Timothy French is a big fan of donor-advised funds.
The vehicles enable investors to group charitable donations they would give over several years into one lump sum that qualifies them for a tax deduction at a time when the increased standard deduction has killed most itemized deductions. The money in the DAF can then be granted at the direction and pace suggested by the donor.
“We recommend them fairly extensively,” said Mr. French, managing director and chief client officer at Altair Advisers. Clients “use the DAF to lock in their deduction and then they can take their time to determine who they want to be the ultimate beneficiary of the funds from the DAF.”
Unlike a private foundation, a DAF does not require filing IRS paperwork to set it up nor does it require an annual Form 990 tax return. Foundations must have a board with legal authority and require an annual 5% payout.
“The DAFs are absolutely easier [to establish] than the private foundations,” Mr. French said.
Financial advisers often reflexively favor DAFs over foundations without looking into foundations, said Page Snow, chief philanthropic and marketing officer at the Foundation Source, a provider of support services for foundations.
“For advisers, a DAF is the default recommendation because they’re comfortable with them,” Ms. Snow said. “I don’t think advisers really understand the differences between the two so that they can advise the client on the best [choice] for their tax, charitable giving and family situation.”
Foundations offer more flexibility than a DAF, Ms. Snow said. A DAF is a single account within a larger charity. A foundation can be used for more purposes.
For instance, with a foundation, a donor can give to families or individuals in need or set up a scholarship program in which they select the recipients themselves. Donors can run their own charitable programs through a foundation, such as providing textbooks for schools.
A foundation can hire staff and pay for expenses associated with charitable endeavors.
More ambitious giving is better served by foundations, Ms. Snow argues.
“If you have a bigger DAF, you’re going to want to do more sophisticated philanthropy” that can be accomplished through a foundation, she said. A DAF cannot be converted to a foundation.
There were about 728,563 donor-advised funds in 2018 compared to 80,000 independent private foundations, according to the National Philanthropic Trust. But foundations had $873 billion in assets compared to $121 billion held by DAFs.
Ms. Snow said it’s a myth that foundations are the domain of the ultra-wealthy. For instance, there is no minimum asset requirement to establish a foundation. She also asserts that they’re not significantly harder to manage than a DAF.
“We’ve made running a private foundation as easy as running a DAF,” Ms. Snow said.
[More: A better way of giving]
A new proposal could end the ban on promoting client reviews in states like California and Connecticut, giving state-registered advisors a level playing field with their SEC-registered peers.
Morningstar research data show improved retirement trajectories for self-directors and allocators placed in managed accounts.
Some in the industry say that more UBS financial advisors this year will be heading for the exits.
The Wall Street giant has blasted data middlemen as digital freeloaders, but tech firms and consumer advocates are pushing back.
Research reveals a 4% year-on-year increase in expenses that one in five Americans, including one-quarter of Gen Xers, say they have not planned for.
Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.
Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.
