Latest / The Nonprofit Podcast / Ep 123| Unlocking the Power of Donor Advised Funds

Transcript

Ep 123| Unlocking the Power of Donor Advised Funds · The Nonprofit Podcast

• 0:04
  SPEAKER_02: The Nonprofit Podcast, powered by DonorBox.
• 0:08
  SPEAKER_02: Whether you're looking to boost your funding, engage with passionate philanthropists, or build a lasting legacy, donor advice funds could be just the thing you've been searching for.
• 0:18
  SPEAKER_02: Welcome to the Nonprofit Podcast.
• 0:20
  SPEAKER_02: I'm Jenna, education and community engagement manager here at DonorBox.
• 0:25
  SPEAKER_02: We are here each week with practical actions you can use today to increase donations and take your nonprofit to the next level tomorrow.
• 0:34
  SPEAKER_02: Donor advice funds attract high net worth donors and also secure larger gifts.
• 0:40
  SPEAKER_02: Better yet, they put you in a sweet spot to cultivate long-term, meaningful relationships with donors who are deeply committed to your cause.
• 0:48
  SPEAKER_02: Joining me today is Kara Augsburger, Executive Director of the Grace Care Center Foundation, Donor Box Podcast co-host and a seasoned advocate for donor advice funds.
• 0:59
  SPEAKER_02: Welcome, Kara.
• 1:01
  SPEAKER_01: Well, thank you.
• 1:01
  SPEAKER_01: Hey, Jenna.
• 1:02
  SPEAKER_01: You know, it is really great to be here and talk about donor advice funds.
• 1:07
  SPEAKER_01: I touched on donor advice funds or DAFs a bit, just a little bit, a couple of episodes ago on the nonprofit podcast.
• 1:14
  SPEAKER_01: It was episode 121, where we did a quick recap of the new Giving USA data.
• 1:21
  SPEAKER_01: After that, there was a lot of interest in going deeper into those donor advised funds and how nonprofits can implement some fundraising strategies around them.
• 1:30
  SPEAKER_01: So I am super eager to talk more about these today.
• 1:33
  SPEAKER_01: Thanks so much for having me.
• 1:35
  SPEAKER_02: I am too, and episode 121 was so great.
• 1:38
  SPEAKER_02: So to our listeners, if you haven't listened, go back and listen to that as well.
• 1:42
  SPEAKER_02: All right, let's jump right in.
• 1:45
  SPEAKER_02: We know that charitable giving is ever evolving.
• 1:49
  SPEAKER_02: And there are many, many ways to fundraise and make a difference.
• 1:53
  SPEAKER_02: And today's donors are really pretty savvy.
• 1:57
  SPEAKER_02: And I think this is where donor advised funds or DAFs come into play.
• 2:02
  SPEAKER_02: So for those who might not be familiar, what exactly are DAFs?
• 2:06
  SPEAKER_01: All right, let's do donor advised fund 101.
• 2:10
  SPEAKER_01: So imagine you have a savings account at the bank, but instead of saving money for yourself, this account is used to give money to your favorite charities.
• 2:20
  SPEAKER_01: So you'd simply set up the special savings account with a brokerage like Fidelity, Charles Schwab, Vanguard, or some really popular ones.
• 2:27
  SPEAKER_01: But I've seen some new user-friendly tools like DAFI come on the market recently too.
• 2:32
  SPEAKER_01: So donors put money into the donor advised fund.
• 2:36
  SPEAKER_01: They receive a charitable deduction when they do from the brokerage.
• 2:42
  SPEAKER_01: And then that money is invested.
• 2:43
  SPEAKER_01: It grows over time and it and it earns interest.
• 2:47
  SPEAKER_01: And that money that's in that fund can only be used for charitable giving.
• 2:52
  SPEAKER_01: You can't use it for any other sort of expense.
• 2:54
  SPEAKER_01: And even for a nonprofit, you can't buy an event sponsorship or a table at a fundraising event or anything.
