Close Close

Financial Planning > Charitable Giving > Donor Advised Funds

Donor-Advised Funds Were 2017’s Philanthropy Star

Your article was successfully shared with the contacts you provided.

Donor-advised funds continued to be the talk of the philanthropy world in 2017 — as an agent of change and, according to critics, a sideliner of money that should go directly to doing good.

National Philanthropic Trust reported earlier this year that DAFs were the fastest-growing giving vehicles in the U.S., growing by 6.9% between 2015 and 2016.

They are also a money-raising juggernaut. The Chronicle of Philanthropy reported that seven organizations at the top of its ranking of the 400 biggest charities that raised money from private resources in 2016 were mainly built on DAFs, and accounted for nearly 25% of total dollars donated to the 400 charities.

Consider these trends, noted by Linda Wolohan at Vanguard Charitable, a major DAF sponsor. As of mid-December, Vanguard had seen a 45% year-over-year increase in new accounts, a 41% increase in the number of contributions and a 40% increase in the number of grants.

In addition, Wolohan said, 81% of gifts from Oct. 1 to Dec. 12 were noncash assets, including appreciated securities. As well, 80% of grants during that period were unrestricted. “This is a positive trend because it shows donors are trusting charities to put the money toward their area of greatest need,” she said.

Critics accuse DAFs of undermining American philanthropy by not distributing their assets in a timely manner.

In response, big sponsors point to grant-making numbers by their account holders. For example, Schwab Charitable reported in January that it had facilitated some $1.5 billion in grants to charities in 2016, a 41% increase from the year before. These grants supported 61,000 charities, it said.

In February, Vanguard Charitable reported that it had supported 30,000 charities in the U.S. and internationally in 2016, up 9% from the year before. These included 7,400 first-time grantee organizations, representing nearly a tenth of all grants for the year. Vanguard’s account holders recommended 78,000 grants in 2016, a 13% increase over 2015. The average account granted $56,000 during the calendar year.

In a paper published late last year, the Manhattan Institute addressed three other complaints about DAFs.

New Ways to Raise Money

The Chronicle identified several trends that are changing how fundraising is done.

Traditional nonprofits, including hospitals, churches and United Way affiliates, are adding DAFs to their fundraising programs.

In addition, new types of charitable organizations are emerging. For example, Morgan Stanley Global Impact Funding Trust recently began offering “white label” funds to charities, allowing them to brand and market them as their own, with Morgan remaining the fund owner.

Community foundations, which have been losing market share to national DAF sponsors, are taking a page from these behemoths’ playbooks, assembling small groups of financial planners who can point clients in their direction. Some are also cutting investment and management fees to become more competitive with the likes of Fidelity Investments and its charitable arm.

Some community foundations are offering their staff expertise and hands-on involvement as key to their value proposition, aware that some donors want to feel part of something big.

This may take the form of a big local project to invigorate civic-minded investors, or allowing financial advisors to mega-donors to continue to manage the donated assets or inviting some donors to “co-create” projects.

— Related on ThinkAdvisor:


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.