The two of us advise some of the most philanthropically motivated people in tech. These are people who genuinely want, and have the means, to make a real difference. But the current infrastructure around giving large amounts of money away is widening the gap between intention and action. 

In 2010, some of the wealthiest people in the world signed the Giving Pledge – a public commitment to donate the majority of their fortunes to charitable causes. It was heralded as a turning point for American philanthropy. But more than a decade on, follow-through looks underwhelming. 

We believe the reason for that runs deeper than any single giving vehicle. The incoming wave of philanthropists is different to the last, but they will meet the same infrastructure and incentives. 

For many, the moment of liquidity itself can be disorienting. The stakes feel enormous while the philanthropic landscape feels overwhelming. Lawyers, financial advisors, and colleagues all have opinions. Some would-be donors retreat back into work and let the moment pass. Others give to the first credible organisation that shows up with a compelling pitch. And the infrastructure most donors encounter at that moment is not designed to help them do better.

The answer most of these newly wealthy philanthropists will arrive at, the answer the financial industry is already prepared to offer, is a donor-advised fund (DAF). The mechanics of a DAF are relatively simple: open an account, transfer your pre-IPO equity before the tax window closes, take the deduction, and punt the decision on where to give until later. Later can mean 12 months, 12 years, or never, and the system’s incentives quietly favor the last option. Opening a DAF feels like the responsible move and, in many ways, it is. But it also means joining a system that, despite its good intentions, has developed a serious structural problem, one that a new wave of philanthropists could make significantly larger.

There is currently over $300 billion of philanthropic capital sitting in American DAF accounts. That figure alone is striking, but the more telling number is what’s happening to it: only around a quarter of DAF assets are paid out in any given year, a substantial portion of which simply goes from one DAF to another without helping any beneficiaries and with no legal obligation to distribute anything at all. In 2024, the most successful charitable fundraiser in the United States was not a hospital, a food bank, or an international relief organization. It was Fidelity Charitable, a DAF sponsor that took in nearly $16 billion in contributions. Eleven of America’s top twenty fundraising “charities” are DAF sponsors. The money is piling into DAFs but it is not moving out.

There’s no point in getting mad at individual donors and DAF providers: they’re only doing what they’re incentivized to do. DAF providers typically collect fees tied to assets under management, not assets deployed, so they have no financial interest in seeing that money move out through grantmaking. Fidelity has generated more than $1 billion in revenue from running its charitable arm over the last five years. The tax deduction arrives the moment you contribute. The financial transaction is complete, the tax benefit is secured, and the question of where the money actually goes slides quietly to the bottom of the to-do list.

The rules are different for private foundations. Foundations are required to distribute at least 5 percent of their assets annually, a rule created precisely to prevent charitable vehicles from becoming indefinite tax shelters. DAFs face no equivalent requirement at all. Proposed reforms have typically pointed to a specific target: the long tail of accounts that took the tax deduction years ago and have sat dormant ever since. Applied meaningfully, addressing that tail alone could unlock billions currently doing nothing. Congress created the tax break for DAFs on the assumption that the money would reach charities. The gap between that assumption and current practice speaks for itself.

Nonprofits and philanthropic organizations have a role to play, too. The sector needs to make it easier to identify high-impact opportunities and execute grants quickly. That means DAF providers built around active grantmaking rather than asset accumulation, and independent evaluators who do the rigorous work of identifying where money makes the biggest difference across cause areas. A new generation of philanthropists is about to make consequential decisions about what to do with significant wealth. The infrastructure they inherit will, if nothing changes, gently steer them toward delay.

That doesn’t have to be the outcome. The original bargain was that society foregoes the tax revenue and charities receive the funds. It was never designed as a mechanism for financial institutions to collect fees on tax-advantaged assets in perpetuity. The system as currently exists doesn’t reliably deliver on that bargain – it needs to change.

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