[ASK AN EXPERT] If Donors Giving From Donor-Advised Funds Want Anonymity, How Do You Cultivate Them?

Our Ask An Expert series features real questions answered by Claire Axelrad, J.D., CFRE, our very own Fundraising Coach, also known as Charity Clairity. Today’s question comes from a nonprofit employee who wants tips on how to connect with and cultivate Donor-Advised Fund (DAF) donors: 

Dear Charity Clairity,

My boss thinks we should get more funding through DAFs. But my understanding is most of these donors give through these vehicles to preserve their anonymity and not be bothered by constant solicitation, email messaging and the like. I don’t really know how to find these folks and, even if we could, I’m not sure how this will help us if we can’t directly connect with and cultivate them over time. Any tips?

— How to Work with Anonymous?

Dear How to Work with Anonymous,

You’ve begun with a widely-held, yet largely untrue, assumption.

In fact, the majority of DAF donors do not want to be anonymous. This means you absolutely can cultivate them, just like you would with any other donor. So, you should be doing everything within your power to leverage more of this giving (I’ll get to some tips to do exactly that in a moment).

First, let’s look at some data to debunk the anonymity myth.

In their white paper “Anonymous Giving Through Donor-Advised Funds” (January 2022) the American Enterprise Institute (AEI) reported that, of the 2,256,033 total grants made in 2020 from donors through the big five DAF sponsors (Fidelity Charitable, National Philanthropic Trust, Schwab Charitable, Silicon Valley Community Foundation, and Vanguard Charitable), only 4.3% of those gifts were given anonymously.

This jives with my own anecdotal research talking with nonprofits who receive these gifts. They report being able to discover the identity of approximately 95% of their DAF donors!

So, if donors don’t give through DAFs to hide their giving from prying eyes, why do they do it?

Reasons for giving through a DAF primarily fall into these categories:

1. Donor had a windfall; want to preserve some of this money for philanthropic purposes.
2. Donor wants to contribute non-publicly traded assets many nonprofits are not equipped to receive directly (e.g., crypto, private stock, restricted stock, and limited partnership interests). This is BIG. For example, 66% of gifts to Fidelity Charitable in 2021 were non-cash donations.
3. Donor wants professional investment or advisor services to assure their philanthropy has the most impact possible.
4. Donor needs a tax deduction this year, and like the flexibility of being able to recommend grants over a period of years (in which they may take the standard deduction).
5. Donor likes the convenience of a centralized philanthropic account.

Given these truths, what can you do to become a magnet that attracts more of this money?

One thing you can do is help your donors who may fall into any of these categories set up a DAF. For example, if you’re talking with someone who tells you they want to make a pledge, that’s an opening to discuss ways they can give that will offer them personal and financial benefits. A DAF is one such method; there are all sorts of other opportunities as well (you might simply direct them to your “Ways to Give” page). They’ll appreciate the information, and maybe begin to consider ways they can give even more than they were considering! They may even tell you they already have a DAF, and your reminder to them will prompt an immediate or larger gift because the money is already set aside for charity.

Other things you can do include:

1. Meet with local DAF sponsor organizations. Let your community foundation know you exist and you’d love to work with them to further their DAF donors’ interests.
2. Provide comprehensive up-to-date information to Guidestar-Candid. Many DAF sponsors share this nonprofit profile information with their donors.
3. Partner with marketing to promote giving through alternative vehicles, always letting donors know you’d also appreciate them informing you directly of their gift. You can do this on your:
   1. website
   2. direct marketing appeals
   3. donation landing pages
   4. reply devices
   5. blog
4. When you’re not sure who the gift is from, do some sleuthing. Sometimes simply examining the accompanying paperwork that comes with the check will reveal the answer. Or you may be able to search your database for a gift of a similar amount from the same DAF sponsor at this time last year. Or maybe you have a major donor who generally gives at this time, but has not done so yet? If so, call the donor and ask if this gift is from them!
5. Report back on impact, both immediately and through the year. DAF gifts come from an investment, and folks need regular reports on how their investments are doing. Just because the check came from their DAF, and not from the donor directly, is no reason for you to ignore the fact that saying thank you is just about the most important thing you can ever do!

The truth is DAF donors prioritize philanthropy. That’s the real reason they created a philanthropic wallet! They’re all about philos (love) and anthropy (humanity), and they want to extend that love broadly to make an impact today. Unlike private foundations, DAFs give their money away relatively quickly: 38% of the dollars donated are gone within a year, 74% is distributed within five years.

Being human, DAF donors generally want to see some of that love reflected back. That’s where you come in. When you make DAF donors feel good, they’ll be inclined to give to you again. As with any other donor, your job is that of a philanthropy facilitator. Fundamentally, you’re in the happiness delivery business.

The best way to work with your DAF donors? The same as you’d work with any other donors.

To your success,

— Charity Clairity (Please use a pseudonym if you prefer to be anonymous when you submit your own question, like “How to Work with Anonymous” did.)

How do you cultivate DAF donors? Please let us know in the comments below.