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Today is DAF Day

by: Melissa Bank Stepno, President & CEO (and Managing Director of DAFinitive)

Today, October 10, 2024, is the first ever DAF Day.

Here at HBG, we host an entirely separate blog dedicated to donor advised funds.  You can check out our DAFinitively Speaking blog here or follow DAFinitive on LinkedIn. But, given that today is DAF Day, there’s no reason not to cross-pollinate, just a little bit!

 

What is a DAF, you might ask?

DAF stands for Donor Advised Fund.

At its simplest, a DAF is an investment account that a donor can use to designate money for charitable purposes.

The vast majority of DAF donors are people, however a number of companies leverage DAFs as part of their corporate giving programs as well.

For non-profits, think of a DAF as a type of giving vehicle.  Just as a donor could send you a check via the mail, make an online contribution, or gift shares of stock, a donor could also direct funds from their DAF to your organization.

 

How does a DAF work?

Every DAF in the United States is managed by a sponsoring organization, which is a registered 501(c)3 non-profit.

The majority of sponsors are community foundations, like the Boston Foundation or Silicon Valley Community Foundation.

Sponsors can also be affiliated with a large financial institution, like Fidelity or Schwab, but it will always be under a separate non-profit umbrella.

Lastly, some single-issue non-profit organizations also serve as DAF sponsors.  You will see this with organizations like Jewish Community Foundations, Catholic Charities, some advocacy organizations, or even large universities.

When a donor makes a gift to a DAF, they are really making a gift to the sponsoring organization and designating their gift to be held in the DAF.  At that point in time, the funds become the fiduciary responsibility of the sponsoring organization, not the donor.  And, the donor is eligible to receive a tax deduction because, after all, they have made a bona fide gift to a non-profit organization.

While the money sits in a DAF, most sponsors offer investment options so that the money can grow over time, just like in a savings account or mutual fund.

The only way that funds in a DAF can be used or spent is for charitable purposes.  So, at their leisure, the donor can direct (or advise!) the sponsor to make a distribution from their DAF to any non-profit of their choosing.

 

So, what is DAF Day?

Ultimately, DAF Day is a marketing effort to activate DAF advisors to make distributions from their DAFs to non-profit organizations, today.  As of the writing of this post, over 1,000 non-profit organizations, 5 sponsor organizations and 20 technology partners have joined the movement.

Marketing efforts like this are not a new concept in philanthropy.  Combining a sense of community, rallying around a cause and creating a sense of urgency is a proven strategy – usually under the more generic title of a Giving Day.

As an example, Giving Tuesday was launched in 2012 to mobilize philanthropic activity on the Tuesday after Thanksgiving.  In 2022 alone, Giving Tuesday sparked $3.1 billion in giving.

According to the Annual Giving Network, “nearly 90% of colleges and universities report that giving days are increasingly important part of their annual giving program.”  While most higher education institutions tend to hold their Giving Days in the spring, dates vary, frequently to be significant to a particular institution’s events or traditions.

And, even before the phrase “Giving Day” existed, the first known ‘day of giving’ was likely the first Muscular Dystrophy Association (MDA) Telethon, which dates to the 1950s!  Hosted for decades by Jerry Lewis, it became known to many as the “Jerry Lewis Telethon,” and aired live on TV.

 

Why launch DAF Day now?

The popularity of donor advised funds has exploded in recent years.

There are roughly 10x as many DAFs today than there were a mere decade ago.

According to Giving USA, giving from DAFs accounts for nearly a quarter of all philanthropic donations.

And, one of the first-ever benchmarking studies on DAF donor behavior showed that both retention and lifetime value of donors who give through their DAFs are better than the typical one-time donor.

Yet, DAFs often get a bad rap as a place where people park money without distributing it to non-profits.

While this might be true in the minority of cases, DAF account holders are generally philanthropic individuals and the velocity of money moving in/out of DAFs is far greater than what we typically see at private foundations.

However, there’s always more than can be done to spark someone’s passion to support the charitable community.  And, research suggests that as of last year, there was more than $234 billion sitting in DAFs, earmarked for philanthropy, and waiting to be distributed.

 

So, why not now?

 

However, the proof is always in the pudding, so to speak.  Just as I do each year with so many other reports, I’ll be most interested to see the analysis after DAF Day has concluded.  If successful, I suspect that DAF Day will become an annual tradition, just like the other Giving Days that proceeded it.

