The ABCs and 123s of DAFs

hello everyone Welcome to our webinar today we are so excited to have you all here we're g to give everyone just a couple minutes to join but if you want to throw in the chat where you are joining us from or what organization you're with we always love to see who is joining us for our webinars amazing oh Andrea love to see someone from Minneapolis I am also based in Minneapolis we live right by the Walker Art Center oh I got to go to to the walker in October it was really nice it is a it's amazi

ng and I see some names in here I recognize so hi to those of you that I know Randy 72 and sunny that sounds amazing from Tucson Arizona someone from Hawaii all over this is so great to see Kansas City go Chiefs we got the Super Bowl coming up soon oh Israel takes the lead for furthest attendees so far I think so amazing I'm gonna give us maybe just one to two more minutes because I know especially this time maybe it's just everyone's wrapping up lunch or their meetings so that way we give peopl

e some time to join and then we can get started is going crazy amazing okay we have a good amount of people here so I think we can go and get started we have a couple housekeeping items and then we will get into all about our ABCs and one 123s of Donor advised funds so thank you again everyone so much for joining us my name is bayy Houston I am with the giving block and we are so excited to have Melissa here today to be talking all about Donor advised funds how they impact nonprofits and ways th

at you can add them into your fundraising strategy so as we go throughout the presentation if you have any questions for Melissa make sure to just drop those in the Q&A so we can make sure we get to everyone's questions we do have some time reserved at the end to go through all of those so if you have any questions come up as we have this webinar please feel free to throw them in there obviously you can use the chat to share any of your own experiences or things like that but would love to keep

the Q&A for all of your questions so we can make sure we get to all of them we will also be sending out a recording of This afterwards so you can expect that by end of week with any other resources that we mention in here so for anyone that might have a colleague that wasn't able to join or wants to share this we will be also sending out a recording of this session so no worries there so with that I am excited to introduce Melissa to everyone so Melissa Bank stno is the managing director of defi

nitive and vice president of Data Insights for the Helen brown group she also serves as an instructor for the Rice University suzan M Glascock School of continuing studies Center for philanthropy and nonprofit leadership based in New Hampshire Melissa has worked in the nonprofit industry for more than two decades spending the majority of her time Consulting with organizations using wealth screenings predictive modeling and other analytics to drive prospecting efforts and strategic decisionmaking

as a thought leader her areas of Interest also include the effective use of data and analytics to drive fundraising growth the impact of high net worth philanthropy on major giving programs and on developing best practices for process research and Prospect management so the perfect person to be presenting on all of this today so with that I am going to pass it over to Melissa for the ABCs and one 123s of Donor advised funds great thanks Billy hi everyone and I'm really happy to be here today th

ank you for being here as well and taking some time out of your day to join us uh and you know donor advice funds have become a really hot topic in fundraising as well they should and we'll talk a lot more about why that is as we go through today's session uh so I joined the definitive team this past summer and when I joined I thought I knew everything there was to know about daffs but I've learned so much since I've started on the team and I've come to really appreciate how fascinating this are

a of philanthropy is so now I want to pay it forward to all of you and hope that uh you learn something through today's session so let's get started so here's our agenda for today uh first I'm going to do an overview of what donor advice funds are just to level set and talk a little bit about why we need to know about them and then we'll talk at we'll look at dos from all different perspectives who are the big players as spons sponsors what should we know about donors and the funds that they hav

e established and what are some considerations for those of us who are working at nonprofit organizations uh because I'm a researcher you'll notice throughout there are a ton of footnotes on all of the slides that bring you to external research sources and things like that and then at the end I'll also share a short list of some other additional websites that you might find helpful there's a ton to know so let's dig so first of all what even is a donor adice fund well they're sometimes called an

intermediary philanthropic vehicle which basically means that they're used as a temporary holding account for money that is irrevocably designated for charitable purposes basically think of it as a savings or an investment account that must be used for charitable donations so let's take a look at what happens when someone opens up a DA we'll talk more about what triggers a donor donor to want to do that in the first place a little bit later in the presentation but for now know that when a donor

is ready to open a daff and contribute to one they might give cash or appreciated stock cryptocurrency private company shares or some other type of complex asset to a daff sponsor and the daff sponsor is always going to be a registered 501c3 nonprofit the donor gets an immediate tax donation when the money hits the sponsor and we see that most of these gifts happen at the end of the year which is typical because tax planning is a consideration and that's when most people are doing their tax pla

nning and we know in philanthropy that we generally see a spike in charitable giving at the end of the year as well so while the money sits in a Donor advised fund the donor typically has a few different ways that they can invest their money so that it actually grows over time it's really important to know that when the money leaves the donor and goes into the sponsor's hands it legally ceases to be the donor's money and that's why they're able to get that tax deduction it's been donated irrevoc

ably to the sponsor which is a nonprofit charity then at their Leisure the donor advises the sponsor where the donor wants the money to go and that's where the term advised comes in the sponsor makes the gift in the donor advise fund's name or anonymously if the donor prefers that prefers Anonymous and we'll talk a lot more about Anonymous giving later too uh to the nonprofit that the donor designates technically the sponsor doesn't have to give the money to the charity although there are very v

