Donor-advised funds spark bigger aid for nonprofits

Charitable investors who incorporate donor-advised funds into their giving strategy are likely to open their hearts and wallets wider to their favored causes.

That’s according to a recent study conducted by Chariot and K2D Strategies, which hints at a powerful link between people’s DAF use and their giving behavior.

The inaugural DAF Fundraising Report, examining data from 2019 to 2023, highlights a 96 percent rise in annual giving among donors who transitioned to DAFs, emphasizing the growing importance of these funds in nonprofit fundraising.

Those numbers also jive heavily with research from Vanguard Charitable. In an April report, it found three-quarters of donors using DAFs increased their spontaneous giving and didn’t let that take away from their planned charitable donations.

The DAF Fundraising Report draws its conclusions from an ambitious data-collection effort, which encompassed over $10 billion in fundraising from 78 million transactions across 20 leading nonprofits.

Karin Kirchoff, founder and president of K2D Strategies, emphasized the impact DAFs have had for beneficiaries in the charitable space over the past five years.

"For nonprofits, increased DAF usage in their donor base is one of the biggest drivers of overall fundraising success,” she said in a statement. “DAFs make it easier for donors to manage and increase their philanthropy - ultimately giving twice as much to their favorite causes.”

Among numerous key findings, the report suggests DAFs are a hot vehicle for philanthropic giving, as DAF revenue has grown 214 times faster than non-DAF revenue within its sample group over the same period. And while the number of non-DAF donors has slipped by 6 percent, DAF donors have surged by a whopping 79 percent.

The report also revealed that at least a quarter (26 percent) of current DAF donors were already supporting their chosen causes even before making their first DAF gift.

The giving habit appears to be stickier among DAF donors, with DAF donor retention rates being 15 points higher on average than non-DAF donors, according to data in the report.

"The DAF Fundraising Report brings home how DAFs can inspire a change in donor behavior,” said Salomon Serfati, co-founder and chief executive officer at Chariot. “DAFs inspire more purposeful giving where donating is seen as less of an expense and more of an investment in a meaningful nonprofit," Serfati said.