• 3:01
  SPEAKER_01: It's just a donation.
• 3:04
  SPEAKER_01: And so donors choose charities they want to give to.
• 3:07
  SPEAKER_01: They can pick their favorite causes.
• 3:10
  SPEAKER_01: And when they're ready to give, they just simply send money from their donor advice fund to their chosen charities.
• 3:16
  SPEAKER_01: They click a button, type in some information, and it's out the door.
• 3:20
  SPEAKER_01: So basically, the DAF is like a special savings account for charity.
• 3:24
  SPEAKER_01: Simple as that.
• 3:25
  SPEAKER_02: Easy enough.
• 3:26
  SPEAKER_02: So people put money into a DAF, get those awesome tax benefits, let the money grow, and then switch charities they want to support over time.
• 3:35
  SPEAKER_02: Yep.
• 3:36
  SPEAKER_02: The planner in me really thinks that this is a cool way to plan ahead and manage that charitable giving.
• 3:42
  SPEAKER_02: It's flexible and efficient.
• 3:44
  SPEAKER_02: So, how long have DAFs been around?
• 3:47
  SPEAKER_01: Well, they've been around for quite a while, actually, kind of decades.
• 3:50
  SPEAKER_01: Um, and they've really grown in popularity in the last four to five years.
• 3:55
  SPEAKER_01: I would say since 2020, they have grown significantly and people are really taking interest.
• 4:01
  SPEAKER_01: There's been quite a buzz for a while.
• 4:04
  SPEAKER_01: And then that recent Giving USA report made DAFs a hot topic the last couple of weeks.
• 4:11
  SPEAKER_01: DAFs are growing and savvy donors are giving this way.
• 4:15
  SPEAKER_01: And nonprofits would be making a huge mistake to overlook adding a fundraising strategy for DAFs.
• 4:21
  SPEAKER_01: Um, I dug into my own organization's data uh this morning to look at how donor advice funds have changed for us over the past couple of years.
• 4:30
  SPEAKER_01: In 2019, we did receive some gifts from donor advice funds.
• 4:35
  SPEAKER_01: In fact, about 7% of our annual giving that year came from donor advice funds.
• 4:40
  SPEAKER_01: That was in 2019.
• 4:42
  SPEAKER_01: So last year, however, in 2023, 28% of our giving came from DAFs.
• 4:48
  SPEAKER_01: So that's huge.
• 4:49
  SPEAKER_01: That's a huge jump in a very short time.
• 4:51
  SPEAKER_01: Um, and let me compare that to our online giving.
• 4:54
  SPEAKER_01: So last year, 16% of our giving came through our website, through our donor box donation form.
• 5:01
  SPEAKER_01: And I spend a ton of time making sure that our website is looking good, making a compelling case for support, and using some of your tips, Jenna, uh, to make sure that my donation form is fit for fundraising.
• 5:13
  SPEAKER_01: So I spend a lot of time on all of that.
• 5:15
  SPEAKER_01: And it would be silly not to put that kind of investment into a donor advice fund strategy too.
• 5:20
  SPEAKER_01: So just like my online donation strategy, donor advice fund strategy is just as important.
• 5:26
  SPEAKER_02: I love that you dug into your data for me for this episode.
• 5:30
  SPEAKER_02: Thank you for that.
• 5:31
  SPEAKER_02: Those numbers are staggering.
• 5:33
  SPEAKER_02: Yeah.
• 5:34
  SPEAKER_02: I am so impressed by that.
• 5:35
  SPEAKER_02: And it's so clear that DAFs are reshaping what we know of fundraising and philanthropy in general.
• 5:42
  SPEAKER_01: You know, they really are.
• 5:44
  SPEAKER_01: It they're so easy to open those accounts, and they often require no minimum investment.
• 5:49
  SPEAKER_01: And sometimes there's a misperception that DAFs are for the super wealthy, but they're really for anyone who wants to start a budget-friendly charity savings account.
