How to better engage with donors who give through donor-advised funds
We’ve heard there’s some confusion in the nonprofit world about donor-advised funds (DAFs). We wanted to offer a few tips—from one nonprofit to another—about how best to engage with donors who give through DAFs and spread the word that your organization welcomes DAF grants.
First, the basics: donor-advised funds (DAFs) are a charitable giving account designed exclusively to invest in, grow, and ultimately maximize the amount of assets a donor has available to give to charities. For information about DAFs, you can read more here.
At their core, DAFs serve as seamless giving vehicles by reducing the administrative burden on donors and nonprofits. DAFs are also poised to maximize sustained philanthropic impact as they are structured to allow donors to grow diverse assets over time.
The best way for nonprofits to successfully engage with DAF account advisors is to reach out directly to the donors. Your organization likely already talks to donors who have DAF accounts. Reminding donors that you are DAF-friendly is a great way to encourage them to direct grants to your organization.
Here are a few actionable ideas to show you’re DAF-friendly
Talk to your donors about donor-advised funds
Donors who open DAF accounts care deeply about giving back—they establish these accounts for the express purpose of supporting charity. Once donated to a DAF account, funds can only be used for charitable purposes. DAF account holders view philanthropy as a core value and they often include loved ones in the giving process.
ACTION: Remind donors to support your organization with their DAF accounts. Share communications that mention your ability to accept DAF grants. This ensures donors feel comfortable recommending a grant to your organization. Mention it on your website, in marketing emails, and during fundraising events.
Know the rules for DAF sponsors
DAF sponsors are nonprofits and regulated by the IRS. Like you, we work within a pre-determined set of rules. Knowing the rules around DAFs may help ensure your organization doesn’t inadvertently step outside those parameters.
For the most part, grants move smoothly through the DAF granting process. As part of that process, DAF sponsors, like Vanguard Charitable, perform due diligence around the grantee organization and the purpose of the grant. Most organizations are in good standing with the IRS and will be approved to receive the grant. During the review process, we have a team of granting experts who reach out to nonprofits when questions arise. DAF sponsors do retain the responsibility to deny a grant and it’s an important step that ensures funds are used for the public good.
ACTION: Make sure your charity’s directory profile is up to date and accurately reflects your organization. Many DAF sponsors use GuideStar by Candid as a data source. If something’s incorrect, you can update your GuideStar profile online. Donors make decisions based on this content and accuracy is important.
Educate your entire team on donor-advised funds
Do your board members, senior leaders, fundraising, development, finance, and marketing teams know what a DAF is and how it works? Are they comfortable engaging in conversation with a donor who gives through a DAF? Do you track donations from DAFs differently than direct donations?
DAF donors are savvy, strategic philanthropists, and they use their DAF accounts to give conveniently, efficiently, and generously. Understanding their mindset will go a long way in successfully educating them about your nonprofit and encouraging them to give.
ACTION: The way you handle a DAF grant or a donor with a DAF account is critical in building relationships. For example, did you know donors with DAF accounts receive tax receipts when they contribute into their DAF account? Instead of sending tax receipts to DAF donors, send a thank-you letter instead. From there, you can start a conversation with the donor about scheduling recurring grants to support your organization. Need a DAF resource to share with your team? Share this link.
Suggest your donors use DAFs for complex assets
Many DAF sponsors have the expertise and resources to liquidate various complex assets, turning them into charitable dollars. Complex assets, such as real estate, private equity shares, stocks, insurance policies, artwork, and more, may hold value that could create long-term charitable impact when those charitable dollars are invested for growth.
ACTION: If your organization isn’t prepared to facilitate a complex asset donation, talk to your donors about donating their complex assets to a DAF. Coach donors on how complex assets can be liquidated, invested for potential growth, and granted out on a recurring schedule.
Build relationships with anonymous donors
Every so often we’re asked, “How do I build a relationship with an anonymous donor?” It’s true that a very small percentage of our donors ask to give anonymously, and we respect our donors’ wishes. But if donors have recommended grants to your organization through a DAF, they know about your organization and are impressed enough to support it.
Maybe they’ve made a one-time donation, but it’s also likely they’ve learned about your organization from you, through an online directory, social media, newsletter, prospect outreach, or mailing list. Continue sharing information on these platforms to educate donors—both current and potential—about ongoing needs and initiatives your organization is undertaking.
ACTION: The vast majority of DAF donors do not give anonymously, so be sure to thank donors directly. While you may not be able to thank donors who wish to remain anonymous directly, you can acknowledge you’ve received a grant by recognizing anonymous grants on your social media, website, and in all donor communications. There’s a strong possibility that your message will be received. And even if it isn’t, you’re sending a clear message to everyone else that your cause is worth supporting. Trust that sending a message to all donors is just as powerful as cultivating a relationship with one donor.
For more information about DAFs and nonprofits, please visit our nonprofits page.
Reprinted from Vanguard Charitable.