As fundraisers, it is time for us to stop fretting about DAFs.
Instead, let’s learn to love them because they’re here to stay…and because they bring enormous potential for the philanthropy sector.
This guide will help you understand DAFs and how to make them work for your organization, particularly for your next campaign.
You'll learn:
The basics about donor-advised funds (DAFs).
Why a DAF donor is an ideal prospective campaign donor.
Why DAFs favor education and cultural institutions.
How to identify DAF holders already in our databases—and how to acquire new ones.
How to secure DAF grants for capital campaigns and avoid common missteps.
The guide includes insights from leading experts in the field of donor-advised funds as well as fundraisers who are seeing significant returns from DAF grants. We’ll cite the latest research on DAFs to give you an industry overview.
Let’s get started.
What's a DAF?
DAFs fall into three categories: national DAFs (Fidelity Charitable, Vanguard, etc.), community foundations, and single-issue DAFs (Jewish National Fund, Nature Conservancy, etc.).
Donor-advised funds work as follows. A donor gives an asset—cash, stocks, or non-publicly traded assets—to a DAF-sponsoring organization. Since the DAF sponsor is a public charity, it receipts the donor for tax purposes. While the donor no longer owns the asset, they can make grant recommendations to charities they believe in. The sponsoring organization invests the assets so they grow over time.
In November 2021, the Giving Institute released pioneering research on DAFs. Their Special Report on Donor-Advised Funds found the value of assets in DAFs grew from $31.1 billion in 2006 to $141.95 billion in 2019.
Between 2016 and 2020, the number of individual DAF accounts rose by 16.3 percent to 1,005,099. Contributions to DAFs in 2020 totalled $47.85 billion, an all-time high (National Philanthropic Trust, 2021).
The popularity of DAFs stems from their ease of use and their facilitation of strategic philanthropy. With national DAFs, donors have a “charitable checkbook” from which they can direct their giving quickly and easily. Donors to community foundations and single-issue DAFs direct their giving to local or specific causes that are important to them.
More Opportunity Than Challenge
DAFs have a bad reputation among too many fundraisers.
They bemoan a lack of transparency, or they perceive an extra level of effort required to identify, cultivate, and steward DAF donors. Our experience—and the counsel we provide our clients—is the opposite.
DAF donors present enormous opportunity, particularly those who are already in our databases.
“DAF holders have already given the money away. It’s already in the account. DAF grants are not coming out of their paycheck and it’s no longer a disposable income decision,” explains Matthew Nash, executive director of the Blackbaud Giving Fund.
DAF donors are also more likely to have multiple ways to give, including personal giving and private or family foundations. And they are increasingly looking to their DAF sponsor for philanthropic guidance.
“Nonprofits should not be afraid of DAFs,” says Leigh Evans Davis, vice president for donor engagement at the Hampton Roads Community Foundation. “Donors are using multiple tools to achieve their philanthropic goals. Many donors have DAFs with national sponsors and community foundations. They also have private foundations.”
DAFs are becoming more and more accessible to a wider array of donors—signaling even more opportunity. And while the average age of a DAF holder still skews higher, younger donors are discovering DAFs as the cost to open one decreases and technology makes them easier to use.
Why Target DAF Grants for Campaigns?
DAFs have a bad reputation among too many fundraisers.
“If a DAF donor is in your database, they are an ideal potential campaign donor. They’ve already identified their charitable priorities and have selected your organization,” says Nash. “DAFs amplify a donor’s ability to give with appreciated funds and through complex assets. Funds are invested and grow over time; ultimately, the donor has more money to give.”
Because DAF donors often have multiple giving vehicles, there is even more potential for a larger aggregate gift. “If a donor has a DAF, ideally their ask amount should be higher because they have multiple ways to give,” says Jennifer Richard, director of philanthropy for HALOS and former Giving USA editorial review board member.
The profile of a DAF donor aligns with an ideal campaign or major gift donor. Many donors open a DAF when they have a life event that triggers an influx of wealth. A DAF is part of the tax planning process and is driven by a wealth advisor. The average DAF annual payout rate is above 20 percent (it was 23.8 percent in 2020) (National Philanthropic Trust, 2021). By comparison, private foundations are only required to grant five percent of their asset value each year.
Academic and Cultural Institutions Must Pay Special Attention to DAFs
DAF granting patterns are different from overall individual giving...and they favor the education and arts sectors.
The Giving Institute’s Special Report on Donor Advised Funds (2021) found that education received the majority of DAF grants (29 percent)—more than twice the percentage of total U.S. philanthropic giving to education (14 percent).
