The DAF Research Collaborative just released its debut report, the most extensive independent study on DAFs to date, and we’ve recapped the most important revelations for nonprofit fundraisers.
The Donor Advised Fund Research Collaborative (DAFRC) released a groundbreaking study on DAF account-level activity across 111 different DAF sponsors in February 2024. The scope of this study is amazing, including:
9 years of activity (2014 - 2022)
50,000+ DAF accounts
600,000+ inbound DAF contributions
2.25+ million outbound grants
This analysis was led by a team of leading academic researchers, including Dr. Daniel Heist from Brigham Young University, Dr. Danielle Vance-McMullen from Depaul University, Brittany Kienker with the Council of Michigan Foundations and Jeff Williams with the Johnson Center for Philanthropy. The research is funded by the Bill & Melinda Gates Foundation and conducted in partnership with GivingTuesday and the 111 participating DAFs, including community foundations, national programs and religiously-affiliated organizations across the country.
According to the DAFRC’s website, “One of the initiative's main goals is to gather and analyze account-level DAF information that is not available from publicly accessible data sources, such as the IRS Form 990. The account-level data allows for a more nuanced and accurate understanding of DAFs, as well as comparisons across different types and sizes of DAFs and DAF sponsors.”
This robust and highly-detailed analysis has 70+ pages of data on DAF account details (size, age, type, etc.), donor demographics, contributions, grants, payout rate and more. We’ve highlighted 9 of the most relevant takeaways for nonprofit fundraisers specifically, and brand new insights that haven’t been previously revealed by other research.
1. DAFs are quickly being democratized | 49% of accounts <$50k in assets
DAFs historically had a reputation of being a philanthropic tool reserved for the ultra wealthy, but this research shows how much that has changed. By the end of 2021, 49% of all DAF accounts had less than $50,000 in assets.
As DAFs become an increasingly common tool for philanthropy across the spectrum of donors, it’s important for nonprofit fundraisers to make sure their full fundraising department (from major gifts to annual giving) is well versed in how DAFs work and how to best communicate with DAF donors.
2. The rapid rise of DAFs | 1 in 4 DAFs opened after 2020
Prior industry research from the National Philanthropic Trust has shown how the total number of DAF accounts increased by 126% between 2018 and 2022 to nearly 2 million and this study adds an interesting dimension to this trend. Of the 50,000+ accounts included, 1 in 4 were opened after 2020, and 81% were opened after 2010.
If the DAF market follows the growth trajectory it’s currently on, analysts predict there could be a trillion dollars in DAFs by 2029 - 4x where we are today. It’s a critical time for nonprofit organizations to be proactively engaging with DAF donors and developing a strategy for DAF fundraising.
3. DAF bequests are a huge, largely untapped opportunity | 36% not willed to family
92% of accounts in the study had a succession plan in place, and of those, 69% were to another person or family. That means that 36% of DAF accounts either don’t have a successor named or have named a nonprofit beneficiary (the DAF sponsor itself or another charity). These accounts present an incredible opportunity for more planned giving conversations with to either add your organization to a DAF donor’s list of beneficiaries, or make sure they have a beneficiary named in the first place.
4. DAF giving is much more consistent throughout the year | Only 15% in December
The distribution of DAF giving is fairly steady throughout most of the year, with 6-9% of the total happening each month in January through November. The most active month for DAF grants is December at 15% of the total dollar volume, much lower than the 26% of overall nonprofit revenue that comes in December, according to the M+R 2023 Benchmarks report. This trend is even more pronounced for large DAF grants, as grants over $50k are distributed more evenly throughout the year.
This is not to be confused with DAF contributions which are highly concentrated at year end as DAF donors are finalizing their tax planning for the year, with 36% of contribution dollars moving in December. The important takeaway for nonprofit fundraisers is to not limit your communications around DAF giving to year end giving season, but to make sure you are engaging your donors on DAFs year-round - because they are using their DAF year-round!
