In the second of a five-part series this week about trends and research in philanthropy, Kristen Robinson and Sarah Gelfand of Fidelity Charitable share their thoughts on donor-advised funds (DAFs).
Robinson, senior vice president of service and marketing, and Gelfand, vice president for social impact programs, think every day about how Fidelity Charitable can support donors, nonprofits, and the entire philanthropy ecosystem.
The past and present
“We work with more than 200,000 donors in every state who have many aspirations and dreams about giving and investing. During the first half of 2019, they gave over $5 billion to more than 140,000 nonprofits,” Gelfand explained.
“We want to learn about how donors engage and think about giving, and consider how we help elevate philanthropy to work in the best way.”
DAFs are considered by some to be controversial engines. Critics claim that the vehicles could lead to “warehousing dollars” (donors receive an immediate tax deduction but don’t have to donate the year of the deduction), a platform that allows donors to give anonymously, and inserting a “middleman” into the giving process.
On warehousing dollars, there has been an argument for establishing a formal payout rate for DAFs. However, Robinson said that Fidelity DAFs on average pay out more than 20 percent per year.
Regarding anonymity, she added that 97 percent of grants given from a Fidelity Charitable DAF have the name of an individual, and oftentimes, an address associated with it.
For the three percent that are given anonymously, Robinson pointed out that these donors have specific reasons for doing so: “These donors can be very private and quiet, and don’t want media attention from a large gift. Or, they might have interests that are very personal that they don’t want shared with the whole world.”
It’s important to know that a donor can create a DAF online with just $5,000. Robinson and Gelfand stated that a gift of this size could broaden American philanthropy by 1) making it easier to give and 2) establishing a tradition of giving for future generations as well.
“We believe that we can bring efficiency, speed, rigor, and diligence to the grantmaking process, which could be seen as a value add and raise the level of philanthropy as a whole in society,” Gelfand explained.
“In addition, DAFs give individuals the chance to create an account, carefully craft their giving strategies, and then donate in the future.
What are future trends for philanthropy, and how does Fidelity Charitable hope to play a role?
Robinson believes that donors are becoming more deliberate about where they give: “They want to hear feedback from nonprofits about their impact.”
Gelfand sees impact investing and more advocacy-oriented gifts playing a larger role: “I also hope that we see more organizations working together to leverage dollars and build collective impact.”
In the meantime, Fidelity is working on expanding its scale and reach to educate donors about nonprofits and tools for them to give smarter, as well as considering how to create scalable solutions that are personal and reflective of donors, as well as community-oriented. “It’s about balancing the art and science of giving,” Gelfand said.
Robinson added that Fidelity Charitable hopes to use stories to “bring humanity” to DAFs and their donors. “We want to share the impact that people are enabling in their communities and around the country and world.”
Tips for fundraising from DAFs
Robinson and Gelfand see the power of DAFs to broaden philanthropy in the U.S., and as such, they advise fundraisers to be aware of DAF donors and learn about how they want to be engaged.
Robinson noted that fundraisers and organizations should acknowledge and thank the donor, not the DAF sponsor. She also explained that there’s a web application that nonprofits can add to their websites to facilitate giving. Gelfand added that including an option of giving from a DAF account could be included within an organization’s communications about ways to give.
“DAFs can create options to explore sustained/recurring giving or bequest giving,” Gelfand noted. “Account holders also designate a successor for their account, so there’s an opportunity for fundraisers to work with not only the current account holder, but they can also operate with the understanding that there may be someone down the line with whom they could work with as well.”
She added DAFs can also use and liquidate complicated assets such as cryptocurrency and real estate.
Fidelity Charitable seeks to engage donors and how they think about giving.
“We want to step forward and work with the sector as a whole in order to help society become more generous,” Robinson said.
What role do you believe DAFs play in philanthropy?
Learn more about DAFs in the report from the Giving USA Foundation, written and researched by the Lilly Family School of Philanthropy.