 

To learn more about DAFs, check out:

 

Image Credit: “Dollar Heart” by cmpalmer is licensed under CC BY-SA 2.0.

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Your donor database has people with DAFs in it already

Chances are good that you’ve read the stats already and you know all this, but just in case this topic is new to you:

  • At the moment, there are around 2 million donor advised funds in the US alone*.
  • The number of DAFs is growing at a rate of about three percent per year, and the compound rate of growth in numbers from 2018 through 2022 is 22.6 percent.
  • The amount of money DAFs hold is astounding: $229 billion in 2022 (the most recent year we have stats for). If you look at past trends and factor in the current stock market trends, we can estimate that assets at the moment are probably around $250 billion.
  • DAFs are giving at a rate of 22.5 percent annually (as opposed to foundations, which give the 5% they’re required to and little more). In the UK, DAFs are giving closer to 25% of assets annually.
  • The average DAF size across all sponsor types (National, Community Foundation, and Single-issue) is $117,466. At community foundations, the average is $547,648. (That’s right – half a million dollars!)

And you know this, too: people are giving money to DAFs rather than directly to nonprofits. And for those of us in the nonprofit sector, that’s frustrating.

Contributions to DAFs in 2022 totaled $85.53 billion, an all-time high, and a 9 percent year-over-year increase. If total giving in the USA – including individuals, companies, foundations, and bequests was $499.33 billion in 2022, that means that giving by people to DAFs was 17% of all giving in 2022.

Not only that, but the compound annual growth rate for contributions to DAFs from 2018 to 2022 was nearly 24%. That’s some astronomical growth there.

Okay, so we know all the stats. What do we do about it?

How do we find those donors and encourage them to direct their DAF grants to our nonprofits? Why does it seem so opaque and so hard? Why don’t they just make donations directly to the nonprofits that need the money now instead of giving to an intermediary?

There are lots of good reasons for frustration and complaint, but in some cases we’re just not meeting donors where they’re at. A DAF may actually be someone’s best option for giving, and we need to understand those reasons so we can either change what we’re doing or be (somewhat? more?) satisfied with the situation that exists.

Why do donors give to a DAF rather than directly to a nonprofit?

  • They’ve had a major financial event and need to get tax relief, fast. Putting money in a DAF solves their now tax problem and gives them a breather while they decide how and where to give. They may not want to give the whole amount to one nonprofit, so parking the money makes practical sense.
  • They want to give an asset that their chosen nonprofit doesn’t take. This could be crypto, restricted stock, part of a privately-held company, a life-insurance policy, or another complicated/non-liquid asset that most small-to-medium nonprofits just don’t have the financial ability or know-how to deal with.
  • They’ve got a financial advisor that they meet with at least once a year selling them on the concept of opening a DAF.
  • People in a friend group or extended family want to pool their giving toward a certain cause, or in memory of someone dear.
  • A family wants to create a funded resource to teach the next generation about philanthropy.

So there are lots of really good reasons for people to start a DAF that have nothing to do with wanting to be purposefully opaque or hoarding money that “should” go directly to nonprofits instead.

It’s not all cases of course, but why not go forward on the assumption that the majority of DAF donors have their own very good reasons for having a DAF. We can lament the situation and/or see it as a blockade, or we can take it as the reality and opportunity that it is and plow forward.

There are things you can do to find and engage DAF donors.

In fact, chances are very good that there are donors already giving to your nonprofit via check or credit card who also have DAFs. They just haven’t given from that account (yet?).

So: what can you do about it? Here are some practical tips:

