How to Target Donor Advised Fund Givers for Fundraising

When your fundraising team looks for donors, they may look to those in the community with influence, connections, and wealth. An often overlooked group includes those with donor-advised funds. Check out the information below about donor-advised funds (DAFs) and their impact on charitable organizations: 

What are Donor-Advised Funds?

New York Community Trust created the first donor-advised funds in the early 1930s. According to the Internal Revenue Service (IRS), “a donor-advised fund is a separately identified fund or account that is maintained and operated by a section 501(c)(3) organization, which is called a sponsoring organization.” The donor owns the account and grants funds to nonprofit organizations to manage. 

Donor-advised fund accounts are available at financial institutions like Schwab and Fidelity. Account managers who oversee DAFs inform members of charities to contribute to from their advised fund accounts. Any 501(c)(3) organization with a current, verifiable listing on the IRS website can receive contributions. 

These types of funding accounts have a unique benefit for nonprofit organizations. This is called what Amy Pirozzolo, Director of Marketing at Fidelity Charity, refers to as the “second power” or “sustaining power.” DAFs allow nonprofit organizations to use the allotted funding as they see fit over a long time period, including being used as a safety net on a rainy day. The funds continue to appreciate after being granted to nonprofits, allowing charities to receive more funds over time.

DAFs are sources of sustaining funds that allow nonprofits to thrive even during down fundraising times like during a recession. They also provide benefits to the donors. Some of the reasons people choose to start donor-advised funds include: 

1. The desire for a generous legacy in retirement years
2. They want to give back excess income  
3. The continuance of giving throughout retirement 
4. They have funds to give, but either don’t have the time to give or are uncertain about what organization to make their fund’s sponsoring charity 
5. The ability to give appreciated securities 
6. The opportunity to grow their donation tax-free 
7. A donor had a windfall or a high-bonus year
8. The ability to see all one’s grants and gifts in one area and better manage one’s giving 
9. There is an immediate tax reduction on the funds inside the account  
10. DAFs are easy to set up and manage 

How People Become Interested in Giving Through DAFs: Boston Healthcare for Homeless 

Michael Bradley felt an urge to give back when he received a $1,000 scholarship at age 13. Years later, he came across Boston Healthcare for Homeless, a nonprofit that provides medical, behavioral, and dental services for the homeless, and contributed. He was invited to tour the medical center and heard stories of some of the patients served. 

Inspired by Boston Healthcare for Homeless’ mission and the selflessness of the leadership, Michael decided to contribute through his donor-advised fund. Michael observes, “When you make a contribution to the donor-advised fund, you’re dealing with a system that really is built to make it possible for you to put 98% of your thinking into the giving and 2% into the execution.” 

Michael started with a small donation. After a tour of the facility and connecting with the mission of Boston Healthcare for Homeless, he decided to make the organization a sponsor for his donor-advised fund. Additionally, the appreciation of the securities in his DAF enabled him to make a larger and more impactful contribution than he could have made with cash or a check. 

Who are DAF Donors and Why They Matter

DAF donors can make a significant fundraising impact on nonprofit organizations. Who are these donors and what difference can their donor-advised funds make? Below are some observed characteristics of these donors and why their giving is important.

Characteristics of DAF donors:

1. They’re very engaged and involved. Generally, 79% of these donors volunteer. In comparison, only twenty-five percent of the general population volunteers.
2. The average age is about 65, with most donors starting their DAFs around age 55
3. They are close to or are recently retired and are thinking about the next stage in their life 
4. These donors are at their highest-income-earning years, having paid off major expenses, and they want to “give back” excess funds 
5. Most have modest amounts in their DAF funds (less than $25,000) though donors represent all income levels

DAFs have taken off in popularity relative to private foundations. A big reason for this is a donor with an advised fund can make an impact with their contributions during their lifetime. With private foundations, the donor’s name (and contributions) are designed to live on after they have passed. 

Fidelity Charitable, an organization that oversees DAF contributions for nonprofit clients, has noted the power of donor-advised funds. They have noticed that over the last 10 years, the number of grants in a donor-advised account rose from 5.8 to 10.4. Additionally, the average grant of $4000 has increased between 15-20% year over year.

Last year, Fidelity Charitable noted $582 million in grants coming from donors with advised funds. They have given $35 billion to charities over multiple years. The investment income and appreciated securities from DAFs contributed to an additional $11 billion for charities. 

How to Find and Engage DAF Donors

Donors with advised funds are audiences your fundraising team can’t ignore. While they can start with a modest $50 donation, they can become loyal, long-time supporters if they believe in your mission. Below are some things to keep in mind when identifying DAF donors:

• Donor Modeling

In finance, modeling refers to predicting the future cash flow of an individual or organization based on their current earnings or payouts. When it comes to donors with advised funds, the modeling or predicting isn’t solely about how much they make or are able to give. Instead, it is looking at the donor’s age and the new life stage they are about to transition into.  

