Fidelity Investments built the country's largest independent charitable fund by making it easier for average investors to both grow their savings and donate the money to the charities of their choice. Critics, though, say that Fidelity's clients are using the investment company's donation vehicle to send money to groups that are not classic community trust favorites like local food banks or medical causes.
The Fidelity-affiliated charitable fund granted more than $330,000 over two years to the Family Research Council, a "research and education organization" in Washington, D.C., who's leader Tony Perkins has called homosexuality "objectively harmful" and advocated for "restraining" the freedoms of Muslims in America.
Also a recipient of the charitable fund's giving is the Center for Immigration Studies, a Washington, D.C.-based organization that has been described as a hate group by the Southern Poverty Law Center.
The SPLC in 2017 documented more than 2,000 instances in which the Center for Immigration Studies "circulated the writings of white nationalists and antisemitic writers." This year the organization was identified as a significant source of information for Stephen Miller, President Trump's top immigration adviser. The Center for Immigration Studies recently got $11,600 from the charitable fund, according to a tax document from Fidelity.
"From our perspective this is a tragedy," said Heidi Beirich of the SPLC, an advocacy group that monitors extremist organizations. "Fidelity is making the decision to follow the wishes of its donors, but we think Fidelity should make the choice not to pass funds to groups that's purpose is to legitimize discrimination and feed violence against the LGBT or immigrant communities."
A spokesperson for the Family Research Council declined to address questions about the statements of its founder, instead saying in a statement to CBS MoneyWatch that the SPLC is "corrupt" and "cannot be relied upon as a source." A spokesperson for the Center for Immigration Studies declined to comment.
The donations that have drawn criticism from SPLC and others came not from the corporate account of Fidelity, which is the nation's largest administrator of 401(k) assets, or those of its top executives, but from the mutual fund company's affiliated Fidelity Investments Charitable Gift Fund, a $30 billion philanthropic juggernaut that is the nation's largest donor-advised fund.
The Fidelity Charitable Gift Fund received more than $9 billion in donations in the 12 months ended June 2018, or nearly three times what was donated to the United Way, according to the most recent data available. Fidelity Charitable gave nearly $5 billion to more than 40,000 charities designated by its donors in that one-year period. (One of those designated charities, interestingly, was the Southern Poverty Law Center, which itself received more than $3 million in donations through Fidelity Charitable in the 2018 fiscal year.)
A spokesperson for Fidelity told CBS MoneyWatch its charitable fund is "cause-neutral" and that people with concerns about the activities of a charitable organization that its fund's donors support should contact the IRS or state charity regulators, not Fidelity.
Invest — and get a tax break
Donor-advised funds, which give money to eligible charitable causes that individual donors themselves designate, have been around for generations. They include community foundations like the Chicago Community Trust and New York Community Trust, each with around $2.7 billion in assets, and religious-oriented institutions like the Jewish Communal Fund, with about $1.6 billion.
But in the past decade, the nation's largest financial firms have also launched donor-advised funds as an additional service for their investor customers. Schwab Charitable has $13 billion in assets. Vanguard Charitable Endowment Program has $8.6 billion in its fund.
In all there is about $121 billion invested in donor-advised funds, up from $70 billion in 2014, according to the National Philanthropic Trust.
Donor-advised funds allow individuals to designate money for charitable giving and get a tax break without actually making an immediate donation. The donor-advised fund sponsor then invests the money until the individual wants to send it to a specific charity. All of the money must eventually go to charity, but there is no limit on when donations must be made.
Some academics and philanthropy consultants who advise wealthy donors have criticized financial firms that earn fees from managing their donor-advised funds and facilitating transactions, saying they have turned charitable giving into a money-generating enterprise.
Fidelity Investments itself received nearly $60 million last year in fees through its donor-advised fund, which also invested about 60% of its donors' money in other Fidelity funds.
More recently, Fidelity and other donor-advised fund sponsors have been criticized for "bankrolling" anti-immigrant and anti-LGBT groups. Last month, the Charlotte Observer reported that a donor-advised fund managed by the local Foundation for the Carolinas, one the 10 largest community foundations in the country, had granted more than $20 million to anti-immigrant groups, including the Center for Immigration Studies and Federation for American Immigration Reform.
