March is Prospect Development Pride month. Here at The Helen Brown Group, we celebrate each year with Intelligent Edge blog posts focused on what we love about our work and on advocating for our industry. We haven’t historically cross-pollinated in the DAFinitively Speaking blog, but there’s no reason why we shouldn’t!
Donor Advised Funds represent an evolving area within our industry and, as such, Prospect Development professionals, need to be fully versed in what they are, why they are important, and how we should think about them in our work.
So, here are the top 5 things that I think Prospect Development professionals should love about DAFs:
1. The DAF landscape is in growth mode right now.
While the first DAF might have been created more than 100 years ago, DAF giving remained relatively unknown until just a few years ago.
Tracking longitudinal data from the National Philanthropic Trust (NPT), we know that the number of DAF accounts in the U.S. has grown more than 106% in the past 5 years! As of 2023 (the most recent data available), there were 1.78 million donor advised funds in the U.S.
The same NPT report found that more than $54 billion was distributed from DAFs to nonprofits in 2023. Considering that Giving USA estimated total charitable giving in the same year was $557.16 billion, this means that giving from DAFs accounts for nearly 10% of philanthropic dollars. Other estimates peg the impact of DAFs to be closer to 22% of giving by individuals in the U.S.
Whichever statistic you prefer to trust, giving via DAFs is becoming a more substantial percentage of U.S. charitable dollars. This means we are going to be encountering them more and more in our research. In fact, it was this realization that led to the creation of DAFinitive® just a few years ago.
2. DAF account holders are philanthropic
When a donor chooses to open a DAF, and more importantly, transfer money into their DAF, they are irrevocably earmarking those funds for philanthropy.
Sure, there are tax incentives for doing so. And, in fact, one explanation for the recent and rapid increase in DAF accounts is the tax code changes that occurred in 2017 which changed the standard minimum deduction.
Regardless of the reason why, having a DAF still signals a conscious decision by an individual to support the philanthropic sector.
As prospect researchers, one of our key objectives is to understand the philanthropic footprint of those whom we are researching. Where have they given? How much have they given? What can this tell us about their philanthropic interests and capacity?
With more philanthropic dollars being funneled through DAFs, researching a prospect’s DAF now needs to be part of the equation. As of today, DAFinitive® is still the only resource available that allows you to do just that!
3. DAF account holders may – or may not – have a lot of capacity
A common misnomer is that all DAF account holders have major giving potential. While historically this may have been true, one of the outcomes of the velocity of growth in this area of the sector is that many individuals who have opened an account in more recent years are not what we would typically consider a major gift prospect. Of course, that might depend on what your organization considers as a baseline for major giving.
In recent years, we have seen an influx of new DAF sponsors, many of whom have low or no minimum requirements for opening a DAF. And, many of the long-standing sponsors have chosen to lower their minimum requirements as well.
While making DAFs more accessible to everyone, it also means that a lower percentage of DAF holders have high capacity.
In addition to more traditional prospect research methods of determining a donor’s potential capacity, one of the things that you can do for DAF account holders is to check out the minimum requirements for the sponsoring organization where the DAF is being managed. If the minimum is low, it might not tell you anything helpful. But if the minimum is high – say $100,000 or even $1,000,000 – it could be a great indicator of baseline capacity!
Check out this great resource, managed and maintained by DAFinitive® to help you track minimums by various sponsors.
4. DAF account holders are more loyal than your average donor
Using the three most common metrics for measuring donor loyalty – recency, frequency and monetary (sometimes referred to as RFM), study after study is indicating that donation patterns are better individuals giving via a DAF than giving via more traditional cash-based methods. Just to highlight a few:
The first ever DAF benchmarking report, published by Chariot and K2D in 2024, found that DAF donor retention is an average of 15% higher than non-DAF donors.
Similarly, Fidelity reports that in 2023, 78% of grants went to nonprofits that the DAF had previously supported. They also reported that the average grant size from DAFs held at Fidelity was $4,625, which is likely far higher than the average gift size for cash donors at your organization.
Lastly, DAFGIving360 (affiliated with Charles Schwab) reports that in 2024 more than one third of the grants that were distributed by their DAF accounts were set up as recurring grants to a nonprofit. Check out the recurring giving statistics at your organization – I bet they are no where near that high!
5. DAFs are not just for individuals
Corporations and companies can have donor advised funds too! If your prospect research responsibilities include identifying potential corporate funders, don’t ignore the possibility DAFs as a potential giving channel.
The rationale and reasoning for a company to use a DAF does tend to be varied. Sometimes donor advised funds are affiliated with a company’s marketing and advertising efforts. Other times it is associated with a Corporate Social Responsibility (CSR) program or a company’s ESG (Environmental, Social, and Governance) efforts. And still other times DAFs are created to provide an employee benefit via matching gifts or an employee engagement effort.
Conveniently for researchers, companies frequently publish information about their corporate giving programs – including DAFs – on their websites or for public companies, you can sometimes learn about them in their SEC filings. So, researching corporate DAFs is sometimes easier than individual DAFs.
To read more about corporate DAFs, check out these two other blog posts: Corporate Philanthropy and Pledge 1% and Corporate Philanthropy, DAFs and the Pledge 1% Movement.
And now, I hope you are more informed about how to incorporate DAFs into your prospect research efforts!
Is there something you’d like us to write about in DAFinitively Speaking? Let us know at hello@dafinitive.com
