Why have the controls of the private foundation vehicle? Mellinger says private foundations have these features not available in donor-advised funds. Foundation donors can expand grant making beyond IRS approved charities, they can also engage their families in the philanthropy and hire the staff.

Donors in private foundations, he adds, can champion their own causes, viewpoints or philosophies, Mellinger notes. But with donor-advised funds, less is more, advocates say.

Kim Wright-Violoich, president of Schwab Charitable Giving, agrees that control is sometimes important, but she says that's not the only factor that goes into deciding on a charitable vehicle.

"It's also an issue of control versus complexity," she says. Private foundations, she adds, provide more control but they also require more administrative oversight for things such as tax filing requirements. A donor-advised funds "has much fewer administrative burdens," Wright-Violoich says. Indeed, the donor-advised fund's staff handles all grant research and reporting. But in the private foundation, these are the responsibility of the donor.

Donor-advised funds also provide donors with anonymity, adds Sarah Libbey, president of the Fidelity Charitable Gift Fund.

Grants can be made anonymously using a donor-advised fund, while private foundation grants are matter of public record. But here again, the competing charitable vehicles offer different approaches. Vanguard's donor-advised fund will not make grants to individuals while grants are allowed to individuals under the private foundation format.

Another issue for clients to consider is cost. More administration means more expenses, meaning donor-advised funds are typically cheaper to run, says Wright-Violoich.

For example, according to Vanguard, there are no startup costs for their fund and no excise costs. Private foundation must pay excise taxes from annual net investment income. There is also no annual IRS 990-PF form for the donor-advised fund, but there is such a requirement for the private foundation, according to Vanguard.

Yet some say private foundations are becoming more affordable. Mellinger of Foundation Source says at one time donor-advised funds were clearly the cheaper alternative. Now, however, outsourcing and other economies of scale have made private foundation cost competitive with donor-advised funds.

Foundation Source, examining fees for a $1 million account, concluded that the average expenses for a private foundation were 1.43% of assets. This compared with an average of 1.40% for eight prominent donor-advised funds.
On an individual basis, however, some donor-advised funds are clearly cheaper than private foundations. Vanguard, for example, charges 0.73% of assets for its donor-advised fund. Schwab and Fidelity-which together with Vanguard hold 90% of the donor-advised fund market-were also below the private foundation expense average.