Latest / The Nonprofit Podcast / Ep 192| Donor-Advised Funds: What Fundraisers Need to Know Now

Transcript

Ep 192| Donor-Advised Funds: What Fundraisers Need to Know Now · The Nonprofit Podcast

• 0:00
  SPEAKER_01: I was in a room this morning with a few dozen nonprofit leaders, and someone asked a simple question.
• 0:05
  SPEAKER_01: They said, How many of you have seen an increase in donor advice fund donors?
• 0:09
  SPEAKER_01: Every single hand went up in that room.
• 0:12
  SPEAKER_01: And that moment made something really clear to me.
• 0:15
  SPEAKER_01: Donor advice funds aren't a niche anymore.
• 0:17
  SPEAKER_01: They're really shaping how people give and how nonprofits need to show up for those supporters.
• 0:23
  SPEAKER_01: If you're a nonprofit leader, founder, or fundraiser and you don't yet feel confident talking about donor advised funds, receiving those gifts from them, or stewarding those donors well, this episode is for you.
• 0:38
  SPEAKER_01: The Nonprofit Podcast, powered by DonorBucks.
• 0:42
  SPEAKER_01: Welcome to the Nonprofit Podcast.
• 0:44
  SPEAKER_01: I'm Kara, your podcast correspondent, and I'm a frontline fundraiser.
• 0:48
  SPEAKER_01: Each week we share practical information, clear insights, and inspiration to help you raise more, reach further, and drive real results to take your nonprofit to the next level.
• 1:00
  SPEAKER_01: Donor advice funds are shaping how people give right now, and whether or not we're paying attention, they're already influencing our fundraising outcomes.
• 1:09
  SPEAKER_01: That meeting I was at this morning, well, everyone agreed they're seeing a shift in donations come through the door from their supporters through donor advice funds.
• 1:18
  SPEAKER_01: And today feels like a real life example of that because after that meeting later this morning, a local foundation reached out on behalf of a fundholder saying they were looking for an organization like ours to grant and asked me to send some information.
• 1:34
  SPEAKER_01: So those two examples totally confirm something many of us are already feeling.
• 1:39
  SPEAKER_01: Donor advised funds are mainstream.
• 1:43
  SPEAKER_01: So let's start with what are donor-advised funds.
• 1:46
  SPEAKER_01: Donor advised funds, often called DAFs, are charitable giving accounts.
• 1:51
  SPEAKER_01: A donor contributes money or assets to the fund, they receive the tax benefit right away from the fund, and then they recommend grants to nonprofits or charities over time.
• 2:04
  SPEAKER_01: You can think of it like a charitable savings account.
• 2:07
  SPEAKER_01: The donor has already set the money aside for generosity, but they don't have to decide immediately where to give or when to give it.
• 2:15
  SPEAKER_01: And it also grows at an investment account rate.
• 2:18
  SPEAKER_01: So it grows a little bit more than if they just had cash in their bank.
• 2:22
  SPEAKER_01: So for example, someone might have a high-income year, maybe they sold a business or they donated some appreciated stock, and we've seen donors receive bequests, and they'll start a donor advised fund from that.
• 2:35
  SPEAKER_01: So instead of rushing to choose charities at that moment they want to give to, they put the funds into a donor advice fund.
• 2:43
  SPEAKER_01: And then over the next several years, they'll recommend grants to the nonprofits that they care about.
• 2:49
  SPEAKER_01: We see that those donors are often giving more thoughtfully, they're giving more dollars, and they're giving more consistently than they otherwise would.
• 2:57
  SPEAKER_01: So for nonprofits, this means that many donors have already said yes to giving.
• 3:02
  SPEAKER_01: And our job is to simply make it easy for them to direct those dollars to our mission.
• 3:07
  SPEAKER_01: So let's talk about the scale of the shift that we've seen in donor-advised funds for a minute.
• 3:13
  SPEAKER_01: So between 1930 and 2020, so that's nearly a century, about 1 million donor-advised funds were created.
• 3:23
  SPEAKER_01: And then between 2021 and 2023, the next 1 million were created.
• 3:30
  SPEAKER_01: So in just two years, so we went from creating a million in over what 90 years there, and then in the next two years, another million were created.
• 3:40
  SPEAKER_01: So that kind of growth, that's not an accident.
• 3:43
  SPEAKER_01: It happened because donors were looking for flexible ways to give.
