In-House and Outsourced Service Options for Donor-Advised Fund Programs

Note: This post is a part two of a three-blog series by Gideon Taub, Ren’s Chief Strategy Officer providing his perspectives on the DAF ecosystem, the latest trends, and insight into Ren’s vision. 

In addition to his role at Ren, Gideon leads the content and programming for the DAF Giving Summit. You can follow Gideon on LinkedIn, and join the DAF Giving Summit email list to keep up with the latest event details.

As the donor-advised fund (DAF) ecosystem has matured, DAF programs now have far more options available to them in terms of technology partners, services partners, and point solution vendors. My previous post shared my mapping of the DAF landscape in the hopes of helping those in the DAF market better understand the supply chain and its participants.

Today, I want to provide a guide to the options DAF programs have in terms of which core functions can be handled by in-house staff and where partnering may be a better path forward.

The table below outlines the options, which for the most part can be mixed and matched as desired. Additionally, a DAF program can choose to change from insourcing to outsourcing (or vice versa) any part of its program as it scales and matures. Of course, there are switching costs, but none of these decisions are forever.

In this post, I share the options, and in my next post, I’ll share the trends I’m seeing across the space.

Let’s dive in across the key decision point:

1. 1. Tech Platform
   2. Sponsoring Charity
   3. Administration Services

In-house services means the DAF program handles all aspects of the DAF such as donor and advisor education and support, transactional and accounting processing and reconciliations, grant processing, due diligence and remittance, and more.

In-house and outsourced typically means the DAF program handles donor and advisor support and outsources most or all of the transactional and accounting processing and reconciliations, grant processing, due diligence and remittance, and more. Outsourced services means the DAF program outsources all aspect of DAF administration to the partner.

Tech Platform

The first major decision point is whether to build and maintain a proprietary technology platform or partner with a vendor listed under the ‘DAF administration technology’ box in the DAF Landscape.

As the first national DAF programs were launching and scaling, there weren’t any great, reliable, scaled technology solutions, and so those programs ended up building out their own proprietary solutions at a great initial and ongoing expense.

Today, there are a handful of options for programs to choose from, where they can license technology and benefit from ongoing investment and improvements in those technology platforms. The best solutions are highly configurable allowing programs to deliver a unique, differentiated program to meet the needs of its clients, donors, advisors, and wider community.

Here is a summary of the options available if you plan to build your technology platform in-house:

If you plan to license your technology platform from an outside vendor, here are your options:

Sponsoring Charity

Another major decision point is around whether a program wants to create its own public charity to act as the sponsoring charity for the DAF program or use one of the leading private-label DAF providers, namely Renaissance Charitable Foundation (RCF) and National Philanthropic Trust (NPT).

Creating their own public charity does come with additional upfront costs in setting up the 501(c)(3), creating by-laws and policies, creating a master services agreement (MSA) between the non-profit and for-profit entities (if needed), and the ongoing oversight required to operate under compliance. This approach does afford the DAF the ultimate control of every aspect of its program. Note that if the DAF chooses to build its own tech platform, it is common to also create its own sponsoring charity.

Alternatively, DAF programs can operate as private label in partnership with a charity like RCF. Together, RCF and the DAF program will partner to determine all the major policies of the program, including branding, minimums, fees, investment options, and many more. The charity is responsible for all the compliance, reconciliations, tax and government filings, and more, while the DAF program can configure the major components of its program.  

When working with Ren, there isn’t a cost difference between a DAF Program using their own sponsoring charity or leveraging RCF, so cost isn’t the key decision driver, but control is.

Here is a summary of the options available if you plan creating your own sponsoring charity:

If you plan on partnering with an established sponsoring charity, here are your options:

Administration Services

Finally, the DAF program must determine which services they will handle internally and which they’ll choose to outsource to a partner like Ren. This can be but doesn’t need to be an all-or-nothing decision. For example, here are three very common approaches to insourcing/outsourcing support services:

1. 1. Program A may choose to handle all the services in-house. Programs that license their own tech platform are licensed as a pure Software-As-A-Service offering, with its staff managing all the services.
   2. Program B may choose to leverage its own employees for all donor and advisor-facing services such as support, account opening, contributions, etc., and outsource all back-office functions such as reconciliations, charity due-diligence, grant distributions and payments, charity support, etc., to its third-party partner.
   3. Program C may choose to outsource both the front-office and back-office service functions to its preferred partner. The services are fully private labeled so that when answering phone calls or emails, support staff will represent the DAF program as if they’re the internal staff, which offers a seamless and trusted experience for donors and advisors.

These three options are listed from highest to lowest cost to the DAF program. Organizations like Ren now have the scale and domain expertise to provide all these services in a more cost-efficient way as compared to what it would cost any leading firm to hire, train, and manage those resources as full-time employees.

To summarize, here is the full table of different DAF program options:

Reach out to us if you’re interested in discussing any of these options or combinations more extensively.

Note: This post is part of a monthly blog series by Gideon Taub, Ren’s Chief Strategy Officer providing his perspectives on the DAF ecosystem, the latest trends, and insight into Ren’s vision. In addition to his role at Ren, Gideon leads the content and programming for the DAF Giving Summit. To make sure that you don’t miss any future posts, subscribe to Ren’s email list here, follow Gideon on LinkedIn, and join the DAF Giving Summit email list. Gideon founded Pinkaloo Technologies, which was acquired by Ren in 2021.