Use of Donor Advised Funds (DAFs) as a way for individuals to make charitable contributions continues to rise and grants from DAFs are becoming a growing source of income for charities of all shapes and sizes. An ever-broader group of donors are embracing them to approach philanthropy in the thoughtful, strategic way once reserved only for mega-donors who could afford to set up private foundations.
A DAF is, more or less, a personal charitable savings account established by an individual with the sole purpose of supporting charities. It is administered by a charitable sponsor organization that has legal control over the donor-advised fund and is responsible for operating and maintaining it. Charitable sponsors include public charities, community foundations, and charitable funds associated with an investment firm. The donor has (1) made the decision to be philanthropic; (2) has not yet decided which charity will be the recipient of their largesse. The DAF money is sitting on the table, but has not yet been “consumed.”
First, let’s consider how much money – and whose money — is sitting on this particular table.
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Per the National Philanthropic Trust 2024 DAF Report*, total charitable assets in 2023 sat at $251.52 billion. I know, it’s a hard-to-grasp number. But even if it were half that value, it’s still a LOT of money – and it’s all been allocated by individual donors for philanthropy.
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Not as much is sitting gathering dust as you might think. Per the Report, the DAF payout rate was 24%. It’s been above 20% for every year on record – way higher than the 5% distribution rate to which most foundations adhere.
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The demographics of DAF donors may surprise you. They’re not just rich people or old people. They can be opened for as little as $5,000 at most major DAF holders. And a new company, Daffy, has no minimum at all. Plenty of Millennials have DAFs, and folks also set up distribution recommendations as recurring gifts.
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The average DAF account is $110,194. Plenty are smaller; many are larger.
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There are over 1.5 million donors who’ve set up their own DAF. This means many of your own supporters may have done this – you just don’t know it.
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Because so much money is involved, you can’t afford to put DAFs on the back burner anymore.
Nor can you passively sit by waiting for DAF grants to come to you.
That’s simply not smart.
You must get proactive!
Want an invitation to the DAF table so you can help yourself?
Now that you know how much money is at stake, and the type of donors who are involved, the next step is letting people know you want to be invited to the table when they sit down and consider their philanthropy for the year.
A funny thing about human nature is when people don’t know something (like the fact you welcome DAF gifts), they create their own subjective reality.
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They may assume you’re not set up to administer them.
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They may think it would be too much trouble for them to attempt to give to you this way. Sadly, this is too often born out. The donor receives an appeal that takes them to a donation page with levels of giving. It lets them select the amount of their gift, but often the method is limited. The donor can give by credit card, or sometimes even PayPal, Zelle, Venmo, ApplePay or their own bank account. But if they want to make a DAF gift, they must leave your website and go log into another site (e.g., Fidelity, Vanguard, Schwab, their community foundation, or whoever holds their DAF). This is where you lose people.
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If you want DAF gifts, you must make it easy and rewarding to give from a DAF.
Toot your horn!
“DAF gifts this way! DAF gifts this way!”
A survey by Freewill found 54% of respondents said they did not actively promote DAF gifts. This turned out to be a major mistake. Because the same survey found something amazing.
Those that actively promoted DAFs to their donor bases received 2.2x more dollars from DAF grants than those that did not!
You’ll be ahead of the game if you let folks know you’re in the DAF-acceptance business!
- Direct donors with DAFs to you in the same way you do donors with credit cards, PayPal, Venmo, checks cryptocurrency, stocks, IRAs and other potential repositories of philanthropic money. Giving to you via a DAF should be as easy as any other method. If the only “instant” way to respond to your appeals is via credit cards or check, you’re going to leave money on the table. So, include DAF giving on your donation landing page.
- Ideally, include a DAF widget with the instructions: “Give from my DAF.” Chariot, a DAF payments company, enables an “express checkout” experience called DAFpay within a nonprofit’s donation forms, akin to Google Pay or Apple Pay. There are others too, including DAF Direct, and dafwidget, Here are some pros and cons of each.
- Also, always include your tax ID number on your donation page. This holds true even if you don’t include a widget. Donors may need this to submit to their DAF administrator. Don’t make them search for it!
Make it sexy
DAF giving shouldn’t be hidden under a bushel, left only to those who may have already been “turned onto” DAFs by their own legal or financial advisors.