• 4:05
  SPEAKER_01: So from the nonprofit side, here's what we've seen at Grace Care Center Foundation, the organization I run.
• 4:11
  SPEAKER_01: I did uh I extracted some data and I found that some of our highest lifetime donors give through donor-advised funds.
• 4:19
  SPEAKER_01: So those are not just big one-time gifts, but they are consistent.
• 4:24
  SPEAKER_01: They repeat them every year, and it's easy for me to build relationships with those donors.
• 4:30
  SPEAKER_01: So I've known just through my interactions with them that these are donors who care about impact.
• 4:36
  SPEAKER_01: These are donors who ask really good questions, these are donors who stay engaged in the organization, and these are donors who often give when there's a sense of urgency.
• 4:48
  SPEAKER_01: When we've had an urgent need at Grace Care Center, like our stock the shelves fundraiser for our choice food pantry, I didn't have to wonder where to turn first.
• 4:58
  SPEAKER_01: I went to our donor-advised fund donors.
• 5:00
  SPEAKER_01: And many of them had already had funds set aside specifically for generosity.
• 5:04
  SPEAKER_01: They didn't need to move money or wait for timing to be right, or they didn't have to think through the tax implications because those were already done.
• 5:12
  SPEAKER_01: Those dollars were ready to be granted to our urgent need.
• 5:16
  SPEAKER_01: And because of that, they were able to step in really quickly and help fill a very real gap.
• 5:22
  SPEAKER_01: The great thing about donor advice fund donors is that those are donors that don't usually wait till year end to make their contribution to you.
• 5:31
  SPEAKER_01: In fact, one of our donor advice fund holders emailed me this week to say she was making her distribution in January to help start the year out strong.
• 5:40
  SPEAKER_01: And so that's exactly the kind of responsiveness you can see when donors have funds ready and then they know your organization is clearly showing them where that money will be used, and then you are prepared to receive those gifts.
• 5:53
  SPEAKER_01: So those experiences changed how I think about donor advice funds.
• 5:57
  SPEAKER_01: You know, these are not passive donors, these are people who have already decided that generosity is part of their plan.
• 6:05
  SPEAKER_01: So when there's urgency, clarity, and trust, they are often among the very first who can respond and they often respond most faithfully.
• 6:13
  SPEAKER_01: Our job as nonprofit leaders isn't to convince our supporters to care, it's to clearly communicate the need and make it easy for them to ask.
• 6:26
  SPEAKER_01: I'd like to talk just a minute about some common misperceptions about donor advice funds.
• 6:31
  SPEAKER_01: So let's take a breath for a second because a lot of what we think we know about donor advice funds is either maybe outdated or just incomplete.
• 6:41
  SPEAKER_01: So, misconception number one: donor advice funds are just for wealthy people.
• 6:47
  SPEAKER_01: And I think one of the biggest assumptions I hear is that donor advice funds are only for the wealthy.
• 6:53
  SPEAKER_01: That may have been more true years ago, but it's not the full picture anymore.
• 6:58
  SPEAKER_01: Today, many donor advice fund holders open those funds because someone had a moment, maybe a really good income year, like I mentioned, they sold some stock, they received that inheritance, and a financial advisor suggested that that it might be a smart, flexible way to give.
• 7:16
  SPEAKER_01: But what's important to understand is that these donors don't always see themselves as wealthy, but they are typically organized.
• 7:23
  SPEAKER_01: They've already made a decision to be generous, and we as nonprofits can miss some real opportunities when we just assume that those donors belong to someone else.
• 7:33
  SPEAKER_01: So don't be under the assumption that only wealthy people hold donor-advised funds.
• 7:39
  SPEAKER_01: Sometimes the regular Joes do too.
• 7:42
  SPEAKER_01: Misconception number two, I hear a lot, is that donor-advised funds delay giving.
• 7:48
  SPEAKER_01: And here's the reframe that really stuck with me.
• 7:51
  SPEAKER_01: Donor-advised funds don't cause delay for the nonprofit.
• 7:55
  SPEAKER_01: Uncertainty does.
• 7:57
  SPEAKER_01: A donor might be sitting on some money.
• 8:00
  SPEAKER_01: And what I mean by that is a donor might be sitting on some money that can go right to work for a charitable cause that could go right to work for your nonprofit, but they, the donor, might be indecisive.
• 8:12
  SPEAKER_01: And so a donor advice fund is more much more like a charitable checking account than some sort of holding tank.
