Fundraising Day in New York: Demystifying donor-advised funds

EventsPerspective

Jul 6

*Fundraising Day in New York ‘Demystifying donor-advised funds’ panel:* *Cat Slack* *(moderator)*, *Janice Schoos*, *Katrena Perou, and* *David Jones. Photo: Rashmi Gill (@rashmigillphotography).*

Donor-advised funds have become one of the most popular vehicles utilized for philanthropic giving. As contributions to—and grants from—donor-advised funds continue to grow, it is critical for fundraisers to have a strong understanding of how they work in order to develop successful gift strategies.

At this year’s Fundraising Day in New York, AFP convened a panel of experts to discuss why donors use donor-advised funds and offer strategies for overcoming their unique challenges:

Cat Slack, Managing Director at Aperio Philanthropy (moderator) 
Katrena Perou, Executive Director at Inspiring Minds NYC
David Jones, VP of Fundraising Operations at Food Bank for New York City
Janice Schoos, Senior Vice President, Senior Philanthropic Specialist at Wells Fargo Private Bank

Introducing the panelists

Katrena Perou brought the perspective of a small nonprofit navigating this financial tool for giving and that of a donor-advised fund holder. Her parents taught her to tithe as a child—so when she sold her home, she put 10% into a donor-advised fund and contributes regularly from it.

David Jones brought the perspective of a jovial skeptic. As the lead for fundraising operations, he is familiar with the challenges of logging donor-advised fund gifts and getting information about about the donors.

Janice Schoos has spent a lifetime helping people give using various financial tools. She came armed with data and the most organized notecards I’ve ever seen.

I (Cat Slack) started the preparation for the panel skeptical of donor-advised fund oversight because I had just read Vu Le’s blog post about how they are being used to surreptitiously give millions of dollars to hate groups. I was already not so wild about them because of how so many dollars remain in donor-advised funds and the hoops organizations have to jump through for multi-year pledges.

However, our panel’s focus was on how nonprofits can increase funding from donor-advised funds, putting them to their best possible use. The panelists offered powerful strategies for tackling some of the challenges accessing this kind of funding.

What are donor-advised funds—and why do donors use them?

Donor-advised funds allow donors to make charitable contributions to an account and then recommend grants to nonprofit organizations. Donor-advised funds are held and managed by a sponsoring organization, giving donors advisory privileges to recommend grants.

This philanthropic tool has evolved and grown in popularity over the years, and as a result, it has become critical for fundraisers to have a strong understanding of how donor-advised funds work.

What is the difference between donor-advised funds and foundations?

A foundation is a separate legal entity with its own board of directors or trustees, allowing direct control over assets. Donor-advised funds offer flexibility, lower cost, and administrative simplicity, while foundations entail higher complexity and costs, as well as an annual requirement to disburse funds to charities.

Sponsoring organizations have control over donor-advised fund assets, while foundation boards have direct control. Foundations face stricter regulations and reporting requirements, while donor-advised funds provide more privacy options.

How to learn about your donor-advised fund holders so you can raise more funds

The number one question that nonprofits ask is, “How do you get in front of donor-advised fund holders to sway them?” The answer is: You can’t.

You cannot get information on your current donor-advised fund holders if they don’t give it. The benefit of a donor-advised fund, to a donor, is near anonymity. The people administering donor-advised funds often do not have time or relationships with the donor-advised fund holders or nonprofits. It simply is not feasible.

It doesn’t matter where your donors bank—you don’t try to make a relationship with Wells Fargo bank, for example, to get to its depositors. So, it doesn’t matter if your donors give via donor-advised funds or their foundation or gifts of stock. Develop relationships with them as humans, and then make it easy to give via the tools they choose.

How to overcome the unique challenges of donor-advised funds?

Focus on cultivating new and existing relationships with donors. The panel of experts offered valuable advice for how to reach them:

Target donor-advised fund owners with marketing
Ask donors about their donor-advised fund structure
Become a donor-advised fund holder yourself and you’ll get to know other donor-advised fund holders
Use donor-advised funds as a conversation point: “Tell me more about your philanthropy…”
Get to know donors’ motivations, and determine where your organization might align with them.

How to attract more donor-advised fund donors

Just like you do with any other segment, think through their experience using your website, phone tree, or sending in support. Make it easy to donate using a donor-advised fund and mention it in your materials.

Talk to your donors about how they are giving and what pain points they have regardless of their giving. It will improve ease of giving for all ways of giving, whether they give by credit card, cash, bequest, donor-advised fund, and more.

Wondering how you measure up? Send me a note and let’s talk about how to make your donor experience stronger.