Host: Welcome back to another episode of the Go Beyond Fundraising podcast. Today I’m sitting down with Ryan Carpenter. Ryan serves as our Vice President of Client Services at GivingDNA, which is our proprietary analytics and segmentation software. Today we are sitting down to discuss donor advised funds.

Ryan, donor advised funds have been a hot topic with nonprofits for what seems like years. Do you have any thoughts or comments before we get into today’s discussion?

Ryan Carpenter: Yes, it’s a hot topic and growing at a consistent rate. From ten years ago until now, you’re seeing it explode with how much is in donor funds collectively, how much is given and how much is distributed every year. I feel like donor advised fund (DAF) giving is getting more mature, too, from what a person’s ability to understand what a donor advised fund is, as well as how to use it. Also, the technology and services around DAFs that can help support nonprofits and how those organizations can accept them and recognize them.

Host: Absolutely. They’ve also been controversial. I remember articles coming out over the last few years about younger billionaires putting a lot of money into donor advised funds. I think this leads us nicely to my first question for you. What are some of those common misconceptions around donor advised funds? There seems to be this idea that the super-wealthy are able to park their income in a donor advised fund, mark that it was a charitable donation, and move on with their day. How true is that perception about donor advised funds?

Ryan Carpenter: I think it’s a little murky because in reality, once you put money into a donor advised fund, that’s it. You no longer control it; you can’t take it out for any purpose. All you can do is guide the institution that’s managing it for you on what you want to support. So, to say people are parking that money isn’t completely accurate. It’s going to have to be given and donated at some point. I don’t have the statistic in front of me, but I believe that from the first year, an average 40% of money in a donor advised fund is distributed. Over five years, it’s upward of 75%. Forgive me, again, I don’t have the exact numbers but it is along those lines. So, it is getting distributed. The popularity of DAFs is growing because of lower limitations. Fidelity, for example, will accept funds without imposing a minimum so you can put whatever you want into it. It’s more accessible to people. And more money is being distributed.

Last year I read a report from K2D Strategies and Chariot and I think it was $58 or maybe $52 billion which was distributed — which is a ten-year high, a record high. So, I feel like it’s true, people are not giving it immediately, but that money is eventually making its way to the causes that we work with and care about.

Another thing, too, is the anonymity of DAFs and how it’s really hurting the relationship-building nonprofits can have with their donors. There are also some new solutions out there that lessen that anonymity — we can get into that in a minute. So, it’s not as though there aren’t ways to understand who the individuals are that are giving through donor advised funds.

Host: I think that’s a great foundation to springboard from. You get asked questions quite a bit in your work with clients at GivingDNA about donor advised funds. As we’ve been discussing already, there’s a lot of confusion around them. So, what’s one of the first questions a client asks about donor advised funds?

Ryan Carpenter: How can I better uncover who those people are? And to that I say there’s actually quite a few new solutions out there. There are payment processors — whether it’s Chariot or Daffy or some of the other ones — where the individual [donor’s] contact information is obtained when they get inspired and they want to make a gift on your website through a DAF. Their name and contact info is captured and shared directly with the organization. I think that alone is going to rapidly increase visibility into who these individuals are. So definitely check to see what’s out there and what’s available to you because there have been a lot of growing changes with the technology around donor advised funds and how you can best receive them.

Host: Let’s dig a little bit more into that question. One question that people have beyond identifying folks is how to receive funds from a donor advised fund. Traditionally, I believe, the donor directs the manager of the donor advised fund to distribute a certain amount from the donor advised fund and then that check makes its way over to the nonprofit. But a lot of times, like you mentioned, the name of the donor is anonymous and the only information on the check is the name of the fund, Fidelity Charitable or Schwab or one of these. So, a nonprofit knows where it came from but they don’t necessarily know who directed that amount to be given.

You mentioned Chariot and a couple of other technology solutions. How does a nonprofit get these solutions installed on their website so that it’s really easy to bridge that gap between the person who is directing the donor advised fund and the nonprofit?

