Foundations or Wire Houses?

When you decide to open a Donor Advised Fund, there are many options where to do it. But your main choice lies between opting for a wire house or a community foundation.

A “Wire house” is a full-service broker-dealer. These include familiar names like Fidelity, Schwab, and Vanguard. (The term “wire house” was coined back when brokerage firms communicated to their branches through telegraph and stock ticker wires.)

Community foundations, by contrast, are non-profit institutions that pool donations for making charitable grants.

If wire houses operate with a profit motive, foundations have social aims. Many American community foundations are “progressive,” with secular (sometimes anti-Christian) aims. Others are more conservative or religious in nature. Capstone Legacy Foundation falls in this latter category.

Here are some differences to consider when deciding to start a Donor Advised Fund (DAF) at a wire house or Christian foundation:

  1. First off, wire house fees tend to be less expensive than those of community foundations. Wire houses charge less up front because they gain other income through assets under management.
  2. Wire houses have no specific moral worldview. They grant money to any 501(c)(3) organization, including those to which Christians would not give.
  3. Christian community foundations protect Christian Giving—especially when cultural climate tempts secular foundations to refuse making grants to Christian charities.
  4. Christian foundations hold a Biblical worldview that keeps them from funding charities antithetical to Christian beliefs.
  5. Christian foundations screen charities to determine their alignment with Biblical values, but they will also make grants to any 501(c)(3) organizations that are not antithetical to Christian beliefs.
  6. Christian community foundations tend to be accessible to their donors—you can drop in and visit them if you want.
  7. Christian foundations tend to keep money moving in ways that commercial DAFs don’t. They donate around twice as much of their assets per year as wire house DAFs, which are incentivized to sit on funds to retain assets under management.
  8. Most importantly, Christian foundations protect donor intent. They screen grants to ensure they comply with the founder’s vision. And they prevent “mission drift” by keeping future heirs from supporting causes the original giver would not allow.

To further discuss these and other issues related to Donor Advised Funds, please contact Capstone Legacy Foundation: