In the ever-evolving world of financial planning, staying ahead of the curve is crucial. As a financial advisor, one of the most effective ways to do that is by integrating donor-advised funds (DAFs) into your practice. I’m going to share with you why DAFs are not just a growing trend—they’re an opportunity for financial advisors to gain a significant competitive edge in 2025.
The rise of donor-advised funds
Since 2014, DAFs have experienced explosive growth. The total value of DAFs has skyrocketed from $69 billion to $251.52 billion by 2023, a staggering 265% increase. In the same period, the number of DAF accounts grew by nearly 800%. And the reason for this surge is simple: DAFs offer an unmatched combination of flexibility, tax advantages, and ease of use.
While private foundations are still well-known and widely used, DAFs have quickly overtaken them as the preferred charitable giving tool.
Here’s why.
Why are donor-advised funds so popular?
- Simplicity and low costs Establishing and maintaining a DAF is straightforward and cost-effective. There’s no need to manage the heavy administrative burdens of a private foundation. With just a single account to track donations, you can help your clients manage their charitable giving without all the complexity.
- Tax advantages and efficiency DAFs allow clients to donate complex assets like appreciated stocks or real estate and receive a charitable income tax deduction. They also avoid capital gains taxes on highly appreciated assets. With tax-free growth and the ability to make tax-efficient donations, it’s a win for both clients and their financial plans.
- Flexibility and control DAFs offer the flexibility of a private foundation without the high costs or complexity. Clients can make grants to their favorite causes, involve family members in the decision-making process, and even defer their giving until it’s most advantageous. This level of control makes DAFs an appealing option for those looking to maintain their charitable giving goals while simplifying the process.
- A lasting legacy DAFs aren’t just about today—they’re about tomorrow. Clients can involve their heirs in the process, creating a philanthropic legacy that spans generations. This makes DAFs a great tool for clients who want their charitable efforts to continue long after they’re gone.
The competitive advantage in 2025
As we approach 2025, DAFs are becoming a must-have in every financial advisor’s toolkit. If you’re not already incorporating them into your practice, now is the time to start. DAFs will not only help your clients maximize their charitable giving, but they’ll also allow you to deepen client relationships by offering a tailored, tax-efficient solution to their philanthropic goals.
Advisors who understand DAFs and use them to build personalized strategies will stand out in a crowded market. They’ll be able to provide clients with a comprehensive approach that combines financial planning with meaningful charitable impact, building trust and long-term value.
Final thoughts
Incorporating DAFs into your practice is more than just a trend—it’s a strategic move that will benefit both you and your clients. The growth of DAFs is undeniable, and as more clients seek out these flexible and tax-advantageous tools, those advisors who stay ahead of the curve will be the ones who thrive in 2025 and beyond.
If you have any questions about how DAFs can benefit your clients, please reach out to our team of experts at [email protected].