Ryan Carpenter: It’s basically a plugin or a widget so when somebody clicks to make a donation, they can select to pay through a donor advised fund. And in the solutions I’ve seen, there are 1,000 plus donor funds that people can click to select and then enter their login credentials to easily make the distribution themselves. That’s a big difference between what you were saying, where historically, as a donor, I would have gone to Fidelity to set up a DAF, selected the type of causes I’m interested in, then just left it in Fidelity’s hands.

In those cases, the best the receiving organization or nonprofit can do is this: 1) Skip sending the tax receipt or anything else to Fidelity — they don’t want it. Instead, send them a note recognizing that you received the gift and request they forward on to the individual donors that you appreciate it. That’s a lot of barriers! That’s step one.

Step two is being more vocal and proactive to your audience that you accept donor advised funds. You can even reach out to your mid-major donors and ask them directly if they have a donor advised fund. Let them know that if they do, you accept donations from donor advised funds. Do the old, harder work of really asking questions and hoping you get some answers.

But that aside, there’s a lot of new technology that puts the power with the individual to make distributions from their donor advised fund so that when they’re done, you’re able to [automatically] get their contact info. I feel like that’s going to be more commonplace than the traditional way these institutions were distributing funds on behalf of individuals.

Host: That’s so great. I love that you mention mid-level donors and major gift donors. But are there also folks who may be hanging around in the annual fund who have significant funds also set aside in a DAF that you could then access?

Ryan Carpenter: Yes! And that’s why soliciting and letting people know about DAFs is so important. The average non-DAF gift is about $65-68. The average DAF gift, excluding gifts of $25,000 or greater, is over $1,100.

And even the median gift is $300. That’s five times to twenty times higher than the average non-DAF gift. Now considering that, and also looking at a study that showed 26 out of 100 DAF donors began giving to an organization before through other channels — whether it was signing up for paying with a credit card or sending in a check with a mailer – letting those people know that you accept DAF contributions and reaching out to your annual fund is going to be a benefit.

There are also ways to be a bit more nuanced. You can use tools like GivingDNA and other external providers, where knowing what the profile of a DAF donor is and then applying that, you can create a look-alike to target specific people. We’ve done that with our clients to better target the people that may be interested in giving through a DAF. They may have a DAF, and making sure they know that you do accept donor advised funds is important. There’s a couple of different ways you can go about it. I think promotion and communication of your acceptance of DAFs is really key because you will see growth in giving through donor advised funds; whereas if you don’t promote it, studies have shown it won’t grow like your revenue from those donor advised funds.

Host: Let’s dig into that identification piece a bit more. In your experience, what are some key characteristics when you’re sorting and trying to build that look-alike audience in a tool like GivingDNA or another wealth screening tool? What are some of those common characteristics that could indicate someone might have a donor advised fund?

Ryan Carpenter: I can’t take credit for all of this, but we had done some work with DonateStock. We asked the CEO if they had a profile. Lo and behold, they did. They had a beautiful one-pager that was like an infographic, with the demographic profile of DAF supporters. We looked it over and thought well, we have all that data in GivingDNA. So, we applied that to our model.

For those that aren’t GivingDNA users, essentially what you are looking for is people that have higher degrees of education, are middle-aged, 44 years old and above. We find that they are very communicative. They will engage through multiple channels. Looking closely at your omni-channel donors as a good key factor, and also home value. We found the home values were about a quarter of a million dollars or higher — which is going to be virtually everybody in this economy. It’s basically $750,000 or greater. So, higher education levels, wherever that speaks to a greater likelihood of being financially savvy, that’s part of it. Also, we see that they’re engaging through multiple channels and they do have a higher home value. Not rocket science, but people of a certain age, with a certain level of capacity that are engaging through a variety of channels. That also indicates comfort with digital and things like that. That’s what we found and it’s working really well to empower our clients to target those people.