ery few instances where they wouldn't take the advice of the donor uh so for example let's say the sponsor has given restrictions on donations to certain types of nonprofits and a donor requests that a gift be made to one in that case the sponsor will go back to the donor and remind them of the fine print in the documents that they signed it very very rarely happens but it is just an important consideration so now that we know what donor advice funds are why should we care there's a quote from T

he Chronicle of philanthropy uh article from I think September that I really love and it called donor advise funds the bullet train of philanthropy they've actually been around for a century literally the first donor advise fund was created in 1924 but as you can see from the statistics on this slide they've really exploded in recent years we're talking about billions of dollars making up 22% of all charitable giving in the United States in 2022 that's according to giving USA so essentially the

stakes have become a lot higher in recent years and there's just more in quantity so at nearly a quarter of the philanthropic dollars it means that in my opinion they're really affecting the entire philanthropic landscape and really that's why we should care um so let's look at this in a little bit more detail this is a chart of the growth of daffs over over the past um basically 10 years coming from information from the national philanthropic trust or npt report on deps they've been publishing

this report annually since 2012 which is pretty remarkable because I've been in this industry much longer than that and I'm not sure that I knew what a DA was in 2012 but that's really a statement on how much has changed in the past decade in fact in this longitudinal view what you could see is that the number of Dos in the US was relatively constant until about 2017 2018 and then they began to spike in prop popularity really exploding around that 2019 time frame what's really interesting not on

this graph but what's really interesting is that as the number of DS have grown the average assets per da account is actually less now than it was in 2012 so now we're looking at an average of about $117,000 and in 2012 it was about $26,000 however the sheer volume of accounts is why we see the collective assets becoming so high so why have assets dropped well in the past five years we've seen a number of new sponsor organizations start offering dos and new workplace giving options that are aro

und donor advise funds that both have low or no contribution minimums and they've attracted donors at a much larger scale so as staps become more accessible to the average person we're seeing that the average assets is dropping a little bit I actually don't think this is a negative thing because it's kind of democratizing donor advis funds but it is something to be aware of because while we know that dap holders are knowledgeable and interested in philanthropy we can't necessarily say that they'

re all major GI specs so let's go back to giving USA for just a moment we've likely all heard the headlines that donations from individuals has been dropping in recent years and that makes for a very big crisis and it is concerning but that stat alone doesn't tell the entire story so giving USA treats donor advise funds similarly to how they treat other pass through types of gifts like giving to the United Way and they do this basically to reduce the double counting of money meaning if they don'

t want to count the gift when it goes from the donor to the sponsor a nonprofit and then again from the sponsor to a receiving nonprofit because that's effectively the same dollars but what that means is I'm going to quote giving you AA for a moment for most types of staffs giving USA takes the net of incoming contributions and outgoing grants when tabulating giving to recipient Subs sectors therefore grants made from a daff to a recipient organization are typically not counted on the sources si

de of the equation end quote so what does that really mean well what it means is when a DA that is held by a Community Foundation and we'll see later Community foundations are the largest sponsor numbers when a daff is held at a Community Foundation it's counted as a foundation gift when that Community Foundation makes a grant not an individual gift even though an individual person might have advised that the gift be made so what this means is that a large percentage of giving that used to show

up as an individual I'm just writing a check I'm just putting it on my credit card has shifted not disappeared and is now showing up in the foundation bucket because I'm giving the gift through my donor advise fund which is held at the foundation so what's interesting is if you look at these two charts and you add up the percentages of the individual giving and the foundation giving in 2017 you're at 86% and if you do it in 2022 you're at 85% so it's almost exactly the same that's not to say tha

t there aren't large scale systemic issues in philanthropy right now but it's just to say that the issue may not be as dire or singularly caused as it looks at first flush so I want to go back to the npt study really quickly for just a moment because on this slide what we can see is and I've got my pointer here to help us um in 2022 gifts crossed the $50 million sorry billion dollar marker for the first time you may have heard that daffs sometimes get a bad rap for being a place where donors Par

k their money but $50 billion dollar in contributions in one year is very very substant and what that says to me is that not everyone is parking their money and if we focus on this other line for a moment what we'll see is that the average payout rate has actually increased from 21% in uh in 2018 to just under 29% in 2021 granted it did dip back down to 22% in 20 in 2022 however there's two things here first um if you compare the distribution rates here to the distribution rates from foundations

DA giving is actually higher so foundations are required to distribute 5% of their assets each year and here we're seeing that 22% is being contributed so that's pretty substantial to think about now the second thing to consider is economic and we need to take a quick look at the economy to put this into perspective economic indicators have always played a really important role in charitable giving and what we saw in 2021 is that the Dow Jones Industrial Average and the S&P 500 which is what we