The arts received similarly high percentages of DAF grants. According to the Special Report on Donor Advised Funds (2021), nine percent of all DAF grants were given to cultural organizations (as compared to four percent of total US giving).
High-net-worth donors are more likely to give to education and the arts than to other sectors. DAF giving follows this same pattern and represents specific opportunities for universities, independent schools, and cultural organizations considering a capital campaign.
Determining DAF Holders
The vast majority of DAFs have donor names and even contact information associated with them.
“Only 10 percent of DAF holders want to be anonymous,” explains Matthew Nash.“Nonprofits often find DAF donors they didn’t know they had. It starts by making sure the organization is capturing all donor information from a DAF gift. Soft credit the donor. Then take a look at a donor’s aggregate giving across different giving vehicles to determine trends and affinity.”
To find DAF holders already in your database, start with a manual search. Download donor lists from the past five to 10 years and look for donations that came from DAFs. If an individual donor is not soft credited in association with the grant, go back to the original documentation. The information is often there—it just hasn’t been captured in the database.
Predictive modeling is not likely to yield information on DAF holders. Tools such as wealth screening are limited in their capacity to determine which donors have a DAF, but they can still be helpful. Ryan Woroniecki, vice president of strategic relationships at DonorSearch, notes, “Wealth screening relies largely on public data sets; as an example, we only flag SEC insiders because it is a public list the government shares. Since national DAFs, community foundations, and single-issue DAF’s rarely if ever list their DAF holders, there isn’t a large single repository readily available. However, many organizations list the names of the DAFs that award them grants in their donor honor rolls. If you look closely you can often find The Jane Donor DAF in a local annual report or playbill which will key you in to the fact that Jane Donor has a DAF.”
The best way to determine which donors have a DAF is simple: ask them. As you cultivate donors, tactfully ask them about their giving vehicles and how they prefer to give. Some organizations survey their donors electronically, but this approach runs the risk of seeming impersonal and disingenuous. A personal conversation that puts the donor and their philanthropic priorities at the center is always best.
Attracting New DAF Donors
Attracting new DAF donors is no different than attracting any other type of donor.
But remember that you are cultivating a person—not a DAF. The same process you use to identify, qualify, and cultivate a major donor is the same process you use for a DAF donor.
Because electronic wealth screening tools are limited in their ability to identify DAF holders, it is likely you won’t know who has a DAF until a grant is made. Cultivate and steward the donor behind the grant and let them decide how they want to make future gifts.
To encourage DAF grants, be sure to include language on your website or on any form you use to acquire new donors. Prompt your donors or prospective donor to make a gift from their DAF by including language such as: “Consider recommending a grant from your DAF” on appeals and gift forms. Also, consider installing DAFDirect, a web application that nonprofits can customize and add to their websites. It enables DAF holders with Fidelity Charitable and Schwab Charitable to access and direct their funds directly to a non-profit organization.
How to Secure a Campaign Gift from a DAF
A campaign gift can come from a DAF grant as long as we know and follow the rules.
The IRS does not allow DAF grants to be used to fulfill a legally binding campaign pledge (2017).
Instead, a donor can recommend a recurring or multi-year grant in support of a non-binding pledge. At the Winkler Group, we encourage clients to create letters of intent that are not legally binding; these LOIs are generally accepted by an organization’s accountant the same way a pledge card is used.
Many DAF sponsors, particularly national DAFs, offer the option to schedule future grants, giving charitable organizations the ability to secure recurring major gifts or campaign gifts.
Fundraisers must also understand the policy of the sponsoring organization. For example, when donors want to direct a multi-year grant, many community foundations require that the DAF have the full, multi-year amount in the fund before committing the total amount. This policy increases the fund’s future giving capacity because the money committed stays in long-term investments earning interest over the pledge period.
Fidelity Charitable’s website offers the following sample language for a non-binding letter of intent. This LOI can be used for a campaign.
I/We intend to recommend a grant from the [name of donor-advised fund], a donor-advised fund, in the amount of $_________ [during the year 20__ /annually for the years 20__-20__]. Grant recommendations are subject to the approval of [name of public charity sponsoring the donor-advised fund].
This expression of intent does not create a legally enforceable obligation.
Stewarding a DAF Donor
A donor is a donor regardless of the vehicle they use to make a gift.
A donor is a donor regardless of the vehicle they use to make a gift. Therefore, it’s critical that DAF donors are stewarded the same way traditional individual donors are stewarded.
DAF donors are intentional with their giving, so it is important to follow stewardship best practices. Illustrate the impact a donor’s investment has on an institution or charity, and continue to build the relationship through regular, but not intrusive, communication.
