4 Reasons for the Importance of Donor Advised Funds for Nonprofits

4 Reasons Why DAFs Are Important to Nonprofit Development

Donor Advised Funds (DAFs) are the fastest growing philanthropic tool. Donations out of DAFs are growing. At The Signatry, grants going out in the first half of the year have increased by an average of 11.8% each year since 2019. Fidelity Charitable, the largest DAF sponsor, has also reported an increase. They saw an increase 11% in donations going out in the first half of 2022. In 2020, when the need was high and the future uncertain, DAFs increased. The 2021 DAF Report found that total contributions to DAFs increased 20.6 percent. There was increase of grantmaking of 30%. 

Here’s the lesson: In 2020, when we saw uncertainty and hardship, we saw donors step up their generosity. The same can be true now. Nonprofit leaders must lean into donor relationships and embrace the potential power of a donor advised fund. There are four main reasons I cover in the video above about why donor advised funds are important to nonprofit work.

1. Capacity — DAFs hold wealth that is set aside for charitable purposes. There has been record growth in assets in DAFs. That means there is an opportunity for nonprofits to make a case for a growing investment in the work. 
2. Consistency — Donors are recommending more grants from DAFs. DAF donors give generously and consistently – across economic cycles, challenges and uncertainty. 
3. Loyalty — DAF donors are loyal. Another DAF sponsor found that 74% of grants went to a nonprofit the donor had already supported. 
4. Versatility – DAFs allow donors to give non-cash assets like stock, real estate, closely held business interest.  

Donor advised funds are certainly important for nonprofits in economic uncertainty. Want to read about my four keys for fundraisers to navigate economic uncertainty? Read our latest blog.