Significant Increase in Donor Advised Fund TransfersSubmitted by American Endowment Foundation on February 4th, 2019
By Ken Nopar, Senior Philanthropic Advisor
The number of donor advised fund accounts that transferred to American Endowment Foundation (AEF) has increased dramatically in recent years. In 2018 alone, over $35 million in transferred assets from the two biggest commercial donor advised fund (DAF) sponsors came to AEF. Millions more came from other single-issue DAF sponsors, community foundations, and private-label donor advised funds from banks and other financial firms.
This trend is expected to continue in 2019 as advisors and donors continue to become aware of AEF and the ability of advisors to manage the assets in AEF DAF accounts at any level and with any custodian.
Additionally, after recent market volatility, some clients who had previously managed their own investments and opened DAFs on their own are now hiring wealth management firms, and will need to transfer these DAFs to a sponsor that will allow their advisor to manage the assets. Other clients will be switching firms and advisors and will need to similarly transfer their DAF accounts.
Some of the reasons advisors have shared for transferring DAF accounts last year include:
- Donors have not been pleased with the investment options and performance at other fund sponsors. They quickly understand the benefits of having their financial advisor manage the investments in their AEF DAF account, regardless of the size of the account.
- AEF fees are often substantially less than other DAF sponsors, so more of the donors’ charitable dollars go to support the charities and causes that are most important to them and not to the DAF sponsor.
- AEF is very flexible in accepting contributions of different types of assets, while some DAF sponsors can only accept some assets but not others.
- Some DAF sponsors refused to approve grant recommendations to various charities in certain geographic areas and to organizations that were not aligned with the mission of the fund sponsor.
- Other DAF sponsors provided poor service and made mistakes in working with donors and advisors, sending out incorrect grants and making accounting errors.
- Donors were not pleased with having to work through impersonal large DAF call centers and wanted personal service like their advisors and AEF provides.
- Donors established DAF accounts elsewhere without being aware of contribution, investment, granting, and succession limitations. For instance, many DAFs only offer limited pooled investment options, while some limit the percentage of their accounts that can be invested in one security.
- Donors established DAFs on their own after reading articles, seeing advertisements, or getting advice from friends and neighbors, and realized that they should have sought advice from their advisors before selecting a fund sponsor.
- AEF provides information & articles from leading experts to help donors give with confidence and feel a greater sense of pride and satisfaction, while advisors appreciate the content AEF provides to help them in their work with clients.
- Donors are sensitive to critical stories about some DAF sponsors they read last year. Because AEF is independent, it has not been the subject of criticism since it does not offer funds for donors from which it can benefit, and AEF’s only mission is to facilitate charitable giving.
- Advisors learned that the process of transferring DAFs from another sponsor to AEF is simple, straightforward, and there is no transfer cost to the advisor or client.
- Advisors understand that regardless of the size of the DAF account, clients are very passionate about their charitable giving, and by incorporating this into conversations is important to deepening relationships. When these accounts are set up outside of the advisors’ control, they cannot manage these assets. Some small DAF accounts increase significantly over time, so it is in the best interest of both clients and advisors that the advisors are involved from the beginning.
Though the transfer of donor advised funds from other sponsors makes up just a small percentage of the amount of new assets that are donated to AEF each year, these continue to increase every year, similar to the donations that come from foundations that are opening complementary DAFs or are closing and converting to donor advised funds.
At American Endowment Foundation, we look forward to discussing the many ways that a donor advised fund can help donors and the advisors who serve them deliver a stronger charitable impact. Contact us or call at 1-888-660-4508 to learn more.