As the landscape of philanthropy continues to evolve, donor-advised funds (DAFs) have gained significant traction; they offer individuals a strategic and efficient way to contribute to charitable causes while maximizing tax benefits and maintaining flexibility in their giving. Recent discussions surrounding proposed regulations impacting DAFs have sparked debate about the role of financial advisors in their donors’ decision-making processes and the potential implications for charitable giving.
In response to these developments, Ren conducted a survey involving just under 100 financial advisors and donors who established DAFs within the past two years. The survey explored various aspects of DAF usage, including education, setup processes, advisor influence, and potential impacts on charitable contributions. The findings shed light on the critical relationship between financial advisors, donors, and the DAF landscape, offering valuable insights into the dynamics shaping philanthropic decisions.
We hope that by leveraging the insights gleaned from this survey, stakeholders can navigate challenges and seize opportunities to create a more impactful philanthropic landscape.
To summarize our findings:
Donors who hear about DAFs from their financial advisors give more to charity than they otherwise would.
- Of the donors surveyed, 75% learned about DAFs from their financial advisors, and 50% of respondents found their advisor “very influential” in their decision to open a DAF.
- More than 95% of donors view DAFs as a highly efficient vehicle to contribute to charitable causes.
- Approximately 50% of all surveyed donors would donate less without a DAF, while an additional 30% would donate the same but reduce the amount by the taxes paid on the sales of assets. Said differently, 80% of all donors surveyed would have given less to charity if not for DAFs.
- Of the 50% who indicated they would donate less without a DAF, 40% of those donors would donate between 40-80% less to charity.
Financial advisors recommend DAFs to help customers achieve their charitable giving goals, but they do not account for a large percentage of their assets under management.
- Approximately 75% of advisors surveyed reported DAFs make up 2% or less of their compensation on a client account.
- More than 90% of advisors are not compensated for opening a DAF, while 85% are compensated with investment management fees to help the assets grow.
- More than 95% of advisors surveyed do not lower fees on a client’s portfolio if they open a DAF, while a little less than 5% lower fees on other assets to incentivize clients to open DAFs.
- More than 30% of advisors would be less likely to recommend a DAF to a client if they were not able to be compensated for their services managing the invested assets.
The survey results highlight the pivotal role that financial advisors play in shaping their clients’ philanthropic strategies and decisions regarding DAFs. With most donors citing their advisors as influential in their choice to establish DAFs, it’s clear that these professionals serve as trusted guides in navigating the complex terrain of charitable giving.
Furthermore, the overwhelmingly positive sentiment towards DAFs among donors and advisors underscores the value and efficiency of these vehicles in facilitating meaningful contributions to charitable causes.
As discussions surrounding regulatory changes continue to unfold, it is essential to recognize the interconnectedness of financial advisors, donors, and the philanthropic ecosystem at large. By understanding the perspectives and motivations driving these stakeholders, policymakers and industry leaders can work toward solutions that promote transparency, accessibility, and effectiveness in charitable giving.