're looking at here Rose pretty dramatically and then it dropped again in 2022 so the dip in payouts last year may have been due to a more conservative Financial sentiment that dropped in the S&P 500 a more pessimistic view per se of financial circumstances so I'm going to be really interested to see what happens when the 2023 data comes out regarding DA giving because the stock market was back up again last year the S&P was up 24% uh so even though we know inflation was also a factor I'm my pre

diction is that we're going to see donor advise funds pop back up again in terms of payout rates we'll see if I'm right or not okay so I've just shown you a bunch of charts we're going to put the charts aside and now that we know a little a bit more about daffs and why they're so impactful and important to the conversation uh let's start taking a look at those three main players and we're going to start with the sponsor organizations so there are actually over 1100 Donor advised fund sponsors in

the United States and as I already noted donor advise funds uh were started about a 100 years ago Community foundations and Jewish federations were some of the first sponsors to offer them and they didn't really gain any any type of popularity until the 1990s they didn't show up in the federal tax code until 2006 when the pension protection act actually uh codified what the term and definition for a donor advise fund is some of the largest daps in the country are listed on this slide and you'll

see that they're split into three different types so on the left you'll see commercial or sometimes referred to as National sponsors uh sponsors like Fidelity Schwab banks financial related organizations like the national philanthropic trust Fidelity is by far the Behemoth sponsor in the entire country they've got over $35 billion do in Assets in their dap accounts and they made contributions of over 11 billion in 2022 then there are Community foundations uh like the Boston foundation and the S

ilicone Valley foundation for Community foundations uh Silicon Valley is by far the largest they've got about $10 billion and assets under management what you'll find with the community foundations is some get super involved and proactive and others are very reactive in terms of the giving that they do and um just do whatever the donor wants but some Community foundations are much more collaborative with their donors in terms of creating research and white papers and making recommendations on wh

ere donors might want to give and then finally there are single issue sponsors which can be nonprofits like University ities religious based organizations like Jewish federations or Catholic communities and other types of special interest groups there's also special interest sponsors that are more political in nature ranging the gamut from conservative to Progressive as well I will just note that in the corner of my eye I see stuff happening in the Q&A but I'm kind of ignoring it right now uh bu

t I just want to reiterate that we will answer questions at the end just hard to split my concentration so uh so actually I'm going to just answer one that I see because it is important I have a feeling a lot of people are asking we can get copies of the slides out afterwards if that's helpful um okay so here's a bit of a look at the footprint that each of those three different types of sponsors have I already noted that Fidelity is the largest sponsor in the country so if you just take a look a

t that commercial and national sponsor column for a moment it's kind of interesting because uh Fidelity has about 174 funds under management, funds excuse me which is 10% of all of the commercial and National sponsors in the country and their contributions are about a third of that total so they're as I said the Behemoth by far I also just want to note that for those of you who are more uh data analytics and numbers driven we know that averages can sometimes be skewed by the outliers so it's int

eresting that even though you see the averages in the last row here ranging from 86,000 for commercial to over half a million for Community foundations the median Donor advised fund size is under $20,000 so I want to say that again the median size of a donor advise fund if you lined them all up in a row and pick the number in the middle is under $20,000 and that's why I think it's really important to just keep in mind what I said earlier that just because somebody has a donor advise fund doesn't

necessarily mean that they are a major gift Prospect okay so what do sponsors get out of managing donor advise funds I'm going to be a little bit cynical here for a moment but for the financial and Commercial sponsors it's actually a really good fin business opportunity for them if you think about a a group like a Fidelity or a Schwab they get a closer relationship with their clients when their clients open up a donor advice fund and they get fees that are associated with the funds they also ha

ve the funds staying within their coffers for investment purposes so it really becomes One-Stop shopping for their clients Financial assets and they're also kind of seen in the community as being more philanthropic for Community foundations and single issue sponsors there's some of that as well but I think there's a little bit of a difference Community foundations are generally set up and run by people who live in a community so their mission their goal of being in existence is to care for the w

elfare and the of the community and the well-being of their constituency so I'm not saying that everyone who is involved with commercial or financial sponsors are doing it I'm sorry uh commercial or national sponsors are doing it for financial gain only I'm just saying that for the community foundations I think it uh is more of a clear line to a nonprofit Mission and then what's also interesting to note is that once the donors of a donor advice fund and advisors pass away so at some point in the

in the lifetime of a donor advise fund the money that's left in that fund reverts to the sponsor organization um so for a university for instance uh the university will get whatever's left in that fund and that is a extra charitable donation to their mission as well so now that we know a little bit more about sponsors let's talk about the donors and and the funds that they have established so most Donor advised funds from a demographic perspective have one or two donors uh donors are equally li

kely to be male and female so there's no difference there and we typically see that the age bracket for Donor advised fund holders are between 60 and 75 years old so that's pretty solidly baby boomers however Fidelity has reported that in 2021 the average age of somebody opening a new donor ADV fund at Fidelity was 55 which is Gen X so we are seeing that this age demographic is dropping a little bit into the Gen aers and the Millennials as well now donors who have donor advise funds tend to be m

ore financially Savvy setting but setting up a donor advise fund is substantially easier than setting up a private foundation and it could often be more cost effective too uh so there's a little bit of that that we see playing in as well but here's something really interesting for those private foundations there's been a report that says 30% of people who have a family Foundation also have a donor advise fund so that's actually something to think about if you're approaching prospects with a fami

ly Foundation or if you're doing Foundation type of uh of fundraising because even if something isn't a fit specifically for the F family foundation's interest areas you may actually be able to leverage gifts from that same person's uh donor advise fund instead and lastly as we think a lot more about diversity equity and inclusion within the fundraising space there was a study out of Indiana University lily family school of philanthropy a couple of years ago that found that among High net worth

