Donor-advised funds are an increasingly favored charitable giving vehicle for Americans, and advisors have growing influence on how they are established, funded and invested, according to research released this week by the Donor Advised Fund Research Collaborative.
In 2024, the research showed, 3.6 million DAF accounts held $326 billion in assets. Contributions totaled nearly $90 billion, and grantmaking reached $65 billion.
DAFs matter to advisors, the report said, because they can facilitate effective philanthropy for their clients and also accomplish other financial objectives.
For its report, the collaborative drew on six focus groups and a national survey of 669 U.S. financial advisors to examine how, when and why advisors incorporate DAFs into charitable planning.
Charitable Planning and DAFs
Three-quarters of advisors reported that they engage clients in moderate to substantial discussions about charitable giving. These conversations mainly occur during estate planning and annual review meetings.
After direct giving, DAFs are the most commonly recommended giving approach. Thirty-five percent of advisors said they recommend them frequently, and 21% do so about half the time. Only 10% of advisors said they never recommend a DAF.
Sixty-one percent of advisors who primarily serve ultra-high-net-worth households, those with $10 million or more in investable assets, reported that they recommend DAFs.
Another 61% of advisors who personally use a DAF recommend the vehicle to clients, compared with 26% of those who do not use one.
Tax benefits are advisors' strongest reason for recommending DAFs to their clients, according to the research, followed by client convenience and flexible timing. Charitable estate planning objectives, simplifying record keeping and donating non-cash assets also factor into the recommendations.
Asset growth and anonymity are not strong considerations for recommending a DAF.
For their part, most advisors said they are motivated to recommend DAFs by accomplishing clients' goals, supporting their values and strengthening the advisor-client relationship. Some advisors simply said that recommending DAFs makes them feel good.
Barriers to Adoption
Barriers to DAF adoption appear limited, the research found. The most common concerns expressed by clients, as reported by advisors, are loss of control and flexibility as a result of making an irrevocable gift of assets into a DAF.
Advisors also cited the complexity of rules regarding DAFs as a major or moderate concern. Relatively few said clients complained about fees or costs.
Once established, the collaborative noted, DAFs are generally straightforward to use and manage, even as some advisors reported that clients required additional education regarding rules and grantmaking restrictions.
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