See what five factors to consider when choosing a DAF provider as well as how their services compare.
As the air cools and the holidays draw nearer – your clients are imagining ways to express their gratitude by giving back to those who need it most.
Increasingly, people are relying on their professional advisors — like you — to help them establish their DAF. Research by U.S. Trust1 shows that 71% of high-net-worth clients believe discussing philanthropy with their advisors is important.
Donor advised funds (DAFs) are a great way to live out those charitable giving goals. The choice of where to establish a DAF is a question that people often breeze over, but that decision may have a big impact on how they give.
Donor advised fund providers are not all the same and it is worth considering at least a few places before deciding which DAF provider is right. Different providers offer different features, services, fund types and ways of doing business.
DAFs are typically offered by three primary types of organizations:
- Community Foundations
- National Providers (often associated with financial service companies)
- Single Issue Nonprofits (usually large institutions such as hospitals or universities)
View our comparison of DAF providers and their services in the chart below.
Watch this quick video to see how a donor advised funds works.
Choosing a provider is a very personal choice and the decision should be based on how someone wishes to engage with their fund. Some providers offer a transactional style experience that mirrors online banking. Some offer a personalized treatment with a wide variety of services. A donor’s personal preferences are going to dictate which is more to their liking.
Five Factors to Consider When Choosing a DAF Provider
There are many factors to consider when choosing a DAF provider, so to make it easier for you we’ve assembled a list of the top areas to consider when guiding your clients through the DAF process.
Many people like being able to request grants from their DAF to favorite organizations without disclosing the name of their fund. That way, they avoid unwanted attention. Anonymity may seem simple, but what if the donor wants to disclose their name to some grantees, but not others?
If your client chooses to set up a DAF with a community foundation such as the Saint Paul & Minnesota Foundation, their designated philanthropic advisor will work with them to ensure only the information they see fit is disclosed to each nonprofit organization they support.
2. Multiple Generations
Some donors like the idea of naming their heirs as “successor advisors” to the fund. They want their family or close friends to be able to make grant requests from the fund after they’ve passed. Some providers offer this feature, while others don’t.
The Saint Paul & Minnesota Foundation typically works with up to two generations of donors. A donor advised fund usually lasts until funds are depleted. After their passing, the Foundation will work with your clients’ successors to help them continue making grants from that fund until the last listed advisor on the fund dies.
3. Investment Options
This is an area that has quickly evolved over the past ten years. Donors have begun to demand more sophisticated investment options for the money sitting in their fund. They want more than ESG filters. They want to be able to support mission-related investments such as program related investments and impact investing.
They’re also thinking about DEI considerations in their investments. Donors want the assets in their fund to be doing good things even before they’re granted out to favorite charities. It’s definitely worth exploring these features when considering a DAF provider.
4. Fees & Minimums
DAF fees can vary in cost based on the provider. Most providers invest in institutional class funds, which come with very low underlying fees. When comparing providers, be sure to look at the overall fee structure compared to the level of service the donor is receiving. Typically commercial financial institutions offer lower fees, while community foundation fees can be slightly higher.
While fees are an important factor, they shouldn’t be the only thing people consider when choosing a provider.
When you partner with a community foundation like the Saint Paul & Minnesota Foundation, you and your clients will receive services and advice tailored to their giving needs. To establish a DAF with the Foundation, the minimum gift is $10,000. This includes having a dedicated philanthropic advisor who provides personalized care and expertise on fund management as well as local nonprofits and prospective grantees.
5. Advisor Fund Management
Several providers now offer special programs that allow a donor’s personal wealth manager to manage the assets in that client’s DAF. The provider sets investment parameters that follow their investment policies, and the individual wealth manager chooses the specific investments.
As an advisor, this can be beneficial, because it allows you to work with the Foundation and continue to manage your clients’ funds. while establishing ways to grow their assets for charitable giving.
If your client is interested in opening a fund with more than $250,000 and would like a professional advisor to manage its investments, your client may be interested in the Foundation’s Individually Managed Fund option.
Partnering with a community foundation like the Saint Paul & Foundation on an Individually Managed Fund allows both clients and their advisors to have the peace of mind of knowing that their assets are going to places they want them to go without the burden of doing the heavy lifting.
Comparison of DAF Provider Services
Saint Paul & Minnesota Foundation
American Endowment Foundation
Gift Planning Consulting
Family Philanthropy Consulting
Local Charity Expertise
Dedicated Philanthropic Advisor
Accepts Non-Cash Assets
Investments in Your Community
United Nations PRI Signatory
Actively Managed Impact Investing
Fees – Administrative
.35% - 1.5%
.1% - .6%
.15% - .6%
Fees - Investment
.01% - .088%
.03% - .79%
.029% - .95%
Charitable Gift Annuities
Charitable Remainder Trusts
Advisor Managed Funds
We hope this breakdown of features adds food for thought to your next DAF discussion. You’ll be ready to present your client with options that fit the way they want to engage with their fund.
As always, our team of experienced Gift Planners is available to work with you and your clients to craft a fund that is just right for them. Reach out to us at 651.244.5463 or email us at firstname.lastname@example.org.
The Saint Paul & Minnesota Foundation does not provide tax, legal or accounting advice. Please consult your own tax, legal and accounting advisors regarding your individual situation before engaging in any transaction.
1The U.S. Trust® Study of the Philanthropic Conversation. Bank of America. PDF.
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