• 5:58
  SPEAKER_01: But as you mentioned in the intro, Jenna, many donor advice fund donors right now are those high net worth individuals and they're seeking some tax-advantaged and efficient ways to support their favorite charities.
• 6:10
  SPEAKER_01: And those donor pools are what we're all looking to attract for sure, right?
• 6:14
  SPEAKER_01: So donors receive their tax receipt from the donor advice fund for the full donation amount.
• 6:20
  SPEAKER_01: And then nonprofits get the benefit of simply saying thank you.
• 6:24
  SPEAKER_01: So it's actually less work on our end for a lot of those donations.
• 6:28
  SPEAKER_01: I'll also mention that there is a ton of money sitting in donor advice funds across many funds in the country.
• 6:35
  SPEAKER_01: And I read recently that there's$230 billion growing in these funds, just waiting to be put to good use.
• 6:43
  SPEAKER_01: And it's my job or your job as a nonprofit leader, founder, or fundraiser to ask for that money.
• 6:50
  SPEAKER_01: So for instance, one of our major donors at our organization said to me, We have money set aside for your organization and our DAF.
• 6:58
  SPEAKER_01: You just tell me when you need it most.
• 6:59
  SPEAKER_01: So these donors who have these funds, it's not a cash flow issue to donate to you.
• 7:04
  SPEAKER_01: You know, they've already given the money to the fund.
• 7:07
  SPEAKER_01: They got their tax deduction, and they just need to pull the lever and issue that grant to you.
• 7:12
  SPEAKER_01: So that's probably why we've seen donor advice fund donors grow more than 75% over the past couple of years.
• 7:19
  SPEAKER_01: And those non-donor advice fund donors, so the cash donors, are continually declining.
• 7:24
  SPEAKER_01: It's like it's screaming to our sector, pay attention.
• 7:28
  SPEAKER_02: Yeah, the benefits truly make donor advice funds really appealing.
• 7:32
  SPEAKER_02: Again, to both donors and nonprofits, they really offer that flexibility, it sounds like, and that potential for growth that traditional donations may not already have.
• 7:42
  SPEAKER_01: Yeah.
• 7:43
  SPEAKER_02: So, can you give us three actionable steps our nonprofit friends can take to start leveraging donor advised funds right now?
• 7:52
  SPEAKER_02: How can they take advantage of these amazing benefits?
• 7:56
  SPEAKER_01: So, here are a few things that you can do to attract these donors who have the capacity to make significant contributions.
• 8:04
  SPEAKER_01: You're going to set up your tech.
• 8:05
  SPEAKER_01: First, make sure you're receiving these gifts properly on the back end through your donor database or your CRM, and then make sure your website is ready.
• 8:14
  SPEAKER_01: So for receiving the gifts, make sure you're creating a record for the fund, like Fidelity, Schwab, or whatever it is when you enter the gift.
• 8:22
  SPEAKER_01: The fund gets the giving credit, but the individual who issued the grant gets what's called a soft credit.
• 8:29
  SPEAKER_01: So the individual gets the thank you.
• 8:31
  SPEAKER_01: And it's important to steward the individual, not the fund.
• 8:35
  SPEAKER_01: So just make sure that you're entering things correctly.
• 8:38
  SPEAKER_01: So it's easy to pull reports when you need to find that information.
• 8:42
  SPEAKER_01: And then make it super easy for donors to contribute through their donor advised funds.
• 8:47
  SPEAKER_01: So think the giving process through from your donor's perspective.
• 8:51
  SPEAKER_01: Don't make them work to find what they need on your website.
• 8:54
  SPEAKER_01: I would recommend creating a dedicated donor-advised fund page on your website.
• 9:00
  SPEAKER_01: At the very least, make sure your tax ID number or your EIN is easy to find on your website.
• 9:05
  SPEAKER_01: Donors need that number, and they also usually need your mailing address to make the request from their fund to get you the money.
