In response to my post yesterday asking who would follow Network for Good’s lead and try to execute one of the “surprises” from my list in the Chronicle of Philanthropy, David Lynn of Social Venture Partners-San Diego writes:
We’ve been working on a plan for #8. If any other readers would like to discuss, we’d be happy to. We’d love to see it happen.
“# 8: A no-minimum national donor-advised-fund will be launched in partnership with a bank.”
My thought on this idea was that banks have made it very easy to save money, by linking savings account products to their checking accounts. Some banks have even created programs where purchases on your debit card are rounded up to the nearest dollar with the excess being rolled into your savings account. ING Direct has created huge national awareness of their online, high yield savings accounts that can be linked directly to other institutions checking accounts.
At the same time, banks have invested in online banking capabilities so that it is now easy and free to pay your bills out of your checking account. So why can’t a bank offer a donor advised fund that is linked to your checking account and allow for free checks to be sent out of the account to nonprofits? They could even offer benefits if you set up a standing order to transfer a portion of your direct deposit paycheck into your donor advised fund.
From a regulatory standpoint, this idea has some problems. For instance only nonprofits can offer donor advised funds, but Schwab and Fidelity have found ways to offer donor advised funds so I don’t see why banks couldn’t do the same thing. The other issue is the overhead involved in operating donor advised funds with no minimum balance. Schwab and Fidelity now have their minimums down to $5,000, but the last leg down to $0 might be difficult. One of the reasons that I thought partnering with Network for Good made sense, was that doing so outsources the charity vetting process to them. I don’t see why a bank couldn’t mail checks out to any nonprofit within the Network for Good database using their existing bill pay functionality. I don’t mean to downplay the fact that there would be some hurdles to this plan, but it sure seems doable.
To tell you the truth, I’d go one step further. Why can’t for-profit firms offer donor advised funds? I know that’s blasphemy, but assuming all of the same rules regarding the use of the funds was followed, what would the problem be?