  • Educate yourself and your fundraising team (especially the gift entry folks) on what DAFs are. The more you know, the better prepared you can be for conversations with donors. There are a myriad of vendors and professional association webinars out there to get you up to speed.
  • If someone makes a gift to your nonprofit via their DAF, flag the donor/donation in your database (or keep a spreadsheet if that’s not an option). Review the list of flagged records monthly for wealth screening or research.
  • Thank the donor specially for their gift. This person has an account specifically set aside for philanthropy, and they have chosen your nonprofit as a recipient. A customized acknowledgement of their generosity is good stewardship, and good stewardship retains donors. (What to do if the sponsor didn’t include that information? Contact the sponsor and ask them who made the gift! Oftentimes the gift isn’t actually anonymous, it’s simply that the generated form with the check just didn’t include the information.)
  • Subscribe to DAFinitive® to see if donors in your database have a DAF. Find new prospects by interest area, geography, and past donations. Get on the waiting list for DAFinitive® screenings when they become available.
  • Pay special attention to Community Foundation DAF holders, especially if your nonprofit serves that sponsor’s local community. These funds hold more money on average and CF DAF donors care about their local community.
  • If you’re a nonprofit that serves a local population, make friends with your local community foundation’s officers. The more they know about your organization’s work, the better prepared they can be to recommend your nonprofit to their DAF donors whose philanthropic goals match your mission.
  • Make it easy for DAF donors to give to your nonprofit. Get a widget for your website (check out Chariot or GiveButter) to give donors one-stop ease in giving via their DAF. (And while you’re at it, you can make it easier for donors to give crypto, too, via The Giving Block widget).
  • Specifically ask for DAF donations on your website and in your communications with donors.
  • Check out our free resources to learn more about donor advised funds and how to find them.

&     &     &     &     &     &     &     &     &     &     &     &     &     &     &     &     &     &     &     &     &     &     &     &

*The US is by no means alone; DAFs exist world-wide in many countries including Canada, Australia, the United Kingdom, France, Singapore, Italy, and more.

Why do you care about DAFs being international? Have you ever had to wade through the hassle to receive a cash donation from outside of your country? What about stock? Or more complicated assets?

If you’re working at a nonprofit that has an international constituency, DAFs are the most fluid way for international donors to give to your organization, bar none. It’s the sponsor’s responsibility to take care of all of the vetting and paperwork, and on the nonprofit’s end you don’t have to worry about Gift Aid or charitable receipts. It’s already done.

For example, let’s take a quick look at UK donor advised funds:

In 2022, total estimated charitable giving in the United Kingdom was £12.7 billion, according to the CAF UK Giving Report. Contributions to UK donor advised funds in 2022 totaled £868.5 million, so that means that 7 per cent of total individual giving in the UK went to a DAF.

What about Canada?

According to a recent study by KCI and CAGP Foundation, total assets held in Canadian DAFs at the end of 2021 were $8.5 billion. In 2021, the mean average size of a DAF was $406,000. The report estimated that 10% of DAFs in Canada hold assets in excess of $1 million. (yes, you read that correctly. wow!)

And so…

DAFs are everywhere, not just in the US, and they’re growing at a rate that looks like the aftereffects of the Big Bang. Chances are good that you already have DAF donors in your database; I hope that these tips help you connect with them soon.

More reading:

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DAF assumption surprises

Post boxes. Photo (c) 2021 Kenneth Kahn

Working on DAFinitive™ over the past couple of years I’ve learned a lot of interesting things about donor advised funds. Some of my previously-held assumptions have been blown apart, and I’ve been surprised by things that I didn’t know would turn out to be factors in understanding DAF sponsors and donors.

For example:

One assumption was that people make anonymous gifts through DAFs because they want to give to causes that might conflict with their publicly-professed political or personal beliefs or because they don’t want to continue to be contacted by the nonprofit if it was just a one-off gift to a cause that’s really not a priority for them.

But digging into that question, I learned something surprising. Conservative think tank, The American Enterprise Institute (AEI), was given access to anonymous donation data from 2019 and 2020 from the five largest DAF sponsors: Fidelity Charitable, National Philanthropic Trust, Schwab Charitable, Silicon Valley Community Foundation, and Vanguard Charitable. Like a lot of us, AEI was interested in learning where anonymous DAF donations were actually going.

In their white paper “Anonymous Giving Through Donor Advised Funds” (January 2022) AEI reported that, of the 2,256,033 total grants made in 2020 from donors through the big five sponsors, only 4.3% of those gifts were given anonymously.

