If you have not yet heard the news, Fidelity Charitable now sits at the top of the Philanthropy 400 list that ranks nonprofits according to the amount of money they raise from private sources.
It was bound to happen sooner or later.
I know some folks have their gripes with donor-advised funds. I’ll save that stuff for another blog post. The SmartIdeas blog is about marketing. So today I’m going to help you understand why the growth of donor-advised funds persists and what nonprofits need to do to get their piece of the growing pie.
First, you simply have to understand why donors like DAFs so much. Here are a bunch of reasons:
- By putting money into donor-advised funds, individuals can get a tax deduction right away (as soon as they transfer their cash, appreciated securities or other assets to their fund).
- The money can grow tax free (while appreciation of foundation dollars can face an excise tax on investment income of up to 2%).
- The money in the DAF is not subject to estate tax.
- Unlike creating a foundation, with a DAF there’s no rule forcing an individual to distribute the money right away. This is attractive to people who want to be less impulsive and, rather, more thoughtful and strategic about their giving— making donation “recommendations” when it feels best for them.
- People love convenience! DAFs make it convenient for people to move their assets around without the need for lots of paperwork or legal wrangling.
- DAFs often have systems in place to help people turn assets (that would otherwise face capital gains taxes) into cash to be used for philanthropy. For instance, rather than paying capital gains tax on 20 shares of Apple that have been held for a long time, an individual can turn those shares into dollars for charity. Otherwise, the supporter would have to give by check or credit card and that would surely yield a smaller donation than 20 shares of Apple. Many DAFs will also help people turn other assets like cars, jewelry, antiques or collectibles into cash. Note: All nonprofits can and should accept these kinds of gifts.
- Supporters give to charities yet may remain anonymous (so they don’t get badgered with email, direct mail, telephone calls and requests for visits).
And, here’s what to do:
Most importantly, you’ve got to find out who, among your supporters, volunteers, advocates, members, alumni, etc., has a donor-advised fund. The best, fastest and most cost-effective way to do that is with a donor survey. Full disclosure: I invented the most robust and most powerful nonprofit donor survey platform in existence. It actually raises current dollars while uncovering information you simply cannot buy.
Once you know who has a DAF, then you can send relevant, helpful messages to those supporters to (for instance):
- Encourage them to create in memoriam funds to support causes a widow or spouse was passionate about.
- Suggest they list their donor-advised fund on a death notice so loved ones can gift to the DAF in lieu of flowers.
- Propose the fund be distributed to your charity upon death.
- Remind them that they can turn assets into cash with their DAF that can then be granted to your nonprofit.
- Point out that they can use the fund to teach their children about philanthropy.
- Recommend they combine their DAF resources with other likeminded donors (as a “giving circle” or club) to make a greater impact.
Don’t fight the flow of dollars finding their way to donor-advised funds. Instead, go with the flow and you’ll get more donation dollars from individuals.
Feel free to share this tile below with your staff.