Donor Advised Funds: Are You Missing Out?
A year ago in The $110 Billion Treasure Trove for Nonprofits the Agitator alerted readers to the immense potential of Donor-Advised Funds (DAFs).
Here’s how Nick described this treasure trove: “Take a football field. Cover it to a depth of nine inches with $100 bills. That’s $110 billion.”
Today, one year later, that amount has increased to $130 billion –all available for those 501( c ) (3) organizations. Especially for those organizations that make just a little bit of effort to ask.
One of the great mysteries in my fundraising life is why in the world so many charitable organizations simply ignore the DAF pile of gold. A review of charitable websites, mail appeals, mid-level, major and planned giving plans reveals a stunning absence of attention to this vast resource.
I don’t get why so little attention is paid to DAFs. After all, the sector goes all-out crazy nuts over Giving Tuesday where all that effort, time and clamor raised $800 million last year. By comparison, tapping just a measly 1% of the $130 billion available today in DAFs would produce $1.3 billion!
For a bit more perspective, DAF donors contribute 10% of all individual giving compared to 8.5% for all online giving. I wonder how many organizations spend as much time and money on getting DAF contributions as they spend for online fundraising? Very few, if any, is my guess.
In an effort to better understand the dimensions of this missed opportunity I turned to Jack Doyle, the energetic, experienced CEO of the fundraising firm Amergent. For years this veteran direct response fundraiser, has also served as a combination pioneer-missionary-pied piper encouraging nonprofits to wake up to the power of DAFs.
To help with this wake up call Jack has compiled a ton of resources that will help get you up to speed quickly. Click here.
[ By the way, since our sector often suffers from curse of “consultant envy” ( the unwillingness of consultants to use or recommend the services of another consultant even when the unwilling consultant doesn’t have the knowledge) I asked Jack whether he shares his expertise. The answer was an enthusiastic “yes”. So if you’re a consultant or an organization and really want to learn the ins and outs of using DAFs in your fundraising program just send him an email. JDoyle@amergent.com ]
Here’s a brief summary from Jack of the ways in which some organizations have approached the use of DAFs in their fundraising programs as reported in our earlier post.
- Finding DAF donors. Larger organizations like The Nature Conservancy and Sierra Club have set up private label DAFs. TNC has staff who set up the funds and handle the distribution, with the promise that 20% minimum will go to TNC. In reality, TNC gets 80% of the annual grants. Not bad when the minimum to open an account is $100,000.
But private labeling is beyond the scope of many organizations. For everyone else, there’s the DAF Direct Widget. This widget plugs into
Fidelity, Schwab, and Bank of New York, three of the largest DAF managers. They account for a large chunk of DAF money and their minimums make for great prospects. When you have the widget on your site or donation page, not only does it take someone to their account, it is restricted it so that person can give only to you.
You can download the Widget here (along with a good FAQ) It costs nothing. All you’ll need is the c(3)’s Tax ID number.
- Working Your File. Actively solicit DAF gifts, starting with the easiest targets: people who have used their DAF before. This can be a bit of a mess. Your database may have soft credits for DAF grants or hard credits or no credits, where you will need to track back through Fidelity, Schwab, et al, who made the gift.
These folks, along with those who have given stock and your mid/major gift prospects, are the most likely to have and use DAFs.
While digging through data can be rough; but imagine that someone gave $500 to your organization in 2018, then gave you $5,000 through their DAF in 2019. If you have the data, you can treat this person as the major gift prospect he/she likely is and cultivate future DAF gifts. If you fail to dig in, do your homework and step up your stewardship you’re missing a great opportunity.
- American Indian College Fund used an insert mentioning their DAF widget and found that it was responsible for 14% of new gift revenue. More than that, it was responsible for 33 of their 41 $1000 first gift donors.
As you know, donors who start at larger amounts are more likely to retain, so there’s a chance those 33 donors were worth more than the 10,226 other donors brought in by the campaign in terms of lifetime value.
Coronavirus Note. Some DAFs are encouraging their donors to consider giving locally during the Covid-19 crisis. See Charles Schwab’s message here.
These are just tip-of=the iceberg steps you can take. But, even basic steps like using the DAF Direct Widget and cleaning up your data can yield large returns.
An Agitator Raise to Jack and Amergent along with a recommendation that you get on the mailing list of Jack’s informative All Thinks DAF newsletter filled with tips and goodies. You can subscribe free here.
I’m gonna take some of my shut-in time to learn more about DAFs. How about you?
Roger
P.S. Our sector often suffers from curse of “consultant envy” ( the unwillingness of consultants to use or recommend the services of another consultant even when the unwilling consultant doesn’t have the knowledge) I asked Jack whether he shares his expertise by way of answering questions and providing advice to other consultants. The answer was an enthusiastic “yes”. So if you’re a consultant or an organization and really want to learn the ins and outs of using DAFs in your fundraising program just send him an email. JDoyle@amergent.com
12 responses to “Donor Advised Funds: Are You Missing Out?”
