Donor Advised Funds: Time to Promote Those Rainy-Day Funds

Today we welcome Stelter’s Senior Gift Planning Consultant, Lynn M. Gaumer, J.D., to get her thoughts on the current state of donor advised funds. 

Across the country, donor advised fund administrators are seeing unprecedented levels of grant recommendations. Many donors transfer cash and securities to these funds every year—sometimes keeping these assets in the charitable savings account for a rainy day.  

Well, guess what? It’s raining. Hard. And your donors are taking note. Let’s look at what is happening right now in the DAF world.

Fidelity Charitable reports over $4.7 billion in outgoing grants have been made in 2020, including over $414 million for COVID-19 relief.

Schwab Charitable reports more than $3.3 billion in outgoing grants during fiscal year 2020—an all-time high. This represents a 24% increase in grant volume.

National Philanthropic Trust reports that the number of grants made rose a record-breaking 54% to $2.11 billion, with a 26% increase in the number of charities, in fiscal year 2020.

And don’t forget about the #HalfMyDAF movement, which has spurred $4.7 million in gifts. This social media effort encourages people to give more from their donor advised funds in response to the coronavirus pandemic. David and Jennifer Risher started the #HalfMyDAF movement and have offered to give up to $1.4 million to donors’ favorite nonprofits. But the clock is winding down: The contributions will only be made if donors pledge to empty half of their donor-advised-fund account and direct that money to charity by September 30.

If you haven’t started asking for gifts from donor advised funds, you need to implement a marketing strategy ASAP. Not sure where to start? Here are some next steps.

RECOGNIZE THE DAF DONOR

During a recent Stelter webinar, attorney and author Claire Axelrad, a national voice on philanthropy, stated that DAF donors possess six common characteristics:

• Prioritize giving
• Desire to make an impact today
• Make larger-than-average gifts
• Have a high rate of volunteerism
• Think long-term
• Want to involve family members in giving decisions

The Fidelity 2020 Giving Report provides even greater insight into the DAF donor:

• The average age when an account is opened is 55.
• The average age when a gift is made is 62.
• DAF donors span the spectrum of wealth. Most giving accounts (54%) have balances under $25,000. Just 9% have a balance of more than $250,000.
• Millennials were responsible for 13% of all new giving accounts established in 2019.

LET YOUR DONORS KNOW YOU ACCEPT GIFTS FROM DAFS

According to Fidelity, three-quarters of grant dollars are distributed within five years. Make sure your donors know that your organization accepts grants or recurring grants. Donor advised funds should be promoted through a multichannel marketing strategy that consists of print, digital, social media and web.

GO THE BENEFICIARY ROUTE

Sixty percent of grant recommendations are designated “where needed most.” Donor advised funds have succession plans. When creating a DAF, donors may select a succession plan to guide the sponsoring organization on how to make grants after their lifetime. One option is to name your organization as a beneficiary to receive a dollar amount or a percentage of the remaining assets.

MAKE IT EASY

Think digital. Many nonprofits have a “Give Now” or “Donate Now” button on their websites. Traditionally, these are convenient ways for a donor to make a quick donation via debit or credit card. Given the explosion of donor advised funds, consider a third option for donors to recommend grants from their DAF accounts. You can also include a DAF Direct widget on your website. In fact, according to Fidelity, 93% of donors recommend grants from their DAF accounts online. A non-digital option is language on your reply cards such as “I would like to make a grant from my donor advised fund.”

PROPERLY ACKNOWLEDGE THE DAF GIFT

Chances are your organization has already received a grant from a donor advised fund. Did you send a tax receipt? How did you thank the donor? Who is the donor—the account owner or the sponsoring organization? This can get a little tricky.

Many organizations feel they need to send a tax receipt or acknowledgment letter to the sponsoring organization. This is not necessary and potentially confusing. It is very important, however, that you properly thank the person who recommended the grant. This is your chance for good stewardship. According to Fidelity, 88% of donors include their names and addresses on grants, so it should be easy to determine where to send a personal letter.

There is no magic language, but the acknowledgment should be similar to the following sample language:

Thank you for recommending that we receive a generous grant of $XXXX through your donor advised fund at XYZ Community Foundation. We received the grant on (date), and the funds will make an impact on [your mission].

Thank you again for caring so deeply about the mission of ABC Charitable Organization. We are grateful for your support.

Make sure your marketing calendar incorporates a strategic plan to promote the distribution of these funds to your organization.

Donor advised funds are the fastest-growing source of philanthropy, now accounting for more than $121 billion in total charitable assets—possibly passing charitable gift annuities as the third most common gift type behind bequests and beneficiary designations. If you are not actively including information about donor advised funds in your promotional material, you are likely missing out on some gifts.

For more information on how to reach out to your donors and promote DAFs, watch Claire Axelrad’s hit webinar here.