Earlier this year, the Amalgamated Foundation, the charitable arm of the union-owned bank, launched a campaign calling on donor-advised funds to stop giving money to organizations that have been identified as hate groups. The campaign followed a report published on Sludge by Alex Kotch that the affiliated donor-advised funds of Fidelity, Schwab, Vanguard and others had funneled millions of dollars to more than 30 anti-Muslim, anti-LGBT and other hate groups.
"Charitable institutions have a responsibility to the public good," said Anna Fink, head of the Amalgamated Foundation, who says 80 fund sponsors have signed on to her Hate is Not Charitable campaign. The list does not include Fidelity or any of the other large financial firms. It is not clear if Amalgamated reached out to those firms.
"There should be a different standard for donor-advised funds than banks or credit card companies that are just processing donations," Fink said.
Also different than donating through a bank check or a credit card: A donor through a charitable trust can remain anonymous, even from the charity itself. The $11,600 donor to the Center for Immigration Studies shows up as Fidelity Charitable, for instance, not the individual by name.
Fidelity: Not our role to dictate values
The Fidelity spokesperson told CBS MoneyWatch it is up to the 200,000 clients of its donor-advised charitable fund to say where the donations should go.
"As an independent charity that is cause-neutral, it is not Fidelity Charitable's role to dictate what their values should be. Each of our individual donors has the right to decide which IRS-qualified charities they choose to support," the Fidelity spokesperson said.
The spokesperson added that the fees Fidelity gets through the donor-advised fund are less than 1% of the fund giant's annual revenue of approximately $20 billion.
"We did not form Fidelity Charitable to make profits," the spokesperson said. "Fidelity contributed more than $25 million in matching dollars to employees' giving accounts last year, just to give you a sense for the culture of charitable giving at our company."
Brian Mittendorf, an accounting professor at Ohio State who has studied donor-advised funds, said deciding where the money goes actually is Fidelity's legal responsibility. Once individuals transfer assets into a donor-advised fund — allowing them to claim an immediate tax break— that money is technically the property of Fidelity's affiliated charity, Mittendorf explained. As the name implies, donors can advise where the money should go, but Fidelity has the right to approve those donations or not.
"I do think this is a problem for Fidelity," Mittendorf said. "Legally these are funds owned by Fidelity. Fidelity is making the choice to largely follow their donors' wishes, but they should take responsibility for that choice and deal with the consequences."
Who gets donations, who doesn't
Fidelity said it won't grant money to organizations that are not deemed eligible charities by the IRS, or are under review by the IRS or state authorities, or have been found to have violated the law.
Other donor-advised funds have similar policies. Schwab Charitableit is no longer allowing its clients to donate to non-profits tied to the National Rifle Association. The move came as state regulators examine whether the NRA abused the non-profit status of a charity controlled by the gun advocacy group.
Fidelity Charitable recently began doing likewise with NRA-tied nonprofits, according to a source in the philanthropic community. The Fidelity spokesman said Fidelity Charitable does not comment on its giving to individual organizations.
In its FAQs on its website, Fidelity Charitable says it conducts a "robust review" of each grant to make sure, among other things, that charities used those granted funds "solely for proper charitable purposes."
Among those grants, according to a Fidelity Charitable tax filing for its most recently available fiscal year, was $56,350 to the New Century Foundation, an organization the Southern Poverty Law Center calls a hate group that "openly peddles white nationalism."
In a 2014 video titled "Race Differences in Intelligence" — which YouTube has flagged as offensive — New Century founder Jared Taylor suggested black children do poorly in school not because of racism but because "on average they are not as smart as whites." He also said it's "simply unrealistic to demand that there be proportionately as many blacks as whites in those professions and in others that require high intelligence."
Twitter banned Taylor in 2017 citing a rule that bars "accounts affiliated with organizations that promote violence," according to a suit that Taylor brought against the social media platform, which has since been dismissed.
Taylor declined to comment on where New Century's donations come from. He told CBS MoneyWatch his group promotes "race realism and white advocacy," not white nationalism.
"Fidelity should serve its clients, not take orders from a leftist organization that recklessly calls people with whom it disagrees 'haters,'" Taylor said.