Host: I love that. We’re having this conversation in late October and year-end and year-end giving is just around the corner. When is the best time to solicit donors for gifts from their donor advised fund?

Ryan Carpenter: Anytime. To be quite honest with you, once you make that contribution to the DAF, you’re getting credited for it, regardless of the time of year. How it affects your taxes is not something you need to think about or do only in December. Anytime, and doing it consistently, whether it’s just something that’s always in your return slip or if you throw buck slips in or if it’s just always at the bottom of your email, just being consistent about it.

Also, a little off-topic but making sure your GuideStar information is up to date for when people research orgs that they want to give donor advised funds to, that’s important. Charity Navigator, as well. Just being visible so people know you’re a trustworthy organization.

Really, any time of year. Obviously, behaviorally, most people give at this time of year. We’re working with a couple of our clients now to target a select group of individuals because, again, the average gift through a DAF is going to be significantly higher than a non-DAF gift. End of year is definitely a good time to double down on that messaging.

Host: Absolutely. I also love that you shared being able to be searchable in certain databases for donor advised funds. I also think that given what you mentioned about donor advised funds being very omni-channel, very channel agnostic when it comes to giving, that it would likely be well worth your effort to invest in some SEO around your specific cause and donor advised funds. That way, if someone is looking for nonprofits in a certain sector that accept donor advised funds, and maybe even some localized advertising spend around that. I imagine that would probably pay for itself many times over.

Ryan Carpenter: Absolutely. And I think yes, thinking locally, understanding the foundations in your local area, family foundations — because very likely, they’re going to give through those vehicles. And if you’re a regional organization, it’s important to not only rely on people that are going to give through Fidelity or Schwab, but also through what’s around you, too. There are many foundations that would be interested in a local organization they can support. Making sure that they’re all aware that you accept DAFs is important, too.

Host: So, just to wrap up, are there any other questions or misconceptions about donor advised funds that we can clear up for folks listening today?

Ryan Carpenter: Yes. I think this concern that we don’t know who those donors are and we can’t communicate with them, therefore they’re probably going to fall off more frequently — that’s actually the complete opposite. What we see is that people who give through donor advised funds are retaining at a little over 60% rate year-over-year, whereas the national average for non-DAFs is about 42-43%. So, once people begin giving through that DAF, whether you know who they are or not, these are loyal donors. Once they’ve made the decision to give to your organization they’re going to continue to do so. Making sure you’re communicating what your organization is doing, the overall messaging, is important because these DAFs are actually retaining donors and continuing to support you.

Also, with the technology that’s out there we’re going to have more and more insight into who our donor advised fund donors are. So that’s going to help assuage those concerns about not knowing who they are, how to steward them, and which of them has potential to support at a more transformational level.

I would do some research on the options that are out there. There’s a variety, and being more proactive – versus taking the reactive ‘Well, we’ll get our check from Fidelity this quarter. That’ll be nice but there’s not much we can do with it’ approach – because the tools are out there to help you have a solid program around donor technology. You can really take advantage of that.

Host: I also wanted to share with listeners that a few months or maybe about a year ago, we did a podcast interview with Chariot, which is one of those technology solutions that you mentioned. We’ll be sure to link to that in the show notes for today’s episode, as well as some of the studies that were mentioned today.

Ryan, thanks so much for joining us for this conversation. It’s something that’s always worth revisiting and talking about as the world of donor advised funds is constantly shifting and evolving.

Ryan Carpenter: Thanks, a lot, Leah. Glad to be here.

Host: Thanks for joining us on another episode of Go Beyond Fundraising. We hope these conversations have equipped you with the tools and inspiration to take your fundraising, marketing, and advocacy efforts to the next level. If you’re ready to transform your nonprofit’s growth and impact, visit teamallegiance.com to get in touch with the experienced team at Allegiance Group + Pursuant. We are here to help you make a lasting difference. Until next time, keep up the phenomenal work you do every day. Together, we can create a brighter future.