Earlier this year, donor-advised funds (DAFs) were making headlines for exceeding year-to-date donations by a vast amount, thanks to the collective responses of donors to the COVID-19 crisis. With the current pandemic situation and the substantial increase in available funds, it is more important now than ever for nonprofits to capitalize on this opportunity to further find their missions. That’s why Moore’s Chief Data Officer Doug Kaczmarek and Amergent’s Jack Doyle will be hosting a webinar on November 12, 1 PM Central to help walk your organization through the opportunities and data points to predict DAF giving as well as how you can effectively execute a strong DAF campaign.
It’s also why a move to open up DAF access to you and me is so interesting.
For those who need a refresher on DAFs, they act as centralized vehicles to allow donors to make an irrevocable contribution of personal assets. Therefore, once you donate, that money is gone; you can’t touch it again. Donors receive an immediate tax deduction, then recommend grants from the fund over time. DAFs are the fastest growing form of charitable spending in America, with an estimated more than $100 billion in DAF accounts across the country as of early 2020. The major national players are Fidelity, Schwab, and Vanguard Charitable.
Recently, Fidelity Charitable has leading on ending DAF account minimums in order to make them more accessible to average households. According to data from the Indiana University Lilly School of Philanthropy, the average American household donates $2,600 annually to charity. Ending their $5,000 account minimums would allow average donors to participate in funds they would otherwise find inaccessible, especially given that other DAFs such as Vanguard Charitable and National Philanthropic Trust require $25,000 minimums. As anticipated, more donors than ever are choosing Fidelity Charitable to manage their giving. It is estimated that the Fidelity Charitable community is now comprised of 209,000 donors, up 16,000 Giving Accounts since last year.
Through early May, total grants from Fidelity Charitable topped $2.5 billion, up 18% from the previous year, which includes more than $236 million targeting response efforts to the COVID-19 pandemic. Since its inception in 1991, Fidelity Charitable has provided more than $42 billion in grants to over 300,000 nonprofit organizations. The continuous growth we are seeing with DAFs means that tapping into DAFs is becoming a fundraising imperative. The accounts held by financial institutions, community foundations, and other organizations hold billions of donor dollars waiting to be channeled to charities.
To identify the best opportunities for acquiring DAF donors, it’s important to understand what makes these donors unique. Most DAF donors have a history of charitable giving. Let’s say that 5 years ago, a DAF donor would have begun their giving to your organization by some other means (check, event, etc.) before committing to a DAF giving account. This still holds true for most DAF donors. Moreover, 75%-85% of DAF Donors have given to your charity before they started using a DAF account. Half of them will be found among your lapsed donors. In addition, the DAF donor will have above average net worth scores and/or above average discretionary spending within your coop’s consumer attributes. However, there are less than 750,000 donors with a traditional DAF account (initial gift of $5,000+). Thus, they are not easy to find, but are definitely rewarding to your organization.
The second greatest source of DAF funds is from new donor prospecting. If your campaign is properly executed, DAF donors will use their giving account to make their first-ever gift to you. It is imperative that your coop modeling partners know that your organization is looking for high net worth donors, not all the wealthiest households they can find. The type of donors you will want to target are people of wealth who have a long history of charitable giving rather than just any wealthy individual who doesn’t necessarily give. Of course, the longer the giving history, the better. Some additional metrics worth paying attention to include above-average levels of discretionary spending, consecutive years of annual giving among coop prospects, and multiple gifts of $50 or more.
For further insight into identifying donors and potential donors who have or are likely to have DAFs, be sure to tune in to Thursday’s webinar. And if you are interested in modeling your file to find the hidden DAF donors in your midst, SimioCloud can help you out.