Behavioral Science Q & A
Integrating an individual giving appeal with other communications from a charity can have both positive and negative effects, and the outcome largely depends on how it’s executed. Advantages of Integration Brand Consistency: Maintaining a consistent appearance and messaging across all communications can reinforce the org’s brand identity and strengthen brand recognition and trust among your […]
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I’m not aware of any in-market tests specifically comparing recurring vs. gift frequency language. I suspect the answer might not be the same with all gift frequencies, nor with all people. It sounds like a great opportunity for you to test and find out what works for your audience. Based on the literature, here’s a couple […]
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Based on what we know from existing data, those renewal notices can actually be pretty effective in getting people to donate. They tap into our psychology – creating a sense of urgency, reminding us of past support, and using personalization to make the message hit home. They’re playing on our natural tendencies to feel obligated […]
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Interesting question. I had a quick look at the testing done on this topic. On the positive side, in all cases, over half of donors decide to cover the fee. In some cases, it goes as high as 65%. Not a negligible percentage at all. Here’s another test from iRaiser showing consistent results (see point […]
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There’s just one thing to consider when designing a supporter journey: the supporter. More specifically, you need to take into account: Who the supporter is i.e. their identity, which is the reason they support this cause, and their personality, which describes the way they “see” and process the world. These will determine the kind of […]
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I’m not an expert in this but a quick search surfaced this article on the effect of tax reforms on 2019’s charitable giving. The researchers didn’t find a reduction. Actually, they observed an “increase in charitable contributions in 2019, even with the lower tax rates and the dramatically smaller number of taxpayers who itemize their […]
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Since the DAFdirect widget only includes only a few DAFs, I developed an alternative widget several years ago that includes over 800. And, I made it 100% FREE for anyone in the sector to use.
Thousands of nonprofits have already downloaded the small line of code (unlike the fairly large and clunky DAFdirect tool).
You can get it here with no strings attached whatsoever:
http://www.dafwidget.com
Greg,
Thank you for offering up your DAF widget. Much appreciated.
I would also recommend the DAF widget that Greg developed. https://dafwidget.com/ It is the widget we recommend to our clients because it includes so many more DAF organizations–including hundreds of community foundations from across the country.
Some of our clients have tested including a checkbox on direct mail reply forms that prompts the donor to choose DAF as their method for making a donation. (As opposed to Cash, Check, Credit Card.) With one particular organization, they didn’t receive many replies with that checkbox selected, but they did see an uptick in gifts received from DAFs around the same time. So it’s something worth testing.
Hi Sabrina,
I don’t want to get all Consumer Reports-like on these widgets, but there are differences to be aware of. The single biggest difference is this: The DAF Direct Widget with the embedded organization’s tax ID makes for a one-to-one decision on how mucho give. The user has no other choice but to give to the organization whose portal the donor is using.
The Market Smart widget brings the donor to the general login page of one of the many DAFs. Once completed that login protocol presents presents the donor with their lifetime giving history to all the organizations they gave to through that particular DAF.
Consequently, the donor is no longer focused on giving to one single organization and can thus be more easily distracted. As a direct response fundraiser that’s the last thing I want.
I guess you could put both widget on the website, but that’s likely to create even more confusion. If I had to opt for one I’d personally choose the DAF Direct widget because the three sponsors of that widget (Schwab, Fidelity and Bank of New York) account for a huge portion of the DAF market. Of course, others may have a different opinion.
Could not agree more! Which is why I wrote about developing strategies to leverage DAF gifts last year. https://clairification.com/2019/02/21/strategies-leverage-donor-advised-fund-philanthropy/ Definitely need to check out Greg’s free alternative widget, and will subscribe to Jack’s e-news. Can I give you an Agitator Raise Roger?
Thank you Claire. And thanks also for you post on DAFs and, for that matter, all the good advice you generously share across the sector.
Thanks so much… yes, I’m one of those consultants that loves other consultants, and Jack has done an amazing job promoting Donor Advised Funds and some nonprofits are following the advice… but so many more could do it.
I’ve been promoting the widget to my clients and personally made some donations just yesterday from my DAF as Fidelity sent an email to its DAF donors challenging us to support this.
The hardest thing I find for organizations to understand is how best to process these DAF gifts and how to recognize/follow up on them so perhaps some more specific guidance would be helpful.
I’ve not yet seen anything consistently published on this, and even looking at different donor bases, the guidelines are all over the map. Thoughts?
and oh by the way, you can set up recurring gifts from your DAF too, with or without an end date (preferably without of course).
Bravo Roger!
I bring up DAF in every single webinar and conference presentation and ask if anyone in the room can share what they are doing to increase gifts from DAF’s. 95% of the time it is pure silence.
However, if you ask about events or online giving you can barely move on due to the chatter than ensues!
Hopefully, this can and will change in the near future.
yes, that and virtually nobody seems to think about recurring giving… nonprofits never cease to amaze me…
Erica,
Thanks for your comments and question. You’re always so alert and helpful when it comes to monthly giving opportunities. You’re right that one of big problems/barriers to use is data collection. I’ll try to round up and share some information on this.
And, you’re right about DAFs and their use for recurring gifts. One BIG plus –usually–is that the size of the recurring gifts are much larger than through other channels.
Great stuff as usual Roger. For the most recent mystery donor study we’re doing (on multi-channel) we actually went to the ‘ways to give’ page of 108 nonprofits to see if they included DAFs there or anywhere during the giving process and found that only 22 of them did or 20%. Not a representative sample but a bit more fodder that the majority organizations are not even doing something as simple as letting donors know it’s an option and how.
Also, there’s a good summary post of some research on disbursements and ‘flow rate’ as well as DAF reliance in recessions is here: http://acreform.org/blog/data-contradicts-common-myths-donor-advised-funds/
Thank so much Brady. I’m always grateful for NextAfter’s research; especially when it confirms my suspicions. PLUS…the link you provided in your comment yields some great facts that are powerful antidotes to some of the negative myths about DAFs.