Your donor database has people with DAFs in it already

Posted on by Helen Brown

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.
  • 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:

A Helen Brown Group Company