The top 10 recipients of anonymous DAF gifts in that year were:

  • Doctors Without Borders
  • Salvation Army
  • Feeding America
  • American Red Cross
  • St. Jude Children’s Research Hospital
  • American Civil Liberties Union Foundation
  • Planned Parenthood
  • Wikimedia Foundation
  • Samaritan’s Purse
  • Southern Poverty Law Center

Not all of them, certainly, but most of the nonprofits on that list of recipients wouldn’t raise much of an eyebrow in mixed political company. Okay, so how do anonymous priorities compare to the overall top ten list of nonprofit recipients for 2020? Are these anonymous-gift recipients the types of nonprofits that donors wouldn’t consider a priority? Check them out:

  • Doctors Without Borders
  • Salvation Army
  • Cru
  • St. Jude Children’s Research Hospital
  • American Red Cross
  • Feeding America
  • Planned Parenthood
  • United Way
  • American Civil Liberties Union Foundation
  • Samaritan’s Purse

It’s pretty much the same cast of nonprofits of good character. So maybe anonymous donors and attributed donors are the same, the former maybe just want the nonprofit’s work, and not their donation, to be the thing that shines? A caveat, though…

That said, one of the underlying issues may the use of the word “anonymous” here. While the DAF sponsor forwarding along the gift from “The R & C Donor Advised Fund” may not technically consider that donation to be anonymous, for all intents and purposes from the nonprofit’s point of view, it might as well be – unless they happen to know who R & C are.

A question of conversion

Another assumption based on lots of reporting is that people are putting money into DAFs instead of giving it directly to nonprofits.

And the reality is that they might be, but perhaps not how or why we’ve been thinking they are. Here’s something interesting to consider:

Fidelity Charitable reported that they received $331 million in digital asset deposits (cryptocurrency) last year to donor-advised funds, which was almost twelve times the amount it received in 2020 ($28 million). Bitcoin accounted for 88% of crypto donations, followed by Ether at 11%.

All told, Fidelity converted $2 billion worth of non-publicly traded assets, including crypto, private stock, restricted stock, and limited partnership interests for deposit into peoples’ donor advised funds.

Listen up

Sixty-six percent of donations to Fidelity Charitable last year were non-cash donations. Allow me to repeat that a little louder for the folks squinting at the tiny print: 66% of gifts to Fidelity Charitable in 2021 were non-cash donations.

Most nonprofits, including some of the larger universities and medical centers, still don’t accept cryptocurrency donations. Or private stock, restricted stock, or limited partnership interests. So two things may be true here:

  1. Donors who want to gift crypto and non-publicly traded assets to nonprofits have to use some sort of conversion middleman, so they’re using Fidelity and the other big sponsors like they’re a Travelex booth. (If you’ve traveled internationally then you know the place I mean: it’s that kiosk you see by the exit through customs where you can convert your cash into the local currency for a hefty fee). Maybe large DAF sponsors are just the most convenient way for donors to make gifts because they take what donors want to give, they’ll take it in huge chunks, and they’ll do it tax efficiently.
  1. Maybe now’s a good time for your nonprofit to look into accepting crypto and cut out the Travelex middleman. There’s a whole lot of opportunity out there.

There’s lots more

Nearly every day I’m finding out something about donor advised funds that increases my knowledge about them – how and why they’re used, and by whom. DAFs are the fastest growing charitable vehicle in the US right now, and not just by a little, so they’re worth our paying attention to.

Want to learn more about DAOs, DAFs, Decentralization, Giving Circles, Cryptos & The Future of Giving? Join me and a host of experts for the PyroTalks Nanoconference on March 29th at 3:00pm-4:30pm GMT / 10am-11:30pm EST. It’s a screamer deal at £25 for the 90-minute fast-paced conference. Learn more and register here: https://www.pyrotalks.com/nano-conference/p/decentralization-cryptos-and-the-future-of-giving

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A DAFinitive answer

It’s Research Pride Month, and boy oh boy do we have a celebration going on at the Helen Brown Group! If you have no interest in donor advised funds, you might want to skip today’s article and wait for next week.

But if you are, let me tell you what the party’s all about here at HBG:

A couple of years ago I got really frustrated by the lack of information about DAFs.*

It was a constant struggle for me and my team to find out:

  • Who are the people with DAF accounts?
  • When we’re researching a potential donor, how can we find out if they have a DAF so we can let our client know?
  • Why isn’t it possible to find DAFs based on their philanthropic interests? Or their geography?

So a few members of the HBG team and I began building a database of donor advised funds to use as a lookup when we did research for our clients.

And it started to grow. And grow. Ten thousand funds. Twenty thousand funds. Forty thousand funds. Fif…holy cow!

