using Schwab Charitable gave grants to charities totaling more than $600 million by the end of June, representing 12% growth from the previous year, according to a company statement; it says the number of new Schwab Charitable donor-advised accounts also doubled in fiscal year 2013.


Both Laughton and Libbey say much of the giving this year and last year has been of appreciated stock, given the 20% year-over-year appreciation in the market. “Everyone in the top tax bracket has had their [taxes] go up, and so the value of the deduction is higher this year than it was last year,” says Schwab’s Laughton.

Appreciated stock accounted for 65% of donations thus far this year, she says, adding that some donors also give appreciated mutual funds or other long-term appreciated assets.

Fidelity says grants of $1 million or more were up 50% for the first half of 2013, compared with the same period last year. The uptick in the number of large grants helped boost the average grant size to $4,285, a 10% increase over last year, according to Fidelity.

Fidelity found that 43% of contributions thus far this year came in the form of securities and the rest came in as cash. Non-publicly traded assets, such as private stock, accounted for 5% of contributions.

As long as markets hold up, Libbey says, she expects giving will continue at historic levels, at least for the balance of 2013: “I would say that we have an opportunity to almost match our record year of last year, if not exceed it, based on what we are seeing so far and assuming that stock market stays relatively strong.”

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