individuals uh blacks black and latinxt donors were significantly more likely to have donor advice funds than uh than white pine up with individuals so a little interesting tiit there um I want to step side side s side step excuse me for a minute to the uh donor advis fund research collaborative they're really an awesome research engine for daffs and in 2021 they did a report where they tried to look at the different types of donor advise funds that exist and they came up with these terms of tub

s tanks and towers and I think it's a really good visual to think about when we consider the type typ of funds that people have interestingly there was a completely separate study out of Canada that did something similar and found these same three types of personas as well labeling them flow through funds spend down funds and endowment funds but really we're all talking about the same thing so think about these as the different types of reasons or or personas that people have with their donor ad

vice funds so tub donors um usually fund their Donor advised funds and think of them like a charitable checking account most likely they're putting in money that they're getting from appreciated stock or maybe from a bonus and they're considering how to give it away over a short amount of time one donor that was interviewed for the donor donor advice fund research collaborative study said that basically they load up their Fund in December with the amount of money that they plan to give charitabl

y in the next year and then they spend it down over the course of the year and then they load it back up in December so they generally know these this Persona generally knows who they're giving to and how much they want to give tank donors they generally do not have a clear philanthropic strategy they're more likely to fund their Donor advised funds through some type of large liquidity event think of that as like selling a business or an IPO these donors are typically more likely to have a longe

r term cultivation strategy and more likely to be thinking about potentially making both major and annual donations out of their funds so um consider that and then lastly Tower donors are looking at this over the very very long term they're the most likely to be making major gift major gifts from their donor advise funds and are thinking about U giving over a 10-year horizon or longer they're more likely to want to build a long-term relationship with a nonprofit maybe even think about this as a

way of of doing bequest planning or intergenerational fundraising either leaving money for their children and grandchildren to then give away in their children and grandchildren's lifetime or to be having conversations uh with their children and grandchildren about giving so with all of this in mind obviously you're not going to see these these tags coded on donor advis funds anywhere but if you're a fundraiser that is cultivating somebody with a DA and you could kind of understand through your

cultivation of them with which archetype they are it could give you a clearer framework on what that donor's motivation is and the ask timing that you may want to consider okay so we're ready we've already talked about this a couple of times so I'm just going to pause here really really briefly but some of you may have heard of something called a Paro principle where almost everything in this world meets a 8020 role and with daffs we see something pretty similar it's actually in this case 8511 b

ut that's close enough in my book so what this uh chart is depicting is that 11% of the donor advis funds have over a million dollars and Assets in it and that represents 85% of the assets across all funds if you consider just wealth distribution in the United States and if you consider your fundraising pyramids even if they don't look exactly like pyramids this kind of makes sense but what it also means is the vast number of funds um have least amount of money in it so again I know I've said th

is a few times but it's I think a really big misn misnomer donor advise fund holders philanthropic thinking about giving we love them we want to engage them in cultivation but they're not all major gift prospects uh so just keep that in mind okay lastly in this section let's take a look at typical distributions this data just keep in mind it comes from Fidelity and I say that because it comes from one sponsor and that means it may be introducing some level of bias but it's the biggest sponsor so

I think it provides good representation for our conversation today and they publish a report every year so it's convenient for us to use it uh so let's look at this uh I'm going to use some round numbers just to talk through it on average the funds at Fidelity are giving to 12 organizations per year with an average Grant of $4,800 now for most of you on the phone $4,800 is probably higher than the average cash gift that your organization is receiving over the course of a year so I know they may

not be major gift prospects but they're still giving typically at higher levels than you're seeing through more of like a direct mail Channel 77% of the gifts that Fidelity distributed went to organizations that the donors and the daffs have previously supported which is really just saying retention is easier than acquisition which is something that we all already know 57% of the contributions into the daffs at Fidelity were from non-cash or complex assets and frankly in some ways it's easier f

or a donor to give a complex asset to a sponsor and let the sponsor deal with converting it or to some other entity than directly to a nonprofit and it also makes sense because last week I was on another webinar with a completely different topic but the speaker shared a statistic that something like 98% of wealth in the United States is held in non-cash assets so in some ways that's more likely where the philanthropy is going to come from anyway and lastly when we look at the name and address st

atistic here there's this huge myth that Donor advised fund donors want to remain anonymous yet at Fidelity 81% ask that their name and address be included in the communications that are going out and actually if you looked at this another way which we'll do on the next slide only 4% actually request anonymity so I want to bust this myth today that Anonymous giving is not the only driver of using a donor advise fund it is a driver but not the sole reason so there's two quotes on this Slide the t

op slide is the Fidelity study that we just looked at again only 4% asked to remain anonymous the bottom slide is that completely separate study that I noted ear that's out of Canada I know there's differences in in philanthropy motivations and and whatnot between Canada and the US but I think in this case it's close enough to say that uh the Canadian donors indicated that anonymity is unimportant however we cannot ignore that Anonymous donations or seemingly Anonymous donations are a challenge

