I know, I disagree with many others on this issue.
But the value proposition offered to donors by donor-advised funds is fair and good. It motivates lots of people to move money into DAFs. Then money gets distributed. In fact, on average, about 15% to 20% of DAF dollars get distributed each year (depending on who you ask). Meanwhile, foundations must adhere to the ‘payout rule’ which refers to the fact that, by law, private non-operating foundations must distribute five percent of the value of their net investment assets annually in the form of grants. I couldn’t find how much actually gets distributed when I Googled the topic.
So, are the DAF holding pens just making money off the generosity of donors?
Yes, but if the money wasn’t transferred to a DAF, they’d be making money off the savings and investments of those same customers. Probably more money! Remember, most DAF dollars were in a bank account or investment account prior to hitting the DAF account. Those dollars weren’t under people’s mattresses!
In other words, think of it this way… The DAF got the donor halfway there for you. They got the donor to move the money from an investment account to an account earmarked for charity.
Subscribe to our blog today and get actionable fundraising ideas delivered straight to your inbox!