New Report: Valuable Insights into Donor-Advised Funds with Dr. Daniel Heist, Part 1

In light of ongoing criticisms of donor-advised funds and their growing popularity as a flexible giving vehicle, Philanthropy Roundtable interviewed one of the authors of a new research report, “The 2024 National Study on Donor Advised Funds.” The report offers valuable insights into why these criticisms are unfounded. Equally important, the report demonstrates the myriad ways DAFs are used by donors to strategically support charitable causes, democratize giving and improve countless lives.  

The authors gathered and analyzed a large dataset covering nine years of activity from more than 50,000 accounts, with over 600,000 inbound contributions to DAFs and more than 2.25 million outbound grants from DAFs. Overall, this report represents the most extensive independent study on DAFs to date. 

To get a better sense of the report’s implications, we spoke with corresponding author Dr. H. Daniel Heist, an assistant professor of public administration and nonprofit management in the Romney Institute of Public Service and Ethics at Brigham Young University. Heist’s research focuses on charitable giving and philanthropy, especially donor-advised funds, as well as volunteering. His nine years of professional fundraising experience inform his research and teaching.   

The interview delves into three key themes concerning the new report on DAFs: 

  • The profile of DAF holders: The questions explored the size distribution of DAFs, the recent surge in new accounts and the involvement of multiple advisors in managing these funds. Understanding the profile of DAF holders (size distribution, new accounts, advisor involvement) is crucial for tailoring strategies to reach and serve this growing donor base effectively.  
  • Motivations for using DAFs: The interview inquires about the factors contributing to the rise in DAFs, going beyond just tax benefits. Exploring the motivation for DAF use helps in understanding the values and priorities of DAF donors, enabling charities to better align their messaging and programs with donor interests.  
  • Long-term implications: The questions explored the use of succession plans for DAFs and their impact on long-term effectiveness. Examining succession plan use and impact on long-term effectiveness ensures the sustainability of DAFs and the continued support they provide to charitable causes.  

The following is the first of three blogs based on this interview. 

Q: Let’s start with the finding that almost half of DAFs have less than $50,000 in assets. Did this surprise you, and is it consistent with your prior research? 

Heist: This is consistent with prior research, but even higher than prior numbers. Before about 44% of accounts were in this size range. Now, including National DAFs, the percentage is even higher. If we were to include workplace DAF (i.e. Benevity) or other Nationals with zero minimum contribution, this percentage would be even higher. So, 49% is likely an underestimate of how many smaller DAFs there are nationwide.  

Q: The study also notes a surge in DAFs opened after 2020. What factors do you think contributed to this rise, and do you see it as a long-term trend? 

Heist: We do see this as a long-term trend. There was a bump in new DAFs in 2017 with the Tax Cut and Jobs Act, but the growth has continued to increase since then, and during ups and downs in the economy. So, the factors for the growth of DAFs go beyond just tax policy and economic factors. Individuals and families who give to charity are realizing the convenience and usefulness of DAFs as a giving tool. A variety of DAF sponsors are reaching a wide variety of donor populations. More than half of the U.S. population donates to charity and right now about one million DAF accounts have been opened. I don’t see market saturation in the near future. 

Q: Interestingly, the study reveals 70% of accounts have multiple advisors. Can you explain what this means and its potential implications? 

Heist: The fact that most DAFs have multiple advisors primarily means that DAFs facilitate family philanthropy. We generally see DAFs being used by spouses, but about 17% of DAFs had three or more advisors, signifying the inclusion of next-gen family members in the use of the DAF. It is possible that some of these advisors are professional (financial) advisors, but our qualitative research indicates it is most likely family members. 

Q: The high prevalence of succession plans for DAFs is noteworthy. What different types of plans are typically used, and how do they impact long-term effectiveness? 

Heist: The most common succession plan (70%) was to leave the DAF to successor advisors, which are almost always family members. This passes philanthropic resources along to the next generation, including the decision-making power for how to use these resources. About 30% of DAFs with a plan were leaving money to an account within the DAF sponsor. This could be an endowment that is designated to benefit a specific charity, or a pooled fund that focuses on a specific area of interest or a general endowment that the sponsor organization uses to accomplish its mission. All of these options fulfill various philanthropic goals, again emphasizing the flexibility of DAFs and their ability to facilitate a wide range of philanthropic strategies. 

Next week, in the second of three blogs in this series, Heist discusses more about the findings of his groundbreaking new research on donor-advised funds.   

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