It’s your job to turn all the people on!
Anyone can have a DAF, and this may be a way for some of your supporters (those who have appreciated real property, cryptocurrency or other illiquid assets you don’t currently accept) to get greater satisfaction from their giving. Many donors won’t know they can set one up as a mechanism to make a larger gift than they might otherwise give — unless you bring it up.
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Sometimes a donor wishes to make a significant gift via a transfer of appreciated real or personal property. If you’re not set up to accept such a gift, this can be an opportunity to suggest they give it to an already-established DAF repository such as Fidelity Charitable, Charles Schwab Charitable (Dafgiving360), Vanguard Charitable and National Philanthropic Trust. Or you might steer them to a local community foundation or faith-based organization with which you have a relationship. It never hurts to make your donors their donors too. A rising tide raises all boats, and it’s good for you to establish relationships with your local funders whenever you can.
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You might also consider meeting with your local community foundation, Jewish Community Federation, or other DAF repository to see if they have any DAF donors who might consider a gift to your organization. Part of their job is making recommendations to their donors, and they may not be aware of how what you do and what their donors care about are a perfect match!
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Complete your profile on charity watchdogs like Candid/Guidestar and Charity Navigator. This is where many DAF repositories (and individual donors too) go to assure you’re legit. Search for your organization, make sure your information is current (are your 990s as recent as possible?), and that you’re happy with how you’re presenting yourself to the world. Could your mission description be improved?
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Promote DAF giving through your multichannel marketing strategy of print, digital, social media and web. Consider including testimonials from folks who’ve given to you through their DAFs. Also consider educating folks about how to set these up so they can give easily to you and all their favorite charities.
Tie DAF giving to active conversations with donors
If you’re only attempting to motivate donors via mail and email, you’re dependent on (1) them already knowing about DAFs as a giving mechanism, and (2) you having a donation mechanism that makes DAF giving super easy.
No matter how persuasive your mailed appeal, if donors can’t complete a gift without navigating through their cold, impersonal DAF repository’s website, you’re going to get a lot of “abandon cart” results.
Drive more DAF recommendations by:
- Asking donors if they have a DAF. After they agree to give, follow up with a “Thank you!!! How would you like to make this gift? Do you have a DAF?” When you tap into unused funds they’ve already aside for philanthropic purposes, it’s often like “vacation money” to people – they’ll spend more of it than if it’s coming out of their checking account.
- Including a link on your website. “Give from my donor advised fund.” This should take them to a widget on your website or, at minimum, to a set of clear instructions for making a DAF recommendation to you.
Ask all donor prospects if they have DAFs:
- Include this as a question on a donor engagement survey. “Do you have a DAF?”
- Include this as a checkbox on a donation landing page or remit piece. “I have a DAF.”
Treat DAF donors specially
They’re literally screaming at you that they value philanthropy (enough to set up their own charitable giving wallet). This means many could likely give future gifts. And larger ones.
Don’t make the all-too-common mistake of treating DAF donors as afterthoughts.
Sure, technically the donation was from “the Fund,” and not the individual, but it was the individual who provided the money and made the gift recommendation to you. So, a form letter acknowledging receipt and offering information about tax deductibility (there is none at this point since the deduction was taken at the time the gift was made to the DAF) is insufficient.
The thank you letter (preferably, preceded by a phone call the instant you’re notified of the gift) should demonstrate your over-the-moon excitement at the impact this gift will have in enacting values both you and your donor care about. Other things to do with DAF donors include:
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Welcoming them into your mid-level or major gift society – with all attendant benefits. Such “clubs” make donors feel connected and appreciated.
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Encouraging them to make future grants to you – either on an annual or monthly basis, or by including you as a death beneficiary of their fund.
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Final thoughts in times of uncertainty
If you’re worried about grant cutbacks from other funders, looking to DAFs makes a lot of sense. Primarily because there is a lot of money sitting in DAFs that’s waiting to be distributed. It can’t be withdrawn for other purposes. So, donors’ inclination to give is less affected by politics and financial pressures than with other types of giving.
This makes DAF giving a reliable source of philanthropic income during times of economic and political turmoil.
Now… go toot your horn. You may be surprised who comes running!
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