5. DAF accounts are typically managed by more than 1 person | ⅔ managed by couples or families
Over ⅔ (67.5%) of accounts in the study were managed by more than one person, as the majority of accounts are jointly held by couples or families. It’s important for nonprofit fundraisers to steward DAF donors as they would a couple or family and not as a single individual. That means learning about how different members of the family engage in philanthropy, what their goals are as individuals or a family, etc. It’s a great opportunity to build a deeper relationship across generations and build deeper connectivity for your organization.
6. The vast majority of grants include donor details | <4% of grants made anonymously
DAFs often carry a reputation of generating a large number of anonymous gifts that frustrate nonprofit fundraisers. While they do offer that benefit to DAF account holders, the vast majority do not make their grants anonymously - only 3.7% of DAF grants in the study were made anonymously, to be exact. When looking at this statistic on a dollar volume basis, it increases to 8.7%, but the researchers noted that this difference is largely attributable to a small number of 8 figure anonymous gifts that are major outliers.
The complaint around anonymous gifts from nonprofit donors is often conflated with a complaint about too little identifying information related to donors. Some DAF gifts only provide a “fund name” (e.g. the Smith Fund) which doesn’t give enough information to identify the actual donor, and most gifts only include a mailing address for contact information.
Chariot’s DAFpay solution provides a solution to capture DAF donor name and email immediately when they initiate a DAF gift through DAFpay, enabling ideal real time stewardship. Learn how the Michael J. Fox foundation is taking advantage of this innovation in DAF fundraising.
7. Most DAFs are quickly moving assets to charity | 54% of DAFs granted out >50% in 3 years
DAFs are often criticized because they do not include a mandatory distribution minimum or deadline. However, in practice, the majority of DAFs are distributing funds quickly. The study showed that 54% of the accounts included in the study disbursed over half of their original contributions within 3 years. After 8 years, 58% had distributed 100% of their original contributions.
DAFs are often compared with foundations as a vehicle for philanthropy, but it’s important for fundraisers to note that most DAF account holders end up deploying all of their capital within a few years. Reminding DAF donors of the critical near term opportunity your organization is working on and time sensitivity of your cause area can help activate more of their DAF capital.
8. First insights into median DAF payout rates | 9% median annual payout rate
This study provides the first-ever insight into median payout rates across accounts at various DAF sponsors. At first glance, it’s surprising that the overall median is so much lower than the industry average (which has been above 20% every year since NPT started tracking in 2007). A few reasons to point to:
When you remove inactive accounts, this figure increases to 15%
The overall average in this data set is 18%, indicating that this sample size likely has lower figures overall on payouts because there was not good representation in the study from low-to-no minimum national DAFs which tend to have higher payout rates (Fidelity, Schwab and Daffy have all recently reported much higher figures)
9. Significant number of inactive DAF accounts | 22% of accounts were inactive in the past 3 years
22% of accounts were inactive (did not make a grant) in the past 3 years, but those were typically smaller and newer accounts. 45% of inactive accounts were opened since 2020 and 72% of inactive accounts being under $100k in size (compared with 62% of active accounts).
This is certainly a big contributor to the 9% median payout rate mentioned in takeaway number 8, and an opportunity for improvement that everyone in the industry is focused on. Nonprofits want more DAF dollars being disbursed faster, DAF sponsors want their clients to be deeply and regularly engaged and technology providers like Chariot want people’s DAFs to be as usable as possible wherever they give.
Drew Schneider, Chariot’s Co-Founder and Chief Product Officer, has interviewed hundreds of DAF donors and shares “it’s pretty shocking how many people forget about their DAF or how much money is in it because they historically haven’t been able to use it in all the places they are most likely to give - a nonprofit’s website, campaign page, etc.”
If DAFpay were a ubiquitous payment option on every nonprofit donation form, how much lower could this inactive account figure be?
Be sure to review the full study from DAFRC for many more fascinating insights, and be sure to get a demo fo DAFpay if you’re interested in making it as easy as possible for DAF donors to support your organization.