so what I want to say here is to think about a couple things one is that in many cases the donors that are giving anonymously to you through their dos are actually giving to you through normal or uh more named channels as well so this may sound a little bit weird but there was a study that interviewed some donors and in one example a donor uh was giving annual fund gifts through their I just keep saying checkbook but I realize most of us don't write checks anymore and they were putting their nam

e on it to the school that their child attended but then they were giving much larger gifts anonymously through their daff and the reason they were doing that was simply because they wanted to Shield their child the student at the school from getting any type of special attention from teachers or any type of chiding and um bullying perhaps from other students so it was actually the same people I mean all different reasons some give that anonymously because they don't want to be overs solicited r

eligious whatever the case may be but I think what's partially going on here is that in some cases a donor may think that a nonprofit has the information that the nonprofit needs to treat them as a named donor and they're not getting sufficient information from the sponsor to actually know who the donor is so I think there's more work that needs to be done across our industry here to assure that nonprofits are getting the right information so that they can thank their donors appropriately and kn

ow who their donors are uh but we' we've got some work to do okay so in summary what's in it for the donor and why do people use staffs instead of just giving money directly to a charity we've talked about all this a little bit we've talked about taxes we've talked about an anonymity so I'll skip those uh but if you're a donor that's all of a sudden got a ton of money from let's say an IPO or something like that maybe you want to do a bit of planning with that money you know you want to give it

away but you're not sure who you want to give it away to you need to talk to your spouse you want some advice from a professional putting a money putting the money in a DA allows you to uh make contributions and a much more measur time we talked a little bit about the uh complex assets before so we don't need to talk about that again uh but we do know that there's a lot of that happening um and there's there's just an ease and a convenience to it particularly as I referenced earlier with those c

ommercial sponsors like Fidelity and Vanguard and Schwab where uh for the person their assets are all being held in the same place and it's almost like they're walking down the virtual Hall to transfer money from their inv account into their daap seamlessly and frankly the money managers at the uh at the financial firms also have a pipeline built in they know what net worth for their Pro for their clients are and they also know when their clients might have tax liabilities where moving money int

o AAP might be tax advantageous for them if we think about International fundraising uh this does break down the barrier a little bit for donors within the United States that want to give to International causes because again the tax donation happens when you give the money to the sponsor so you still get your tax donation versus if you give a gift directly to an international organization that doesn't have a US fundraising arm you lose out on that tax donation uh and lastly there's a there's fa

mily intergenerational things that come into play setting up a DA is a great way to start to instill philanthropy within your children and within your grandchildren and many sponsors particularly on the on the Community Foundation side hold classes and workshops and have infrastructure in place to help families engage in philanthropy together and also to help donors be better informed about where they're making their gifts when you look at the psychology around fundraising I was actually a Psych

ology major in college so I always think about the psychology of fundraising the psychology of giving through adop is kind of interesting too because every donor gets this like warm fuzzy feeling every person when they make a gift to a nonprofit and in some ways that happens twice with donor advice funds because they're getting it at the time they're giving their money to the sponsor and then they're getting it again when they're making that allocation out to a uh nonprofit as well okay so last

little section here we're going to talk about the nonprofit recipients I'm going to take a sip of water before I do that okay thank you for my little pause so who are the players and who are the important people to make connections with we want to receive daap donors these probably seem obvious but we're going to walk through them anyway first the donors and the advisers of the funds um that makes the most sense that's going to be where you're most successful but I would say to think about how t

o build relationships with sponsor organizations because in the instances where there's sponsors are helping their clients identify organizations to give to the more the sponsors know about you you your priorities your successes your mission uh the more likely they are to recommend you to the folks that have donor advice funds at their organizations this is particularly true if you work at an organization that is locally focused and you can build relationships with your local Community Foundatio

n U also as I mentioned earlier once the final donor and final advisor passes away from a donor advise fund the money from that fund devolves into the sponsors managed accounts so any information that that sponsor has about your mission uh makes it more likely that you may receive a gift directly from let's say the Community Foundation as well and then lastly financial advisors financial advisors often bring daff donors to sponsors and provide some level of education and recommendations for nonp

rofits that a donor might want to give to so i' think about relationship ships with them as well actually kind of interesting here slightly sidebar but I think it's interesting there's a conference that is now in 2024 will be in its third year called The daff Giving Summit and the conference attracts uh individuals across the entire entire ecosystem of donor advise funds but rather than being majority of fundraisers at the conference the majority of the people that are at that conference are on

the sponsoring organization side of the industry the wealth advisor side of the industry the financial services side of the industry and not actually working for a nonprofit organization so there you have it so prospecting I noticed when we started and folks were saying where there we from there's a number of prospect researchers in the audience I just happen to recognize their name so here's some prospecting considerations philanthropy simply stated if someone has a donor advice fund you know t

hey're philanthropically minded which is great I've said it a few times that you can't assume major giving capacity here but there are things that you can do to try to work around that can you determine the assets that are in the daap can you determine the source of the funds can you determine what distributions are being made is there a way for you to find out what the minimum investment is at the sponsoring organization some sponsors have minimum investment requirements of $100,000 or a millio

n dollar so you know that if a donor has a fund at that sponsor they've put at least six or seven figures into that fund that's really crucial information for trying to determine capacity um so thinking about who that sponsor is and what type of sponsor is good as well uh people who set up daffs through Community foundations give something like 60% of the money to community-based organizations and the rest of the 40% are going elsewhere uh but that's an interesting stat to think about people who

give or have have Donor advised funds at single issue sponsors are obviously interested in that particular issue or charity or cause so if you have something within your organization that relates back to that type of issue or cause uh it's important to lean into those as well and finally if it's out a financial firm if the sponsor is a financial firm some of those financial firms have minimum amounts for contribution as well either for the donor advise fund itself or just to be a client at that

