By Ken Nopar, VP-Senior Philanthropic Advisor
Nearly all AEF donors recommend grants to their favorite charities every year, and many are very involved with these organizations. They volunteer, serve on boards and committees, and are advocates for the non-profits.
This year, more than ever before, most of these organizations are in dire need of donations. The number of donors has decreased while the need has increased due to the COVID-19 pandemic and the economy. Fortunately, many AEF donors have stepped up and have been very generous, and the charities have been very thankful. In the past, some charities warily viewed DAF sponsors, but now that they have received numerous and significant grants from donors with DAF accounts, more understand how donor advised funds are beneficial, especially in times like these.
During challenging times and when there is great need in many areas of society, there are various movements or initiatives to force or encourage donors to give more now. Most high-net-worth donors do not need this additional prodding and on their own maintain or even increase their donations.
Donors and fundraisers understand that DAF sponsors cannot provide a list of their donors or recommend specific organizations, and they realize that nearly all donors know which causes and charities they wish to support before they even set up a DAF account. However, there are many steps that charities can implement that will result in additional or larger donations from their donors who have donor advised funds. They can:
- State clearly on their websites that they accept contributions from all DAF sponsors (as well as from private foundations, bequests, appreciated stock, etc.). Most still just indicate on their Donation pages that they accept credit card contributions and checks. A small number offer the DAF Direct link to its three DAF sponsors, but do not reference AEF or the hundreds of other DAF sponsors from which other grants can be sent.
- Analyze the contributions from their DAF donors. Numerous studies have shown that donors who have DAF accounts are more generous when recommending grants from their DAF accounts than those who write checks, donate by credit card, or even donate appreciated stock. This is largely because the assets in the accounts can only be granted to charities, and they do not have to pull money out of their checking or investment accounts that can be used for other purposes.
- Ask donors when meeting with them how they prefer to donate, and if appropriate, determine if they have a DAF or other charitable vehicle. Some who have donated by check or credit card before may instead decide to donate from their DAF account.
- List information on their websites that donors can provide to their DAF sponsors so they can quickly vet the organization and send a check. Provide the tax ID number, address, and contact information for a development staff member should the DAF sponsor have any questions or if they need information should they prefer to ACH funds instead of sending checks.
- Engage donors every time a grant from their DAF is received. One of the reasons donors discontinue support is when they are not properly thanked, yet many DAF donors do not receive thank you notes when they recommend grants from their DAF account. If a donor has taken the time to establish a donor advised fund, they are likely interested in and serious about philanthropy. If the grant is substantial, invite the donor for a site visit, volunteer event, or fundraising event.
- Follow up with DAF donors even if a grant is small since it is difficult to ascertain the size of a donor’s account. Though the median size accounts of the largest commercial DAF sponsors are smaller than AEF and are under $20,000, they also have some very large accounts.
- Pay attention to which DAF sponsor has sent the grant check. If a donor recommends a grant from a DAF sponsor that is also a prominent bank or wealth management firm, that likely indicates that the institution manages their money and therefore the size of their DAF and wealth may be substantial, even if the grant received is small.
- Send a thank you to the donor c/o the DAF sponsor for any anonymous grants, and request that the DAF sponsor forward it to the donor. Though AEF will do this, not all DAF sponsors will, and it can be worth the small effort. Less than 5% of grants are anonymous, but donors give anonymously for a number of reasons and still usually welcome a thank you. Once thanked and engaged, these donors may increase the amount of their next grant or become public donors and advocates for the organization.
- Let donors know that the IRS has indicated that DAF sponsors can now fulfill pledges from DAF accounts as long as the sponsor does not refer to a pledge in the grant letter to the charity. DAFs still cannot pay for tables or auction items.
- Be aware that because certain assets have significantly appreciated, and because donors are able to donate large assets like privately-held stock, real estate, or insurance, donors may not feel comfortable in making these large donations at one time to one charity. By donating these to a DAF sponsor, they may prefer to make grants to their favorite charities over time instead of fearing that they have to give it all at one time. Also, because the DAF sponsor does the work of accepting the asset, the charity saves much time, effort, and expense and simply receives the grant checks from the DAF sponsors.
AEF provided many of these recommendations to the Association of Fundraising Professionals for its website to help their members in their work with donors. Sharing these suggestions with the development team or leadership of charities AEF donors are involved with can be very helpful to them, especially during this year when they most need the help.
(This article originally appeared in Advisor Perspectives, Sept. 24, 2020.)
At American Endowment Foundation, we look forward to helping donors and advisors determine the best strategies for their charitable giving. Please contact us or call at 1-888-966-8170 with any questions.