Your Nonprofit Guide to Donor Advised Funds
Donor Advised Funds (DAFs) have become an instrument for philanthropic giving, transforming the ways in which both people and institutions support charitable causes. We'll explore the nuances of DAFs, their significance, who utilizes them, and the difficulties organizations encounter in realizing their full potential. We'll also look at practical methods for locating and interacting with DAF donors. We'll also discuss how integrated platforms, like Kindest and Chariot, are optimizing the process to make it easier for donors and NGOs to work together.
What is a Donor Advised Fund?
A donor advised fund (DAF) is a specialized financial account used for charitable giving. It allows individuals to make a charitable contribution, receive an immediate tax deduction and then make grants to 501(c)(3) organizations over time.
The money in a DAF can also grow tax free and be donated at any time in the future - there are no time limits or distribution requirements for DAFs today.
Anyone can set up a DAF - either through companies that provide banking services (Fidelity, Vanguard, Schwab, etc.), newer startups dedicated to DAFs (Daffy, Charityvest, Groundswell, etc.) or often through local community foundations.
There is currently $234 Billion sitting in DAF accounts ready to be donated - because they have to be.
Why do DAFs matter?
DAFs are huge and make up nearly 10% of annual giving in the US.
Annual DAF giving is now nearly $46 Billion.
DAFs are the fastest growing vehicle in philanthropy.
DAF giving is growing 28% in both 2020 and 2021. The number of DAF accounts has nearly tripled over the last four years.
DAF gifts are MUCH larger than other forms of giving.
The average donation from a DAF is nearly $5k.
DAFs are a reliable source of funding during economic uncertainty.
The money in DAF accounts has already been set aside for charity and can’t be withdrawn for other purposes, so people’s propensity to donate from a DAF is not as affected by financial pressure.
Who uses DAFs?
Not just the ultra-wealthy.
While the average DAF balance is $183K, 56% of accounts are more less than $25K. (Read more common DAF myths busted here.)
Not only much older people.
The average age when someone opens a DAF is 55, but the fastest-growing group is younger than 40. (Read more common DAF myths busted here.)
More active and engaged donors.
People with DAFs are 63% more likely to donate, contribute more than 11 grants per year, on average, and have 24x larger average donation size.
Expecting an easy, digital process.
40% of DAF donors at leading digital fundraising charity first donated with a credit card on their website. (According to private data shared from a global leader in online fundraising with Chariot.) It's nearly universal that DAF donors also donate with credit card. (According to internal analysis of DAF holder feedback.) 96% of DAF holders initiate their grants digitally.
What's The Issue With DAFs?
Historically, DAF giving has been far below its potential because high-value donors can have a poor experience & staff can be overburdened. Without a solution like Kindest's integration with Chariot, DAF fundraising has been limited for many organizations because:
DAF giving has been too disconnected from broader fundraising efforts.
DAF giving can’t happen at the point of inspiration - a link from a friend, an instagram ad or an event.
DAF gifts, which are 24x as large, have been less likely from new donors.
The most common reason to donate to a new org for a donation is because someone you know asks you. However, there’s no way for a new donor to deploy DAF dollars through peer-to-peer platforms, in donation forms or at events where friends ask.
It’s been difficult to know who has a DAF & steward them accordingly.
New DAF donors typically give with a credit card first - leaving organizations in the dark as to who in their donor file has a DAF. DAF gifts often arrive without clear identifying details and never with email contact information. Even if a mailing address is included, thank you's are weeks delayed. No one wants their highest potential donors to have a poor donor experience.
DAF giving has been a cumbersome process, which limits conversion.
The typical DAF giving process without Chariot takes 15 steps, over 3 minutes and multiple redirects to complete. (According to internal analysis of existing DAF donation processes.)
Managing DAF gifts has required considerable staff effort.
It can take weeks for checks to arrive at organizations, often without identifying details that create significant gift processing burden. Fundraisers often have to follow up with major donors to make sure DAF grants are completed.
Efforts to engage donors have been structurally hampered.
The most effective way to increase DAF donations is to educate donors about DAFs and how to use them. But it's significantly less effective when explaining the DAF process is complex and so much time & effort is required to actually complete DAF gifts
Organizations that don’t address these challenges could be left behind.
People follow the paths of least resistance and DAF donors will make more DAF donations where it’s easiest.
How Do You Find DAF Donors?
Finding DAF donors is really all about making it easier for DAF donors to find you.
1. Make it easier for donors to give with their DAF.
Otherwise they'll most likely give a much smaller gift with their credit card, or worse, not give.
2. Increase awareness that you're able to accept DAF gifts.
Market your capabilities to your donors and make the information prominent on your website & in communications.
3. Ask your donors about their DAFs.
Don't be afraid to ask your donors in a survey or directly in 1x1 conversations if they have a DAF set up.
4. Include DAF giving options wherever you acquire new donors.
In your donation forms, in your peer-to-peer fundraising pages and at live events. DAF giving needs to be everywhere.
5. Most importantly... get started with Chariot & Kindest.
