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Review of 2024 Reports on Donor Advised Funds

Review of 2024 Reports on Donor Advised Funds

By Elisa Shoenberger

In the past few weeks, two big reports on donor advised funds (DAF) in the US were released. The findings are pretty fascinating and can help reorient your thinking of how to approach DAF advisors for your organization.

The 2024 National Study on Donor Advised Funds (NSDAF) undertook the largest study of DAFs in the US so far by working with 111 DAFs to parse their data from 2014-2022. One of the most interesting findings is that 81% of DAFs in the study were opened after 2010 with 25% or more opened after 2020. That is astonishing! That means that most DAF advisors are relatively new to having a DAF.

Even more striking, inactive DAFs, accounts that had a zero payout rate for the three most recent years, tended to be smaller and newer – 45% of inactive DAFs were opened in 2020 or later. Almost a majority of DAF balances were less than $50K.

A few possible explanations are that DAF advisors are trying to grow their DAF account balance and/or figure out their philanthropic priorities before making a first gift. The report noted, “Donors with smaller balances may feel less urgency to make grants. Inactive DAFs were newer than active DAFs, suggesting that some donors have not started making decisions about grantmaking.”

Ask for gifts throughout the year

With respect to appeals, the study found that the majority of DAF advisors make their donations to their DAFs at the end of the year, but the majority of accounts made grants out of the DAFs throughout the year, not just year-end. So, if you are sending out appeals or making asks, you don’t have to wait until the end of the year. Plus, the finding found that grants over $50K from DAFs were given throughout the year and grants under $50K were more likely at the calendar year-end.

Even more intriguing, the report found “Contribution amounts show that DAFs are a mid-range philanthropic vehicle, accommodating contributions larger than typical household donations yet smaller than those establishing private foundations.” We have been keen to better understand the wealth levels of DAF advisors so it’s helpful to know that it’s in-between annual giving and being able to establish your own foundation.

Of course, at Aspire, we have seen many DAF advisors who give directly, through their foundation and company, and their DAF.

Fidelity Charitable also released its 2024 annual report on DAFs for 2023. So, while it is a year ahead of the more general study, it too had some notable findings. The amount of money given from DAFs in 2023 was $11.8B, which was $600M more than the year before. This level of giving is in spite of people’s perceptions of a struggling economy and several armed conflicts. Plus, Fidelity reported that 88% of Fidelity DAF owners made at least one recommended grant in 2023.

Fidelity’s DAF advisors appear to be loyal givers. Fidelity found that 78% of grant recommendations went to a charity that the DAF holder previously supported. Plus, the median balance of accounts were $21K, which is a bit lower than the more comprehensive study.

Always Read the Footnotes

As we say with any financial statements, always read the footnotes. When I read through both reports and their notes, I found that both reports had taken out DAFs of significant sizes from the analysis. Fidelity reported that it removed four outlier DAF grants totaling $970M from this calculation of median balance of accounts.

Similarly, the NSDAF noted concerns about privacy of account holders for the study, so “to protect the anonymity of donors, outlying accounts that were considered “potentially identifiable” (approximately 63 accounts, usually with assets above $100M) were excluded from the sample by the originating sponsor organizations.”

While I generally agree that outliers can do some wacky things with data and that privacy is generally a good thing, these omissions are troubling. One of the biggest criticisms of DAFs is that the DAF advisor gets an immediate tax deduction and then the money just sits in their account. DAFs generally do not have minimum payouts in comparison to foundations.

And while the numbers in both reports look promising, the fact that these larger grants and DAF accounts were purposefully excluded means that we are not getting the full picture. I think critics of DAFs would be more concerned about the millions, if not billions, of dollars sitting in DAFs not going to nonprofits that need them.

So, with these omitted accounts, what is the median account balance? How much of these $100M DAF accounts advise grants each year and to whom? I’m not worried about the millennial with a $5K DAF account who is not giving; I’m more concerned about the $400M just sitting in a bank, chasing returns, instead of going to a nonprofit who can do so much good with that money.

As noted above, the NSDAF study found that people tended to give more than annual giving and less than a foundation. But how does that number change with the outliers?

And of course, the amount and timing of DAF donations to nonprofits is only a part of the larger critique of this giving vehicle. Critics are also concerned about the lack of transparency with DAFs; unlike foundations, DAFs have no requirement to report where the money went.

For example, a recent Inside Philanthropy article reported that billionaire Elon Musk donated almost $100M to his own school and university called “The Foundation” from his private foundation in 2022. While this definitely should raise questions about self-dealing, we know this because it was granted from his foundation that has public reporting requirements, and not granted from his DAF, which has no such requirements. But what about those other $100M DAFs? How many of them are donating to their own organizations or to less reputable charities?

So, while these DAF reports are helpful for organizations to think about how they approach DAF advisors, some of the data reported need to be taken with a grain of salt.

It also begs the question — if so many accounts give more than 5% and so regularly, why do so many DAF sponsoring organizations resist any regulations in terms of how much needs to be given out in a given time period?

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