If stewarded properly, a DAF donor is likely to recommend a second grant. Just as with donors who give small “test” gifts initially, DAF donors are savvy and want confirmation that an organization is a good steward of their investment before they give again.
Cultivate the Sponsor
Just as relationships are built with donors, it is important to build relationships with DAF-sponsoring organizations, particularly community foundations or single-issue DAFs.
“You can never thank a donor enough,” states Marco Corona, chief development officer for the International African American Museum. In impact reports and donor lists, he prefers to list all donors alphabetically and not break them into giving levels. This enables both the donor and the DAF to share recognition. “The soft credit becomes more of an intentional tool for strategy and stewardship,” he explains. “Most donors see their donor-advised fund as a method to give, not a separate philanthropic entity.”
Davis encourages the nonprofits her community foundation serves to have ongoing conversations about their work and priorities. “We want nonprofits to come to us when they are launching a campaign. A good community foundation will connect DAF donors to projects in the community that matter to them.”
While most DAF-sponsoring organizations do not accept grant requests, more are providing higher levels of philanthropic advice to their DAF donors, signaling new opportunities for nonprofits to share their campaign message and case for support.
Some DAFs offer to connect nonprofits and donors electronically. For example, the Blackbaud Giving Fund, a DAF that encourages workplace giving, allows nonprofits to register and be positioned to receive donations.
Avoid These Missteps
As fundraisers, we must understand DAFs to avoid eroding the trust of DAF donors.
As fundraisers, we must understand DAFs to avoid eroding the trust of DAF donors. Never send a DAF holder a tax receipt. The DAF donor received a charitable contribution deduction when they made their initial contribution to the DAF. They are not eligible for a deduction through a grant they recommend. Instead, if a donor’s name and contact information is included with a DAF contribution, send the donor a thank you.
Never ask a donor to use their DAF to purchase gala tickets, buy parking passes to sporting events, or pay for membership fees. The IRS prohibits DAFs from being used for anything that provides more than incidental benefits to the donor, advisor, or a related person.
Do not pressure a DAF sponsor to divulge donor information if it is not included with the grant. This is unethical and can cause mistrust among donors and DAF sponsors.
DAFs Are Here to Stay...Use Them to Fuel Your Vision
DAFs represent significant opportunity for fundraisers who recognize their potential, particularly for transformational giving in a campaign.
The basis of good fundraising—building relationships and connecting donors’ passions to mission—is the essence of a successful approach to DAFs. DAF holders, because they are strategic and intentional in their philanthropy, should be prioritized and stewarded.
For organizations and institutions considering a capital campaign or major giving initiative, DAFs should be a critical component of the planning process. First, identify DAF holders already in an organization’s database. Second, make DAF grants a part of the conversation and the solicitation process. The investment will pay off with larger campaign gifts and more investment opportunities that will lead to long-term funding for an organization’s mission.
A special thank you to these subject matter experts who contributed to the guide:
Matthew Nash is the executive director of the Blackbaud Giving Fund. He previously served as senior vice president of marketing and donor experience at Fidelity Charitable and executive director of the Generosity Commission Working Group.
Ryan Woroniecki is vice president of strategic relationships at DonorSearch, a prospect research, screening, and analytics company. Ryan has worked with hundreds of nonprofits and is a former APRA-MD board member and current secretary of The Giving Institute.
Leigh Evans Davis is vice president for donor engagement at the Hampton Roads Community Foundation. Leigh has fostered philanthropy across Southeastern Virginia since joining HRCF in 2000.
She is a graduate of Duke University and earned a Master of Business Administration from the College of William & Mary.
Marco Corona is chief development officer of the International African American Museum, and former chief development officer for One80 Place. A graduate of UCLA, Marco serves on the AFP Global Board of Directors and is past IDEA committee chair.
Jennifer Richard is director of philanthropy of HALOS. She served as a member of the editorial review board of Giving USA; she has a B.A. from the University of Pennsylvania and a J.D. from Harvard University.
For You—The Board Preparedness Worksheet
Is your board ready for a capital campaign?
We wear many hats as fundraisers. But we must remember that our biggest role is to develop relationships—among our board members as well as our donors. If left unattended, a dysfunctional board can derail a campaign before it begins.
With the Winkler Group’s newest resource, The Board Preparedness Worksheet, you can rate your board on core competencies like roles and responsibilities, spheres of influence, personal investment, and campaign planning—and learn how to increase their functionality.
If your board is not where it could be, this worksheet will help identify the gaps and where more work needs to be done. With coaching and intentionality, most boards can become well-oiled governing bodies that lend support and influence to successfully execute a campaign.
