Donor-advised funds (DAFs) continue to grow in popularity as donors learn how these charitable vehicles can benefit them and the charities they support. 

However, it’s not just the donors who benefit. Many advisors have realized that discussing DAFs enables them to attract new clients, retain existing clients, and increase their assets under management (AUM). 

Discussing charitable planning often allows the advisor to manage a larger pool of assets overall – especially if the client opens a DAF. More importantly, these discussions are a great wayto expand philanthropy and help the client make an impact on causes that matter to them. 

10 Ways DAFs Can Lead to Increased AUM 

Advisors have shared several scenarios through which opening DAFs has led to increased AUM for them. The outcome of each scenario makes it clear – discussing philanthropy is crucialto a mutually beneficial advisor-client relationship. 

1. Donating Unmanaged Assets to Create or Fund a DAF 

Advisors can encourage clients to donate unmanaged assets to open or fund a DAF account. When donated to a DAF sponsor that allows advisors to manage the assets in the DAF, theseadvisors can determine how to invest the assets once liquidated. Most advisors charge on these assets, and clients are pleased to have the guidance of a trusted advisor for their charitable endeavors. 

2. Donating Outside Assets That Have Appreciated 

Clients may receive an income tax deduction for the fair market value of long-held outside assets that they donate to a DAF (subject to limitations).* Often, these assets have appreciatedover time. A donation eliminates the need to determine this, while also allowing the advisor to manage them (depending on the DAF sponsor) and committing the assets to charity. 

3. Working With the Entire Family 

Advisors can work with clients to fund and establish a DAF that represents the charitable legacy for their entire family – or separate DAFs from which their children can recommend grants to causes important to them. Either way, it enables the advisor to engage the next generation of donors, helping to maintain the relationship after a client’s passing. 

4. Working With Younger Clients 

Some advisors work with younger clients who have wealthy, charitably minded parents. As part of charitable planning discussions, these clients may decide to open DAFs for their parents, the assets for which the advisor can then manage. This facilitates a new relationship with people who may have previously managed their own investments or worked with another advisor who never discussed DAFs. 

5. Donating Privately Held Stock 

When advisors work with clients who are selling their business or other illiquid assets, they can encourage them to donate some of the privately held stock before the sale. This could help reduce the capital gains taxes the client would have to pay if they donated the stock post-sale.* Once the sale is complete, the advisors can invest and manage the liquidated assets.  

6. Transferring to a DAF That Allows Advisor Management 

Some clients come to advisors with DAF accounts established on their own through DAF sponsors that offer limited investment choices. Advisors can help clients transfer these to DAF sponsors that allow advisors to manage the assets. With these assets under management, the advisor can invest and grow them to enable future granting. 

7. Discussing Charitable Planning Regularly 

Most advisors recognize that if they do not discuss philanthropy with clients, other advisors will. Advisors can ask clients questions about charitable giving to ensure that the conversation is ongoing. Along with encouraging the client to donate more to the DAF managed by the advisor, such talks can inspire referrals as they’re more likely to share with philanthropic friends, family members, and colleagues that their advisor discusses charitable planning and opening DAFs. 

8. Communicating With Other Advisors 

Financial advisors can ensure they’re able to manage the assets in their client’s DAF accounts if they maintain open communication with all advisors with whom the client works, from estate planning attorneys to accountants and more. These other advisors are more likely to suggest a DAF than any other charitable giving vehicle. Awareness of the financial advisor’s ability to manage DAF assets can prevent them from suggesting a DAF sponsor with which the advisor cannot work. 

9. Streamlining Giving Season Donations 

Advisors who help their clients open DAF accounts can make their own operations much more efficient during the peak time for charitable giving known as Giving Season (October through December). Clients need only donate to one DAF instead of numerous charities, and they can suggest grants from that DAF at any time. This added efficiency reduces the workload, which may even allow the advisor to take on more clients. 

10. Submitting Grant Recommendations for the Client 

Some clients, especially those who are not tech-savvy, may be reluctant to fund DAF accounts if they will be responsible for making grant recommendations to the DAF sponsor. By taking this responsibility off their plate, the advisor can encourage them to open a DAF – thereby increasing the advisor’s AUM. 

Continue Engaging a Client’s Family & Friends 

One thing is clear in many of these scenarios – DAFs enable advisors to get to know their clients’ spouses, children, and loved ones. Often, other family members are more philanthropically minded than the main wealth creator and become the successor donor associated with the DAF. This holds true for donors without children or spouses, as other relatives or friends may help manage the DAF after their passing. DAFs enable advisors to remain in their role on these and other accounts for many years. 

Work With the Right DAF Sponsor 

Another common theme that has emerged – not all DAF sponsors allow advisors to manage the assets in their clients’ DAF accounts, so it is important to choose wisely. While advisors want to manage the assets and investments in the DAF to increase their AUM, they must also understand that supporting their clients – and their clients’ favorite charities – is the top priority. Charitable planning discussions should prioritize philanthropic goals, though meeting those goals still involves choosing the right DAF sponsor. 

Is Your Client Ready to Open a DAF? Talk to AEF.  

American Endowment Foundation (AEF) understands the convenience and appeal of a DAF for charitable giving – it’s what we do. If you and your client are interested in opening a DAF to expand philanthropy with us, reach out today. 

NOTE: An earlier version of this article appeared in Financial Advisor. 

*The information provided herein is for informational purposes only and should not be interpreted to constitute legal and/or tax advice. Donors should consult their legal and tax advisors regarding their specific situations.