Americans have poured money into donor-advised funds (DAFs) over the past decade, and it’s easy to see why. After all, donors can take an immediate tax deduction for a donation into an account, but are under no time constraint to send that money to an actual charity.
Often, donors can make gifts directly from their investment accounts into funds that were created by financial services groups that manage investments, including Fidelity, Schwab, and Vanguard. The ease of use has helped propel Fidelity to the No. 2 spot in the Philanthropy 400 ranking of charities that raise the most money. Four other donor-advised funds created by financial institutions were in the top 15.
As popular as they are with donors, the funds present a challenge to fundraisers, who often complain that it is difficult to tap into the interests of people who use the accounts and pitch to them directly. The major donor-advised funds report that an overwhelming majority of their donors provide personal information when they direct a donation to be made from their accounts. However, some charities say a lot of the gifts they receive from the funds come anonymously.
Here are some basic steps to take to connect with givers who use donor-advised funds:
1. Acknowledge that some donors prefer to make gifts through their donor-advised funds, and mention on all your materials that you accept these gifts. That means that every solicitation you send — whether by email or direct mail — and your nonprofit’s website should remind donors they can give from their accounts.
“It’s a simple prompt,” says Mark Hefter, associate vice president for planned giving at the American Technion Society. “A significant portion of people with wealth forget they have these things. They don’t make the connection that when we’re asking for money, they can give from their fund.”
2. When a gift comes from a fund, see if the donor’s neighbors would also like to give from a DAF.
After it receives a gift from a fund, the American Technion Society will often send appeals to other people in the donor’s ZIP code specifying that gifts can be made from donor-advised funds.
3. DAF account holders want flexibility; give it to them. Account holders often prefer to make gifts from their funds because they get an immediate tax deduction for a gift to a fund, but can advise that the funds be given to charities on their own timetable.
Andy Kaplan, chief financial officer at DonorsChoose.org, designed a similar method to support his nonprofit. Account holders can make a donation from a fund to the charity, which supports classroom projects in schools throughout the nation. But donors don’t have to decide immediately which classrooms receive their gifts. They can return to the DonorsChoose site at their leisure to further direct their donation anytime an appealing project is highlighted.
4. Use a “widget” to allow donors to give directly from their donor-advised fund accounts when they visit your website. Fidelity, Schwab, and the Greater Kansas City Community Foundation created “DAF Direct,” an online tool that enables donors to make a gift from their DAF when they are on a participating charity’s website, without having to visit their fund account site.
5. Frequently, donors who make gifts from their donor-advised funds are repeat donors. Get to know them, and tailor your pitches to their interests. For example, the Columbus Foundation periodically sends out “critical-needs alert” emails to its DAF holders to tell them when local nonprofits face a dire need. After one alert, the fund raised $400,000 that several local nonprofits used to buy clothing and school supplies for homeless children. The community foundation also invites donors to discussions about pressing issues, such as family homelessness and heroin addiction.
If your nonprofit receives donations from community foundations, which tend to have established relationships with donors who use these funds, see if the foundation is willing to gather donors who use the accounts and have indicated an interest in your cause. The meeting may not generate immediate support, but it is a good way to start a relationship.
Remember, even though donor-advised funds have gained in popularity relatively recently, the donors who give through their sites share the same aspirations as donors who send in a check. Find out who they are and what motivates them. Says Amy Danforth, president of Fidelity Charitable: “Our donors are your donors.”
