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

“[DAFs] have gotten incredibly popular in the last five to eight years, and the speed they’re growing has overtaken [the speed in which] private foundations [are growing],” says Eileen Heisman, president and CEO of National Philanthropic Trust.

How popular have they gotten? According to National Philanthropic Trust’s 2013 Donor-Advised Fund Report:

• The number of DAF accounts increased by 7 percent in 2012 over 2011;
• DAF assets grew 18.9 percent in 2012 over 2011, exceeding $45 billion in total assets;
• DAF accounts in 2012 totalled more than $13.7 billion;
• More than $8.6 billion was granted in 2012 from DAFs;
• The average DAF account size reached nearly $225,000 in 2012, up 11.2 percent from 2011;
• Payout rates from DAFs exceeded 16 percent from 2007 through 2012.

And according to Fidelity Charitable’s 2014 Giving Report:

• The average number of grants per giving account continued to rise, up from seven in 2012 to eight grants per year in 2013;
• The average grant size rose 6 percent from 2012 to 2013 to more than $4,000;
• The majority of incoming contributions are fully expended as grants within a decade — 91 percent of contributions to DAFs made between 1996 and 2000 were granted to charities by the end of 2010.

The pros
From a fundraising perspective, there are numerous pros to DAFs. For starters, donors who open DAFs are loyal givers.

“We hear it from our donors, and we see it through their actions — we survey our donors every year — 64 percent of them tell us that they give more once they open a donor-advised fund, and we tie that back to the fact that they become more strategic in their giving and their commitment to charitable giving,” Danforth says.

She adds that for donors who have longer-term giving interests, “the ability to invest the dollars over time is a benefit because that money grows tax-free and enables them to fund things on a larger-scale basis than they otherwise might have if they hadn’t dedicated the dollars.”