Financial firm in general so if you can find out if there's minimums for asset under under management with that at the firm level it'll tell you something about their capacity as well just a couple of words of cautions in terms of giving restrictions that are a little bit more nuanced than when someone does just send you that credit card gift contributions from a daff again are not tax deductible the tax deduction happens when the gift goes to the sponsor not to you as the receiving organizatio

n so when you think about your stewardship strategy and your acknowledgement letters I would recommend removing language about tax deductibility from your gifts that are donor advise fund gifts and instead focus on gratitude and impact um donor advise funds also cannot be used to fulfill a formal pledge because technically the donor does not have control over that money the sponsor does there are ways around this consult your legal your lawyers uh but thinking about using intent to give instead

of finding pledge is one way to think about that and lastly Donor advised funds cannot make gifts that have tangible benefits like ticketed events or Gallas or sponsoring a force them at a golf event uh so for anything like that you uh shouldn't be soliciting gifts out of donor advis fser okay so what's in it for the nonprofit recipient what's in it for you guys well all of evidence points to the fact that we're going to see more of these gifts coming into our organizations so I'm going to just

circle back to the beginning and say why should I care write that section of our report you should care because you sort of have to this is the bullet train that is in front of us and we need to dare I say it figure out how to Pivot to uh to work with donor advis funds um not against them so I understand that they may complicate fundraising they may complicate steward ship and cultivation uh but there's nothing to say that there's nothing that we can do on this call to stop the impact that they'

re having uh so I like to think about what can we do to work with them so with that in mind I want to just talk briefly about three things that you can do to be more successful with donor advise funds so the first one is to ask the right questions and to use the right type of Education team up with your marketing department to ensure that your Communications are encouraging donors to give uh through their donor advice funds or to notify you when they're making a gift from their fund uh you can d

o this on your website you can do it in your direct marketing appeals on your donation forms make sure that you have places on your website that call out in your like ways to give area that this is just another way to give it's also likely that many donors assume that you know that when their gift is arriving um so if they don't realize that you're having a challenge identifying them they might actually be wondering why you're not stewarding them so some of these things encouraging them to be pr

oactive and letting you know can be super helpful now I would say though that this shouldn't be the donor's problem as people in the philanthropy industry which I believe I'm assuming everybody on this phone is from in the philanthropy industry we should not be making this the donor's problem so the second thing that I would recommend is that you think about how to leverage technology to help you there are tools out there the giving block has one of them that allows you to help facilitate donor

advice fund giving directly from your website it's a widget that you can install and basically what this does is it doesn't make the donor leave your web page to initiate a grant from the sponsor it allows it to be seamless for them they're doing it from your website uh they are sort of porting themselves into their sponsor from your website and you're receiving all of the information that you need to manage record acknowledge and Steward that gift and then to round this out this one may seem a

little bit weird but I encourage you all to make sure that your EIN number is in a prominent place on your website and in particularly on your giving Pages it this may seem odd because that's a tax thing why would we want our donors to worry about it but for sophisticated and Savvy donors if they're requesting gifts from their sponsor rather than going through the widget I just recommend to you uh having your EIN number will improve the likelihood that you are actually getting the gift that the

donor intends for you to give if a donor asks their sponsor to make a gift to the local Humane Society or to the food bank there's you know dozens of Humane Societies and food banks out there and the EIN number is going to help make sure that the gifts being routed appropriately so I want to close today by just saying a quick word on what may be the elephant in our virtual room or in this case the elephant that's approaching so I know I mentioned really briefly earlier that there was some legisl

ation in passed through Congress in or the IRS actually in 2006 that codified were codified what a donor advise fund is uh there's more legislation that's pending right now in Congress there's an open comment period that's open through mid-February I think through the 15th and I'm not going to spend a ton of time here because we don't really know what's going to be passed through this legislation but suffice it to say that there is the possibility that there's going to have uh new regulations pa

ssed through Cong Congress that have some pretty substantial impacts on donor advice funds including the definition of what one is who could advise what holders can have what nonprofits might have to do to report the giving that they're getting through funds um and some are actually concerned that this may help hurt the industry where I think the intent is that it Sparks charitable giving so we don't know exactly what's going to happen here but if you're passionate about this I would take a look

at the legislation I would consider if you do want to comment or your organization comment but it's something to definitely keep an eye on because I think this is going to be an evolving situation and that's if anything passes because uh they tried to do this in 2017 and it just sort of fell by the wayside so with that um here are all those extra links that I me mentioned again I told you a lot of my slides had footnotes in it so keep an eye on those as well but I did want to point these out be

