Donor-advised funds are an increasingly popular philanthropic vehicle, used by charitably minded people to give away millions of dollars every year.
But questions exist about DAFs’ effectiveness and the charitable intent of donors who give with these vehicles.
Vanguard Charitable, one of the country’s largest DAF sponsors, recently examined 10 years’ worth of granting by its account holders to answer these questions.
Pulling data from 2004 through 2013, researchers analyzed the granting patterns of more than 15,000 donors based on gender and generation makeup, balance and tenure of their accounts.
They also asked donors and numerous charities they supported their thoughts about giving with a DAF. Was philanthropy more strategic? Were donors and charities better giving partners?
Vanguard’s study found the following about its account holders:
- 61% were male and female, 28% male only and 10% female only
- 31% were born before 1946, 44% were baby boomers, 13% Gen X/Millennials and 12% mixed
- 56% of donors used a DAF for the majority of their giving, while some 12% preferred to write checks
Vanguard said it granted 20.3% of assets to charity annually, but giving levels of individual accounts varied based on donors’ individual strategies and goals.
It said account holders may prefer to give regularly in equal amounts to their favorite charities, while others do not give in one year in order to recommend a large grant for a major project in the following year.
The minimum grant from Vanguard Charitable is $500. Vanguard data showed that accounts with higher balances of more than $100,000 tended to recommend fewer but larger gifts to charity, while accounts with smaller balances made many smaller grants.
For their part, 63% of charities surveyed said they preferred many small grants — for one thing, a broad base of supporters lowers risk over the long term — while 37% preferred fewer but larger grants — big donors tend to be very committed to the charity’s mission, and large gifts can be “game changers.”
Vanguard data also showed that donors give to charities across the country and around the world.
Ninety-four percent of donors said they donated to the same charity more than once, 47% gave similar amounts every time they donated to repeat charities; and 22 charities in foreign countries received direct grants and many received grants through intermediary organizations.
In terms of interest areas, male-only account holders supported human services, education and religion; female-only account holders favored human services, education, and arts and culture; and male and female donors targeted education, human resources and civic causes.
Vanguard said that while the majority of grants supported general operating expenses, the majority of money does not. Very large grants are often restricted to enable the donor to monitor progress and meet goals for a specific project.
Vanguard found that its DAF account holders were both involved with the charities they supported and strategic in their giving. Seventy-three percent of donors were involved with the charities they supported, through volunteering, involvement with the board and the like.
Sixty-one percent of donors said they were strategic about their philanthropy when giving with a DAF by following a long-term plan that included a budget, investment strategy and appropriate time horizon to meet their current and long-term giving objectives
Finally, 79% of nonprofit organizations said they were completely or mostly satisfied with DAFs as a giving partner.
Just as donors see DAFs as a way to simplify and maximize giving, charities see how they can partner with DAFs to scale development activities while increasing reach, according to Vanguard.
Nonprofit organizations described donors who gave with a DAF as sophisticated, savvy, accountable, “high-capacity givers with extended funding cycles” and “steadfast partners.”