The Rise of Donor-Advised Funds: A Game Changer for Fundraising

Donor-advised funds (DAFs) have emerged as a powerful force, outpacing traditional foundation gifts and reshaping the strategies of fundraising teams across the nation. At the Dreyfoos School of the Arts Foundation, we have witnessed firsthand the impact of this shift, prompting us to adapt and innovate in our approach to engaging donors.

DAFs are unique in allowing donors to make a charitable contribution, receive an immediate tax deduction, and then recommend grants from the fund over time. This flexibility has made them increasingly popular among philanthropists who seek to manage their charitable giving with greater precision and foresight. According to the National Philanthropic Trust, contributions to DAFs have grown remarkably, surpassing $38 billion in 2019 alone (National Philanthropic Trust, 2020). This trend shows no signs of slowing down, signaling a new era in philanthropy.

One of the most compelling aspects of DAFs is their ability to democratize philanthropy. While traditional foundations often require substantial assets and administrative overhead, DAFs are accessible to a broader range of donors. This inclusivity has opened the doors for many individuals to engage in significant philanthropic activities, thus broadening the donor base for nonprofits. We have benefited from this trend at the Dreyfoos School of the Arts Foundation by connecting with new supporters who are passionate about arts education and eager to make a difference.

However, with the rise of DAFs comes the need for fundraising teams to evolve. Traditional donor engagement and stewardship approaches may not suffice in this new environment. Fundraisers must develop a deeper understanding of the motivations and preferences of DAF donors. Building relationships with financial advisors and wealth managers who guide donors' philanthropic decisions is also crucial. By fostering these connections, nonprofits can position themselves as trusted partners in donors' philanthropic journeys.

Moreover, transparency and accountability are paramount when working with DAF donors. These donors often expect a high level of responsiveness and clarity regarding the impact of their contributions. At the Dreyfoos School of the Arts Foundation, we have implemented reporting mechanisms to ensure our DAF donors are documented properly and informed about the outcomes of their gifts. By providing detailed updates on the programs and initiatives their contributions support, we reinforce their trust and commitment to our mission.

Another significant advantage of DAFs is their potential to provide a steady funding stream. Unlike some one-time grants from foundations, DAFs can offer ongoing support, enabling nonprofits to plan and execute long-term projects more confidently. This stability is particularly beneficial for organizations like ours that rely on sustained funding to deliver high-quality arts education programs. We can secure a more predictable revenue stream by cultivating relationships with DAF donors, reducing our dependence on traditional foundation grants.

The growth of donor-advised funds represents a pivotal shift in the fundraising landscape. For fundraising leaders, this trend offers both opportunities and challenges. By embracing the potential of DAFs and adapting our strategies to meet the needs of these donors, nonprofit organizations can position themselves at the forefront of philanthropic innovation.

References

National Philanthropic Trust. (2020). 2020 Donor-Advised Fund Report. Retrieved from https://www.nptrust.org/reports/daf-report/

Nonprofit Pro. (2024). DAF Contributions Outpace Those from Foundations: Is Your Fundraising Team Prepared? Retrieved from https://www.nonprofitpro.com/post/daf-contributions-outpace-those-from-foundations-is-your-fundraising-team-prepared/