By: Ken Nopar
The Donor-Advised Fund (DAF) Research Collaborative recently published insights into the diverse landscape of Donor-Advised Funds (DAFs). This study demonstrates the broad range of DAF donors spanning from those with significant resources to more modest contributions. Additionally, it emphasizes the active engagement of DAF donors, who utilize their DAF accounts to recommend grants to numerous charities.
The Collaborative collected data from over 100 national, community foundation, and single-issue DAF sponsors. However, it’s important to note that the study’s findings may not fully reflect AEF DAF accounts. This is because AEF donors’ financial advisors administer the assets in nearly all AEF DAF accounts and AEF does not offer retail DAFs like other DAF sponsors. Nevertheless, the conclusions from the study are important and applicable.
Several interesting conclusions from the study include:
DAFs are utilized by donors at all levels. The median size of DAFs in this study is about $50,000. AEF’s median DAF size is approximately $80,000, while larger commercial DAFs are in the low $20,000s. Some DAF critics contend that only extremely wealthy donors open DAFs, so the findings debunk this. 7% of DAFs in the study exceed $1,000,000 and 1% are over $10,000,000.
Donors with DAF accounts are active donors. DAFs have an average (mean) annual payout rate of 18%, significantly surpassing the payout rate of Private Foundation donors. Though some DAF donors do not recommend grants immediately after opening their account, they typically become actively engaged soon after. The concern among DAF critics is that the money in the DAF accounts become idle, but the data indicates that this is not true.
DAFs allow donors to quickly respond to charitable needs. Only 32% of grants from DAF donors occur during the fourth quarter. With assets readily available in DAF accounts, donors can recommend grants anytime throughout the year to help charities meet their needs.
Nearly all DAF accounts have succession plans in place. The majority of donor-advisors designate successor advisors to oversee and continue the fund after their passing. Additionally, some outline disposition plans that designate charities receive the remaining assets at passing or in the years after passing.
Very few DAF grants are anonymous. Despite the option for anonymity in DAF grants, only 4% of DAF grants are made anonymously.
81% of DAFs in the study have been opened since 2010 with 25% opened after 2020. The popularity of DAFs continues to grow, while the growth of private foundations has remained stagnant, with many converting to DAFs)
The comprehensive 70-page report is available here. This report provides a better understanding of how DAFs expand philanthropy and clearly demonstrates how DAF donors utilize their accounts to create a significant charitable impact.
Ken Nopar is the Director, Philanthropic Practice Management for the American Endowment Foundation (AEF), one of the nation’s leading independent donor-advised fund sponsors since 1993 with $7 billion in assets.