• 8:19
  SPEAKER_01: That money has already been set aside for generosity.
• 8:21
  SPEAKER_01: The donor just hasn't often decided where it should go.
• 8:24
  SPEAKER_01: So here's what you can do: ask when the moment is right, not just at year end.
• 8:30
  SPEAKER_01: Donor advice fund donors often have more flexibility than cash donors.
• 8:35
  SPEAKER_01: And so I'd recommend doing this.
• 8:37
  SPEAKER_01: First of all, reach out when you have that urgent need, whatever time of the year it is.
• 8:42
  SPEAKER_01: You can ask in January, you can ask in summer, or right in the middle of a crisis.
• 8:47
  SPEAKER_01: And I would avoid assuming that generosity only lives in December.
• 8:51
  SPEAKER_01: I think that's something that we as organizations have trained our supporters to think.
• 8:56
  SPEAKER_01: So when you're making asks earlier in the year, you are getting ahead of that giving, especially when it comes to donor advice funds.
• 9:03
  SPEAKER_01: Many donor advise fund gifts happen just because someone from an organization thought to ask.
• 9:10
  SPEAKER_01: So ask, ask, ask.
• 9:13
  SPEAKER_01: All right, now misconception number three.
• 9:16
  SPEAKER_01: I think there is a belief in many of our organizations that we say, oh, well, we'll get the gift anyway.
• 9:24
  SPEAKER_01: And donor advised fund dollars don't move on their own.
• 9:28
  SPEAKER_01: Donors have to actively recommend grants and they can choose from thousands, literally thousands of nonprofits.
• 9:36
  SPEAKER_01: If your organization isn't visible, if it's not clear how to give to your organization, or if it feels even a little complicated, donors may move on.
• 9:47
  SPEAKER_01: They'll look right past you, not because they don't care, but because ease really matters.
• 9:54
  SPEAKER_01: And so here's what you can do.
• 9:56
  SPEAKER_01: So make the donor advice fund option really clear and speak about it frequently.
• 10:02
  SPEAKER_01: Many donors don't recommend grants simply because no one mentions donor advise funds.
• 10:08
  SPEAKER_01: And so you can improve this by easily just saying, hey, you can give from your donor advice fund in your fundraising appeals, add it to your donation page, add it to emails, you can even add it to your email signature, and be sure to include it in one-on-one conversations, especially if someone mentions that they have a giving fund, or maybe as you're meeting with them, they've talked about a recent business transaction, something like that.
• 10:36
  SPEAKER_01: Basically, I want you to normalize donor advice fund giving.
• 10:40
  SPEAKER_01: And what will happen is that you reduce hesitation and you create inertia for your organization between your organization and those donors.
• 10:49
  SPEAKER_01: What I keep coming back to is this donor advice funds tend to reward the organizations that are clear, prepared, and donor-centered, not aggressive, just ready.
• 11:00
  SPEAKER_01: And when nonprofits make donor advised fund giving obvious, when you remove that friction and then you steward donors with care, those donor advise funds stop feeling mysterious and they just become one of the most reliable tools in our fundraising toolkit.
• 11:19
  SPEAKER_01: I'd like to jump into three things you can do right now.
• 11:23
  SPEAKER_01: So let's get really, really practical here.
• 11:25
  SPEAKER_01: There are some simple steps you can take this week, not someday, literally just take them this week.
• 11:30
  SPEAKER_01: First, make sure the words donor advised funds are on your donation page.
• 11:37
  SPEAKER_01: You can add a line that says, Would you like to give from your donor advised fund?
• 11:41
  SPEAKER_01: Then build out a simple FAQ for those who plan to give to you this way.
• 11:46
  SPEAKER_01: This very small prompt does something really powerful.
• 11:49
  SPEAKER_01: It reminds donors in a soft way that they can give this way and that you welcome it.
• 11:55
  SPEAKER_01: Remember, people tend to give the way that they're invited to give.
• 12:08
  SPEAKER_01: Donor advised fund holders are often actively looking for your EIN or your tax ID number.
• 12:14
  SPEAKER_01: If they can't find it quickly, that momentum is lost.
• 12:18
  SPEAKER_01: So remove that friction.
• 12:19
  SPEAKER_01: Put your formal organization name and that tax ID number on your donation page or on a clear ways to give section on your website because this communicates readiness, it communicates professionalism, and it honestly respects your donors' time and they will appreciate that.