Major birthdays like 40, 50, or 60 are models to look at. When donors are at this stage of life, they are in the middle of or ending their careers. They are financially stable and have experienced a sudden boost in income and tend to make larger contributions.

If your organization waits to reach out to these donors after they see that income boost, you’re too late. Other charities are already in line asking for donations. That is where DAF modeling comes in handy. It enables you to have the donor on your fundraising radar before these life and income changes occur. 

• Successor Agreements and Automatic Grants

In many cases, wealthy donors will list a successor organization to become the beneficiary of their DAFs when they pass. Donors with advised funds will likely name the nonprofits they are currently contributing to as successors. This means it’s important to identify and pursue these donors early on. 

Besides setting up a successor agreement with a donor, allowing them to quickly and easily make grants from their DAF to the organization is another way to find and engage these types of donors. With automatic grants, donors with advised funds will come to you after learning about your organization. 

• Engage and Welcome

Unlike other donors who can spare a one-time donation, those with advised funds have extra money designated specifically for charitable contributions. Additionally, these funds carry appreciation which increases their donation. These donors are looking for nonprofits to give funds to and need to be a top priority for your fundraising team. 

Like Michael and the Boston Healthcare for Homeless, the power of relationship-building with DAF donors is essential for your organization to stay at top of mind when donors are looking for sponsor organizations to contribute to. Start with a “Thank You” acknowledgment of their first gift. Then, create more touchpoints between them and your organization like a site visit.

As noted previously, donors with advised funds want to see and experience the impact of their contributions. A phone conversation, a video embedded in an email, a lunch meet-up or a site visit are ways you can show DAF donors the specific and detailed impacts their contributions have on those your organization serves. The more powerful and compelling your mission is and the greater the difference the contribution makes, the more persuaded potential DAF donors will be to give. 

Another example of the power of DAFs is the story of Dan and Jill Francis. They were able to give an additional $170,000 to a charity because of the appreciation and investment income generated through their DAF. This hefty donation enabled the Francis fund to educate an extra 79 at-risk preschool students. 

Donor-advised funds benefit the donor as much as the charity that receives the contribution. The appreciation of the securities of DAFs enables donors to give more to the organizations they care about. Donors can also see where their funds go and observe the immediate impact their gift has made.

These types of funds are meant to provide a convenient and more impactful giving option for donors. They also give the donor more control over where and how their contributions will be spent. DAFs also allow donors to give back when they have their highest income level.

• Make DAF Contributions Easy With Direct Links 

Fidelity Cable, Vanguard Charitable, and Schwab Charitable are the most common, national donor-advised funds. Pirozzolo notes, “There are around 468,000 donor-advised fund accounts in the US, with 50% of those in a major DAF. The other 50% are community foundations (30%) and single-issue donor-advised funds (20%).” 

Fidelity Charitable has found that organizations that allow donors to connect their DAF accounts make larger contributions. DAF Direct, a widget made by Schwab Charitable, allows nonprofits to do that. It connects a donor’s advised fund account directly to the specific charitable organization of their choosing. 

This widget creates a deep link a nonprofit organization can put on their donation page or letter that takes a donor to their DAF login page. From the login page, the contribution is populated with the nonprofit organization in the checkout process hosted by Schwab Charitable, Fidelity Charitable, or a similar DAF.  If you’re not familiar with DAF Direct, you can register on their website.

A great case study where DAF Direct is used is The Pan-Mass Challenge bike ride. In the widget, a participant can send solicitations to friends with a link to use their donor-advised funds. The donor can select the rider’s name and he or she will get credit for raising those funds. 

• How to Get Started With Donor-Advised Funds

The first step in setting up your nonprofit for donor-advised funds is getting it listed on the Internal Revenue Services’ website. Once it is in the IRS database and listed, it will be picked up by organizations like Charitable Fidelity. Businesses that connect donors with sponsoring organizations to receive DAFs compile lists based on IRS nonprofit listings. 

Being listed on sites like Charity Navigator with current organization information is another option as Charity Fidelity and similar organizations scrape this and similar sites for nonprofits to include on their DAF sponsor lists. You can sign up for electronic DAF transfers once you register. Once connected, donors will have the option to select your organization as the sponsor or recipient of their donor-advised funds.

Donors who have an advised fund need to be one of the key supporter groups your fundraising team prioritizes fosters long-term relationships with. Fidelity Charitable and WealthEngine have a unique partnership whereby nonprofits can identify, learn about, and engage with various donor groups including those with donor-advised funds. WealthEngine provides charities with software that includes details about the wealth, giving capacity, and other financial data of donors, including whether they have an advised fund. 

WealthEngine helps nonprofits by educating fundraisers on ways to get donations effectively and efficiently. Fidelity Charitable can help nonprofits get listed to become a sponsor organization for the donor-advised funds of their members. Together, WealthEngine and Fidelity Charitable help charities find and cultivate donors with advised funds.