• 9:14
  SPEAKER_02: Such a good point on the soft credits and shameless plug here.
• 9:18
  SPEAKER_02: DonorBox CRM is here.
• 9:20
  SPEAKER_02: It is in beta.
• 9:22
  SPEAKER_02: And you can now issue soft credits to your supporters.
• 9:26
  SPEAKER_02: So that's a perfect way to keep track and make sure that you're pulling the reports and have the data that you need.
• 9:31
  SPEAKER_02: On the landing page, it's a great idea.
• 9:34
  SPEAKER_02: So what are some good ideas for that?
• 9:36
  SPEAKER_01: Well, you know, that brings me to my next tip.
• 9:38
  SPEAKER_01: And my tip number two is make yourself look like a valuable investment.
• 9:43
  SPEAKER_01: Donor advice fund donors are typically pretty savvy.
• 9:47
  SPEAKER_01: So make sure you communicate your mission, communicate your impact, and communicate your effectiveness.
• 9:53
  SPEAKER_01: You want to make the case that you are worth investing in.
• 9:57
  SPEAKER_01: So on your website, and really honestly, throughout all of your communication, use success stories.
• 10:02
  SPEAKER_01: Show those measurable results and showcase your achievements.
• 10:06
  SPEAKER_01: Spend some time, spruce up your about us page on your website.
• 10:10
  SPEAKER_01: You know, savvy donors will often look at your leadership and your board.
• 10:14
  SPEAKER_01: They're looking for trustworthy leaders and sound management.
• 10:17
  SPEAKER_02: And once they've determined you are a good investment and they choose to support you, what's next?
• 10:24
  SPEAKER_01: Well, that brings me to tip number three.
• 10:26
  SPEAKER_01: And it's all about that personal touch.
• 10:28
  SPEAKER_01: We talk about this all the time, but it's so important.
• 10:31
  SPEAKER_01: So use your donor data to find donor advice fund donors who have given to you through their DAFs previously, whether it's in large volumes or regularly or even just a one-time, I call it like a test gift.
• 10:44
  SPEAKER_01: You know, sometimes you'll get$100.
• 10:46
  SPEAKER_01: And what they're doing is they're just testing out to see if you're going to acknowledge them, if you're going to keep them in the loop with all the good that you're doing.
• 10:54
  SPEAKER_01: Reach out to those donor advice fund donors and get to know them better.
• 10:57
  SPEAKER_01: Invite them for a cup of coffee or invite them to join you on a behind-the-scenes tour.
• 11:02
  SPEAKER_01: You know, you're going to want to treat your donor advice fund donors much like your major donors.
• 11:08
  SPEAKER_01: And I would recommend segmenting or tagging them in your database, provide them some exclusive updates or reports, send some notes or some videos or something like that.
• 11:17
  SPEAKER_01: You know, basically create a cadence of acknowledging, then accounting for their donations by showcasing impact and then making it really attractive to keep giving to you in the long term.
• 11:28
  SPEAKER_01: You can even set up some automated follow-ups to stay in touch and show appreciation without taking on a lot of extra work on your part.
• 11:37
  SPEAKER_01: And then when you're considering which donors to consider for major gifts, I would also recommend taking a look at who is giving from their donor advice funds.
• 11:45
  SPEAKER_01: So my organization recently had an exclusive donor luncheon and I dipped a little further into the data and invited supporters who gave from their donor advice fund last year.
• 11:55
  SPEAKER_01: It brought some new faces to the table and it inspired some new donations this spring.
• 12:01
  SPEAKER_01: So it really worked in that case.
• 12:03
  SPEAKER_01: But I really think it's smart to start integrating those donors into your fundraising strategy now rather than when it's too late.
• 12:11
  SPEAKER_01: And they can really help diversify your funding sources, build stronger donor relationships, and don't forget about the future.
• 12:19
  SPEAKER_01: Donor advice funds can also be part of a donor's estate planning, offering potential for planned gifts.
