NPT’s Heisman: Why Donor-Advised Funds Are Surging

Eileen Heisman, president and chief executive of the donor-advised fund sponsor National Philanthropic Trust, recently spoke with ThinkAdvisor about the remarkable growth of DAFs as a charitable giving tool.

Heisman, a regular lecturer for the Nonprofit Board Leadership Program at the University of Pennsylvania’s Wharton School, also offered some observations on the recently announced Chan-Zuckerberg Initiative and a pendulum swing she has observed in how donors’ money is deployed at nonprofit organizations.

DAF Surge

National Philanthropic Trust in November reported the fifth consecutive annual increase in the number of individual DAF accounts, total grant dollars from these accounts, total contributions to them and total assets increased for the fifth consecutive year.

What accounts for this surge into DAFs?

For one thing, Heisman said, Fidelity and Schwab both lowered their minimum contribution size to $5,000 several years ago. “All of a sudden you have people who are only modestly wealthy starting DAFs. This is huge. It’s the democratization of philanthropy.”

In addition, DAFs have become a popular charitable giving tool inside financial firms. “That has allowed distribution of DAFs that previously was being done only by charitable fundraisers. That’s a really different distribution model.”

When DAFs first started, Heisman said, donors had no way of hearing about them unless they were involved with a charity that offered them. Then in the early ’90s, Fidelity launched its DAF, followed by Vanguard and Schwab.

“All of a sudden you had financial services marketing dollars and distribution strength that the for-profit world has and charities don’t, and seeing it applied to this easy-to-use giving vehicle, making it available through this new marketing effort.”

Now, the Web provides transactional simplicity. “You can open an account in a day, fund it in a couple of days and start making grants a week later. You can make a donation at 2 in the morning.”

People love the ease of it, she said, and not just moderately wealthy donors. “Very, very high-net-worth individuals are using DAFs. People can give from $5,000 to $100 million.”

Heisman noted that there have been rumblings in Washington about regulating DAFs. But Capitol Hill observers with whom she has spoken have seen little appetite among legislators to consider regulations, especially ahead of next year’s congressional and presidential elections.

Chan Zuckerberg Initiative LLC