• 12:37
  SPEAKER_01: Okay, your third tip to do right now this week steward donor advised fund donors like major donors, because many of them are.
• 12:47
  SPEAKER_01: You're just not seeing all of their generosity.
• 12:50
  SPEAKER_01: You're seeing just a small portion of it usually.
• 12:53
  SPEAKER_01: So that gift amount just might not feel really huge to you, but if they're giving from a donor-advised fund, you need to treat them like a major donor because donor advised fund holders have already set that money aside for generosity.
• 13:07
  SPEAKER_01: That means when there's urgency, when like when you have a funding gap or a time-sensitive need or even a matching opportunity, they may be among the very first people you should call.
• 13:19
  SPEAKER_01: Donor advice fund holders value transparency.
• 13:22
  SPEAKER_01: They want to know what their gift will actually do.
• 13:25
  SPEAKER_01: They want to know where your gaps are, and they would want to know what would change if more funding were available.
• 13:32
  SPEAKER_01: And then it's super duper important that you steward them well.
• 13:36
  SPEAKER_01: Send them prompt acknowledgements.
• 13:38
  SPEAKER_01: Um, make sure that your impact reporting is very clear and you are providing consistent communication.
• 13:44
  SPEAKER_01: It will truly make you stand out.
• 13:47
  SPEAKER_01: Just remember those donor advised fund gifts aren't transactional.
• 13:51
  SPEAKER_01: It's an invitation to partner with your organization.
• 13:55
  SPEAKER_01: And that donor advise fund giving it accelerates when trust is already built.
• 14:00
  SPEAKER_01: And okay, I have one bonus thing for you to do this week.
• 14:04
  SPEAKER_01: So this is number four.
• 14:05
  SPEAKER_01: If you really want to understand donor advice funds from the inside, consider opening one yourself.
• 14:11
  SPEAKER_01: You can usually do it without even putting money into the fund.
• 14:15
  SPEAKER_01: It only takes a few minutes and explore the different providers to help see how the process works and what feels like the best fit for you.
• 14:24
  SPEAKER_01: And here is another tip from me to you as a fundraiser.
• 14:28
  SPEAKER_01: If all of this is new to you, you may be wondering where do I even start?
• 14:32
  SPEAKER_01: Well, you can start by reaching out to the staff at your local community foundation.
• 14:37
  SPEAKER_01: Introduce your nonprofit, explain your mission, ask how you can share updates or opportunities with their fund holders who care about work like yours.
• 14:47
  SPEAKER_01: For some national donor advice fund providers, there's a ton out there, like Fidelity, Schwab, Dafe, Vanguard, whatever it is, make sure your organization is registered and eligible so that donors can recommend grants to you.
• 15:02
  SPEAKER_01: You may not, and you likely won't in this case with those large holders.
• 15:06
  SPEAKER_01: You might not get direct introductions to supporters, to fund holders, but being visible and ready makes it easy for those donors to give.
• 15:15
  SPEAKER_01: The key everywhere is clarity, professionalism, and making generosity simple.
• 15:21
  SPEAKER_01: Remove all the friction that you can.
• 15:24
  SPEAKER_01: The reality is these opportunities don't just happen by accident.
• 15:28
  SPEAKER_01: Building relationships and being ready for fund holders like the ones who contacted me today, you know, it makes it simple for donors to give when the timing matters.
• 15:38
  SPEAKER_01: If donor advice funds feel intimidating right now, let me reassure you, you certainly don't need to be an expert and you don't need complex systems.
• 15:46
  SPEAKER_01: You just need to make generosity easier.
• 15:50
  SPEAKER_01: Use the tools that donors are already using and treat those donor advice fund donors like the long-term partners they often are.
• 15:59
  SPEAKER_01: That room full of nonprofit leaders this morning, every hand went up for a reason.
• 16:03
  SPEAKER_01: Donor advice funds are here and they're growing, and they can be one of the most reliable tools for long-term impact, but only if nonprofits are willing to meet donors where they already are, make that giving easy, and show where that money is going and steward those donors well.
• 16:22
  SPEAKER_01: Well, that's it.
• 16:23
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• 16:26
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• 16:32
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• 16:36
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• 16:39
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• 16:44
  SPEAKER_01: Until next time, take that first step and stay inspired.
• 16:49
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• 16:54
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• 16:56
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• 17:00
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• 17:03
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