cause these are going to be um really great the definitive website has a resource center that tracks news articles and white papers and research on the donor advis fund industry so I would encourage you to take a look at that as well as our blog and then the three others that are on here the Council on foundations the donor advis fund research collaborative and integer which is uh the do policy Network are all really good resources to tap into if you're interested in learning more so at this poi

nt I can say thank you I can take another soup of water and we could start looking at all your questions amazing that was so so informative Melissa and I think everyone is going to be walking away with some really tangible information not only about dabs but about ways to really incorporate it into your fundraising strategy we have a lot of questions to get through which is really exciting um before we get to those questions I did want to just launch a quick poll that we have um so if anyone tha

t is in this webinar is interested in getting in touch with either a member of definitives team with Melissa or someone from the giving block to find more about our Donor advised fund giving form please just feel free to select yes on here um and we will reach out after this if not um or if you change your mind later we will be sending out a follow-up email that will have some more information on how to get in touch with Melissa and definitive but if you are interested now in getting in touch wi

th someone from either of our teams feel free to press yes on here so we can make sure to note that and I just while biley was doing that that I scrolled through the Q&A and I think there's a couple of these I can answer at the same time so I'm going to jump around a little bit if that's okay and um Billy if you don't mind just keeping me honest on on the time as well but there were a couple questions in here about the about what happens when a donor passes away and devolved funds so let me just

talk about that in a little bit more detail so this very much depends on what each sponsor has in its uh rules regulations terms and conditions uh many of the SP sponsors will actually outline this publicly on their website if if you go to a sponsor and look for the form that you would fill out if you were to create a donor advice fund so some sponsors will allow the donor of a fund to basically designate a new advisor uh so just like you would with a bequest like who's going to get your the mo

ney that's in your checking account who's going to become the adviser of your donor advise fund when you pass on some sponsors say you can only do that once so it's like one generation some say twice some you could do it indefinitely other sponsors say you cannot do that at all once you pass away that's the end of it and the donor advise fund becomes devolved uh so it is going to be very situationally specific to each sponsor's regulations there's also instances where there may be an allow for t

he donor to designate somebody but the donor hasn't designated someone in which case the money would devolve into the sponsors cers as well um so if you think about that from a Community Foundation perspective I live in New Hampshire New Hampshire commun charitable Foundation basically their general fund would become larger and they could do whatever they want with the money uh even for the national and Commercial sponsors like the fidelities it still needs to be used for charitable purposes so

I think that that answers a lot of those questions yep I went through and did that we answered all those lives that way we just have the ones still left in here yeah there was a question about da showing up on the tax code it the original legislation was passed in 2006 it was under the the pension something act I forget the exact term it's on my slide and then there was some additional legislation that was introduced in 2017 and it just sort of fell by the wayside and then as I said there is mor

e legislation that's being proposed today uh would a retirement distribution from a fidelity charitable be considered a DA so you can for your for required rmds required minimum distribution if I have a 401K with Fidelity and I'm I think it's 70 years old if I'm of the age where I need to do my rmds I can take a retirement distribution from my 401k move it into my donor advise fund also at Fidelity and that does meet the requirement for my rmds so that's that's actually a really good question pa

rticularly as more of the Baby Boomers are reaching that age where they need to be doing their required minimums um it is definitely something that that is possible so hopefully that answered that one uh do I have any hunches on the payout rate for Community foundations is less than commercial and single issue sponsors it's a really good question I have to think about that one a minute I'm GNA come back to that one Celeste let me think about that um is there any reason or benefit for a nonprofit

org to open a daap account of their own you know I'm I there are actually Four profit companies that have donor advis funds and they use them to help Channel their philanthropic giving um oftentimes of their uh ESG ESG strategy or their Community giving strategy I don't know of any nonprofit organizations to have one I suppose you could if you have it as part of your mission that you're giving money away to others but if I think about it in terms of some of the larger just in quantity types of

nonprofits like universities or hospitals they're typically not giving in giving money out I guess you can say uh scholarships but they're not usually granting organizations if you are a granting organization you would have to look at the legal tax code to see if you could but I don't see any reason why you couldn't I don't know that I answered that one the best but that those are some thoughts um what is the best way to court da sponsoring organizations Beyond local community foundations this o

ne I get asked a lot actually I think it's going to be the hardest with your uh with your financial firms I keep picking on Fidelity it's really nothing against Fidelity they're just the biggest so it's like they have a big Target on their back but there's like 70 of them so it's not just them um I think they're going to be the least likely to engage with you because they really are thinking about this from a fiduciary and Financial perspective a little bit less so from a philanthropic perspecti

ve the strategy with some of the single issue sponsors though can be very similar to a Community Foundation it's just not based around geography it's more based around cause so uh maybe not so for a university but you know for instance the The Pride Foundation is a sponsor so if you're an organization that's focused on uh lgbtq plus types of activities then your peer sponsor type is maybe the pride Foundation just as an example and I would think about how to make relationships with them just as

you would with your Community Foundation amazing um can you share the link or info on the pending legislation so yes but I don't have it while I'm sharing so if you wouldn't mind um if you're interested actually you know what when we send out the materials afterwards with the recording we will include a link I will make sure we include a link to the pending legislation let me just make a note of that how am I doing on time do we have time for more yep we definitely have time okay um I haven't ig

