Donor-Advised Funds: The Source Fundraisers Can't Afford to Ignore

Over the past few years, the fundraising sector has been debating the merits of donor-advised funds (DAFs). Proponents point out that DAF donors are dedicated to philanthropy and able to easily release their funds to the nonprofit organizations they support, while opponents believe DAFs encourage donors to delay giving and make it more difficult to build relationships.

No matter your take, DAFs are a funding source fundraisers of all sizes and missions cannot afford to ignore. According to both Fidelity Charitable’s 2014 Giving Report and the National Philanthropic Trust’s 2013 Donor-Advised Fund Report, DAFs are on the rise, growing in popularity and dollars dispersed to the charitable sector.

They aren’t going away anytime soon, which means every development office must have a strategy in place to engage with DAF donors.

The stats
DAFs are not new. They have been around for more than two decades and have come a long way since their inception, according to Amy Danforth, president of Fidelity Charitable, the nonprofit arm of Fidelity Investments that houses DAFs.

“Donor-advised funds are a planned-giving vehicle that enable donors of more modest means all the way to the highest-net-worth donors to, as we call it, give, grow and grant,” she says.

They are, essentially, charitable savings accounts. Donors can open accounts, get their tax breaks the moment they add money and then invest that money through the DAF provider — fellow nonprofits such as Fidelity Charitable, National Philanthropic Trust, Schwab Charitable and the Greater Kansas City Community Foundation — to “grow their philanthropic dollars and increase their impact over time,” as Danforth says.

Donors then can grant that money from their DAFs to the nonprofit organizations of their choosing at any time.

With today’s donors expecting more say in where their philanthropic dollars go and demanding more proof of impact, DAFs have become attractive to help set aside charitable dollars while donors become more strategic with where they dedicate their philanthropic money.