About a year ago it dawned on me that this would be helpful to researchers everywhere. Not just us at HBG, but a research resource created by prospect researchers for prospect researchers. Or for anybody, really, who is interested in DAFs and their donors.

It’s finally here and we’re ready – and super excited – to show it off to you. It’s called DAFinitive™.

What can you do here? Well, check out the search page:

  • The keyword box searches the entire database. That includes every field you see here as well as additional fields you don’t, like notes we might have found about the fund.
  • Or, you can search by the last name and first name of a donor or fund administrator.
  • Want to search for a list of DAFs in Florida that have an interest in animals? You can do that.

Is every DAF in DAFinitive™? Absolutely not, but we do have about 5% of the roughly one million DAFs estimated to be in existence, and we’re adding at least 1,000 funds every week.

We’re elbow-grease searching for those tough-to-find funds, too (you know the ones I mean…the ones held by sponsors that rhyme with Schwidelity and Billicon Salley that don’t list their funds anywhere aargh). Fair warning – if you’re thinking DAFinitive™ is going to solve your Fidelity-Charitable-is-a-black-box problem, I’m sorry, we’re not there yet. We do have a few of those funds – and growing, though.

That said, we’re happily crowdsourcing from everyone in the research community (hint hint!) who sends us a fund name and a URL to confirm it so if you want to see a fund in DAFinitive™, send it along!

Do we know how much is in each fund? No, but much to our surprise we did find a couple of sponsors that actually did list how much (or a range of how much) was in each fund account – that was a yahoo moment! And you might be as interested as we were to learn that the average fund size held in those commercial sponsors (like Fidelity and Schwab) is lower – by a lot – than in community or single-issue sponsors. (Check out the facts and figures below).

If you want to know more about DAFinitive™, there are lots more FAQs on the front page of the site (www.DAFinitive.com) – take a look to learn more.

Thanks for sharing my excitement! A heartfelt and massive thank you to the absolutely amazing beta testers who gave us honest and helpful feedback to bring DAFinitive™ to the launch pad.

Happy Research Pride Month!

*Not familiar with DAFs? Here’s a bit more information for you!

DAFs are philanthropic bank accounts that just about anyone can set up with one of the 976 sponsoring organizations in the US. Sponsors are regional community foundations, the nonprofit arm of a for-profit financial institution (also known as “commercial sponsors” or “national sponsors”) or a single-issue sponsor (like a university, religious-based community fund, etc.).

The donor gets a tax deduction when they deposit money into the account, and then they advise the sponsor to make donations from that account when they’re ready.

Lots of times information about those funds (and particularly about the donors) sits in a big black box. Many of the commercial DAF sponsors don’t publish anything about the funds they hold, and it’s hard for nonprofits to find out if someone has a DAF unless they make a gift. (And sometimes even then the nonprofit doesn’t find out who directed the gift if the sponsor doesn’t include that information with the donation!)

Want to know more about DAFs? Giving USA just released a fascinating report that is a must-read. Here are some key points from the report:

  • Many DAF accounts have multiple donors or administrators that make gifts from the fund. Vanguard Charitable reported in 2016 that 61 percent of their funds had both male and female donor/administrators.
  • DAFs provide much less of an administrative headache than setting up a personal or family foundation, and in recent years an increasing number of foundations have rolled their assets into DAFs.

Don’t miss the 2021 DAF Report, either, from the National Philanthropic Trust (NPT). 2021 marked their eleventh annual report about DAFs, and this edition holds some fascinating information. For example:

  • “Grants from DAFs to qualified charities totaled an estimated $34.67 billion, representing a 27.0 percent increase compared to 2019 and a new high-water mark. This is the highest DAF grant increase in a decade.”
  • In 2006 there were 160,000 donor advised funds in the United States with assets of about $31 billion. NPT reports that as of 2021 that number now stands at over 1 million funds with assets of nearly $160 billion. The majority of them are held with commercial sponsors (approximately 864,099), with another estimated 84,334 held at community foundations and 56,666 at single-issue charities.
  • The average size of a DAF account across all sponsor types is $159,019 but that average varies quite a bit between them. The average amount in a commercial-sponsor DAF is $115,901; in a community foundation it’s $543,553, and in a single-issue sponsor is $244,238.

 

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