Tom Petty wants you to know about Donor Advised Funds

Tom Petty’s song Free Fallin’ may be the current anthem for fundraisers after we experienced a 13% nosedive in philanthropic donations from individuals in 2022. But keeping with the throwback music theme, there is a luft ballon rising — the Donor Advised Fund.

According to the National Philanthropic Trust 2022 DAF report, grants from DAFs to charities increased more than 60 percent in the past two years, accelerating an upward ten-year trajectory. That means, your DAF strategy is an important pillar of your midlevel program.

Here’s the 101.

To establish a donor advised fund, donors make a contribution of personal assets—which could include cash, stock or real estate — to a sponsor (like Fidelity, U.S. Charitable Gift Trust or National Philanthropic Trust). The donor receives an immediate tax deduction for the contribution. Then, the donor invests the assets in the DAF which grow tax-free, creating more philanthropic capital for the donor to make in grants. As soon as the fund is established, the donor can recommend grants to charitable organizations.

Here’s the challenge. 

The sponsor makes the transaction, so it’s difficult to create relationships with DAF donors simply by tracking grants.

Here’s the opportunity.

• Grants from DAFs to qualified charities totaled an estimated $45.74 billion in 2021.
• Based on our research with donor files over the past several year, you likely have more donors with Donor Advised Funds than you think.
• That means you should be engaging with them as special DAF donors and encouraging them to make a DAF grant to your organization.

Your first step. 

Ask donors if they have Donor Advised Funds whenever you can (via surveys, offline mailings, one-on-one conversations etc…). Collect the data and make sure it is reflected in your database of record.

Your second step. 

Create a strategic outreach plan for donors with DAFS.

• When will you communicate with DAF donors? I recommend a quarterly touch point.
• What do you want to say special to DAF donors? Some organizations send impact reports branded for DAF donors. Some organizations send DAF investment tips.
• When will you ask for a grant distribution? I recommend at least a year-end request.

Your third step. 

Track revenue raised from DAFs and optimize your approach.

Let’s make Tom Petty proud. DAFs won’t back down. 🙂