Donor-advised funds (DAFs) offer individuals a powerful tool for managing their charitable giving. Some DAF sponsors, such as American Endowment Foundation (AEF), enable the donor’s financial advisor to manage the DAF’s investments while others do not.
Here are five reasons DAF sponsors should allow outside investment administration for donor-advised fund assets:
- Improves Client Trust and Confidence
- Allows Customization and Flexibility
- Enhances Account Performance Awareness
- Enables a Long-Term Giving Strategy
- Opens Up Alternative Asset Donation Discussions
1: Improves Client Trust and Confidence
Clients often trust their financial advisors to select the appropriate investments for all their accounts, including DAFs. Choosing their own investment advisor can instill confidence in how the charitable assets are managed, making them more likely to fund the DAF.
2: Allows Customization and Flexibility
Advisors can customize investment portfolios for donor-advised fund accounts based on clients’ philanthropic goals and asset levels, ensuring alignment with their preferences and objectives.
3: Enhances Account Performance Awareness
Many DAF donors are unaware of the DAF’s investment performance without an advisor keeping track of it. This lack of insight can lead to surprises, especially during market fluctuations. Financial advisor management creates opportunities for conversation and education, giving donors a higher level of awareness.
4: Enables a Long-Term Giving Strategy
DAF donors typically have a long-term approach to giving, hoping to maximize asset growth over time for sustained charitable giving in the future. Their financial advisor can help to ensure these goals are being met while offering additional strategies for charitable planning.
5: Opens Up Alternative Asset Donation Discussions
In challenging market conditions, donors may seek alternatives to optimize the DAF’s performance. Donating illiquid assets may be a viable strategy—but donors might not be aware this is an option if their DAF assets are not managed by a financial advisor. Working with a DAF sponsor that accepts illiquid assets and allows investment management by the donor’s financial advisor ensures that these discussions can take place.
AEF is happy to work with financial advisors who administer DAF assets on behalf of their clients. To learn more about how we can help your clients expand philanthropy and meet their goals for charitable giving, contact AEF today.