nored you celest I'm still thinking about your question um so someone's asking about a recommended website widget I I will be fair and balanced and say that there are a handful of them on the market but this is a giving block webinar and I do not work for the giving block so I will also l you know that the giving block has a really good one uh so if if you want to reach out to them they can help you and if you are at a at a organization where you've got to do some comparison shopping there's a c

ouple out there as well and we'll include in the fall email a little bit more about our tool just a link in there as well so if you want to learn a little bit more about how it works you can get started there as well yeah uh how can one question from a donor how can they best maximize their dep in regard to making regular or recurring gifts to nonprofit organizations I would recommend that the donor talk to their sponsor about that and see if the sponsor would be willing to set up something in p

erpetuity there are actually some donor advise funds that are considered endowed donor advise funds not the tubs tanks and Towers thing that I talked about earlier that's more about an an archetype or a motivation for a donor to give but some sponsors actually have funds that are called endowed Donor advised funds and for those funds uh you set up the fund and the agreement is that money will per will perpetually go to nonprofits that you designate so I think they need to work through their spon

sor to um see if that's something that the sponsor will allow is there a company similar to definitive for Canada uh no but definitive does have some Canadian uh funds in it so I would say reach out to us and we can show you what we've got in our system do you have any insight on how to handle daff gifts that come in without prior knowledge if a patron is looking to apply These funds towards a membership program that has benefits Associated are they legally allowed to pay the difference for the

benefits value or should they be directed back to your sponsor so this is an interesting one and there's been some chatter and like LinkedIn and list serves and stuff like that and what's the responsibility of the nonprofit to make sure that donor is doing something that is legally acceptable and what I would say to you is that I would um it is not the nonprofits responsibility per se but from an educational standpoint I would encourage you to make sure that the donor knows that it's not somethi

ng that they should be doing uh I don't even think it's a member of the difference in the benefits versus the above amount it's just that from a tax perspective they're they're not allowed to give to anything that has benefits associated with it at all it should be for Pure philanthropy so I would I would not um encourage them to do the pay the difference type thing what if a donor pays for an event sponsor well I just sort of answered that too what if a donor needs to pay for an event sponsorsh

ip with a daap does the organization need to reach back out uh I would say it's a good practice to do it but again it's not your responsibility to make sure they're doing what they should be from a tax perspective uh but it's not something that you want to lean into and encourage either how is the big giving block different from daff direct I would say this is a place where test driving is a really good thing um you know I Hondas and Toyotas are very similar but they're not exactly the same and

there's some folks out there that love their Hondas and others that love their Toyotas so uh someone did ask about options in daap direct is another option that has widgets yeah and I'll just say quickly too I think um because we have had nonprofits that use daff direct as well I would say the biggest thing is that with our integration donors can actually log in to their da provider directly within the tool so they never get taken to another page to their daff provider to log in and then make th

e donation everything that they do happens directly on your website so that can help you know with donor turnover things like that when they're doing everything on site but again like Melissa said um good to look at all the options out there and see what works best but but um what's really nice about I think what we offer is that donors can make the gift start to finish of the process all right on your website so definitely worth checking out and we'll send some followup about kind of what our t

ool offers in that follow-up email I've been so focused on the Q&A that I'll say two things one I didn't realize that the full results were showing I think they were showing but celest I wanted to get back to your question and I thought it would be better if I looked at the slide while I answered it so uh we're almost at the end of our questions uh Craig asked a question about unique entity ID replacing Ein and I'll be honest I'm not familiar with what the unique entity ID is so I would have to

do a little bit of research before I answered that um and yeah I don't know if anyone else on the call knows what that is and wants to put it in chat or put the answer in Q&A I'm happy to read it out loud uh but back to celeste's question the big question that I had to think about why is the payout rate for Community foundations less than for commercial and single issue sponsors so I brought that SL back up just so we can look at it together and it's one minute after the hour so I'm running late

I'm sorry guys this will be the last question I answer I promise um I think it's partially because if you look at the average assets the average assets are so much higher that significantly more money is being funneled into the Community Foundation per daff so even though the payout rate is less there's there's actually if you if you do the math quickly there's more money more dollars being generated out of those funds um than there is perhaps on the commercial and single issue side even though

the coffers are building at a little bit of a higher clip amazing and I think we had just one final question and then I think we can call it a wrap um is the unique entity ID replacing the Ein that's the one I don't know but Amanda just put this in chat that uh Amanda thinks the UEI will be used primarily for government funded relationships where revenue is paid out from a government agency to an NPO I love learning things when I am giving webinars so I thank you for teaching me something and I

thank you all for SP spending an extra two minutes with me thank you that was amazing so thank you again so so much to Melissa for this amazing presentation and thank you everyone for joining us today again as a followup we will be sending out an email that will have a recording of the webinar we'll include the slides all the great resources we talked about and then some more about how you can get in touch with Melissa and definitive if you have any other follow-up questions so look for that pr

obably by the end of this week by Friday and thank you again everyone for joining us and with that I'm going to go ahead and end this webinar so have a great rest of your Wednesday everyone