Why Fidelity and Vanguard are restricting donations to the SPLC

According to several media publications, including The New York Times, two of the largest sponsors of donor-advised funds (DAFs) - Fidelity Investments (via Fidelity Charitable) and Vanguard (via Vanguard Charitable) - have recently restricted grants to the Southern Poverty Law Center (SPLC). The decision has raised questions about how donor-advised funds work, who controls them, and what happens when a nonprofit comes under legal scrutiny.

What is a donor-advised fund?

A donor-advised fund is a charitable giving account administered by a public charity (like Fidelity Charitable or Vanguard Charitable, though those aren't the only players in town). Here's how it works:

  • A donor contributes cash, stocks, or other assets into the fund
  • The donor receives an immediate tax deduction
  • The assets can be invested and grow tax-free
  • Over time, the donor recommends grants to specific nonprofits

The key detail: the sponsoring organization, not the donor, has final legal control over where the money goes.

Why are grants to SPLC being blocked?

The recent restrictions stem from legal and compliance concerns, not simply donor preference.

  • The SPLC has reportedly been the subject of federal investigation related to alleged financial misconduct.
  • DAF sponsors have policies that may pause or deny grants to organizations facing criminal charges or serious legal allegations.
  • These policies are tied to IRS rules requiring funds to be used for legitimate charitable purposes.

That said, the SPLC has not lost its tax-exempt status and there has been no final ruling. Fidelity Charitable has said organizations under investigation may be deemed "not eligible" for grants during this process. Vanguard Charitable similarly pauses grants when charges raise questions about a nonprofit's compliance with tax-exempt rules. In short, this is a risk-management and regulatory-compliance decision from the firms involved.

Why this matters: the limits of donor control

This situation highlights a core tension in donor-advised funds. Donors expect flexibility and control over giving. But legally, they only make recommendations, not final decisions. When a sponsoring organization determines a grant could violate rules (internal or external), or create legal exposure, it can simply decline the donation, even if the donor strongly supports the cause.

Are there alternatives?

Yes. If donors want more control or fewer restrictions, several options exist:

1. Direct giving

  • Donate straight to a nonprofit
  • No intermediary approval
  • Downside: less flexibility in timing your tax deductions

2. Private foundations

  • Fully controlled by the donor or family
  • Greater autonomy over grantmaking
  • More complex, can be expensive, and heavily regulated

3. Other DAF sponsors

  • Different DAF providers may apply policies differently, though large sponsors often follow similar compliance standards.
  • You have options for where your money is held - and right now, tens of billions of dollars sit in DAFs at Vanguard and Fidelity alone.

4. Fiscal sponsorship or intermediaries

  • Donations routed through another qualified nonprofit
  • Sometimes offers flexibility, but is still subject to oversight

DAFs are powerful, tax-efficient giving tools, but they are ultimately controlled by the sponsoring charity. The restrictions on grants to the SPLC highlight how donor-advised funds actually operate and raise broader questions about what may be yet to come in an increasingly politicized environment - including whether such actions disproportionately affect education, history, and civil rights-oriented nonprofits.

For donors, the takeaway is simple: if absolute control over where your money goes is essential, a donor-advised fund may not always provide it - especially in moments of controversy or legal uncertainty.

Questions about your options for philanthropic giving? Let's connect.