• 12:25
  SPEAKER_01: So nurturing a good relationship with that donor advice fund donor now could open the door to a nice planned giving conversation down the road.
• 12:35
  SPEAKER_02: All about that communication and those relationships.
• 12:38
  SPEAKER_02: For sure.
• 12:45
  SPEAKER_02: Any advice that our listeners can take away today.
• 12:50
  SPEAKER_02: Sure.
• 12:50
  SPEAKER_01: You know, I do have some advice, and it's something that's often overlooked.
• 12:53
  SPEAKER_01: I know I've overlooked it too.
• 12:55
  SPEAKER_01: You can know all that's out there about donor advice funds.
• 12:59
  SPEAKER_01: You can make your website look incredible, but it's all worthless if you don't ask.
• 13:04
  SPEAKER_01: So segment your fundraising appeals, whether it's mail, email, those in-person personal asks, whatever it is, curate your communication to those donor advice fund donors.
• 13:15
  SPEAKER_01: And I personally like to remember that they've already given the money and it's just sitting in their fund.
• 13:20
  SPEAKER_01: So it's not a cash flow situation.
• 13:22
  SPEAKER_01: They're just waiting for you to make the case and make the ask.
• 13:27
  SPEAKER_01: So that takes some fear out of the asking.
• 13:30
  SPEAKER_01: So be confident and ask.
• 13:32
  SPEAKER_01: That's my advice today.
• 13:34
  SPEAKER_01: I love that insight.
• 13:36
  SPEAKER_02: They're just waiting for you to ask.
• 13:39
  SPEAKER_02: Well, I think that it's very clear that incorporating donor-advised funds into a bigger fundraising strategy can really have a big impact on a nonprofit's financial health and donor engagement.
• 13:53
  SPEAKER_02: And for our listeners, I really hope that this discussion has maybe debunked a lot of the overwhelm and the buzz and shed some light on how powerful and accessible DAFs can be for any organization, regardless of its size.
• 14:08
  SPEAKER_02: Yep.
• 14:09
  SPEAKER_02: It sounds like it's important to improve the process for donor-advised fund givers, make your organization look like a great investment, and then actively seek out and cultivate relationships with DAF donors.
• 14:23
  SPEAKER_02: There's a lot of potential for long-term sustainable funding through DAFs, and no better time than now to embrace this opportunity.
• 14:33
  SPEAKER_01: You have been taking very good notes.
• 14:34
  SPEAKER_01: Yep.
• 14:35
  SPEAKER_01: You nailed it.
• 14:36
  SPEAKER_01: Thank you for summarizing that so well.
• 14:38
  SPEAKER_01: Thanks, Kara, for joining me today.
• 14:41
  SPEAKER_01: Of course, Jenna.
• 14:42
  SPEAKER_02: Thanks so much for having me.
• 14:43
  SPEAKER_02: And thank you for joining us in the Nonprofit Podcast.
• 14:46
  SPEAKER_02: I hope you've left with the confidence to take a small step today that will make a big difference tomorrow.
• 14:52
  SPEAKER_02: Be sure to click the download button on your podcast player, then leave the nonprofit podcast a review, or give it a thumbs up if you're listening to the nonprofit podcast on YouTube.
• 15:01
  SPEAKER_02: Your review is a great way to help others find us.
• 15:04
  SPEAKER_02: You're here to help others, we're here to help you.
• 15:06
  SPEAKER_02: Until next time, stay inspired.
• 15:08
  SPEAKER_00: That warm feeling when you help someone, it's not just happiness, it's fulfillment.
• 15:14
  SPEAKER_00: And we believe it should be available to everyone.
• 15:16
  SPEAKER_00: From frontline heroes to first time fundraisers.
• 15:20
  SPEAKER_00: Our tools empower you to help others.
• 15:22
  SPEAKER_00: This is our mission.
• 15:24
  SPEAKER_00: This is DonorBox, helping you help others.