Why prioritize DAFs? How to make the case to your team

Guest post by Patrick Schmitt, co-CEO of FreeWill

Donor-advised funds (DAFs) represent a massive fundraising opportunity for nonprofits.

Many organizations already understand the benefits of prioritizing DAFs. Grant payouts to nonprofits reached nearly $55 billion in 2023.

However, other organizations haven’t yet tuned into or been able to pursue this new field of fundraising. After all, any new giving initiative requires organizational buy-in and an investment of time and resources, which can be uphill battles in many cases.

If you know that DAFs need to be a priority for your organization, how can you best make the case to your leaders and board members?

Here, we’ll outline key talking points and statistics you can use to make a persuasive pitch.

Why prioritize DAFs: The numbers

Numbers often speak much louder than words, especially when an organization needs to weigh its decisions to steward its resources responsibly.

Thankfully, the numbers show DAFs are a resounding winner. Take a look at these key findings from three recent industry reports about DAF fundraising:

The 2024 FreeWill DAF Report

• 76% of surveyed nonprofits reported that DAFs would be more important for them in 2024. More than two of every five fundraisers said securing DAF gifts would be a high or very high priority for their nonprofits going forward.
• Surveyed nonprofits raised over $13 million from DAF gifts in 2023.
• 58% of surveyed nonprofits actively solicited or promoted DAFs to donors in 2023, a sharp rise from 46% the year prior.
• Of those nonprofits that actively pursue DAFs, a whopping 98% of them reported receiving at least one DAF gift in 2023. 

Chariot’s 2024 DAF Fundraising Report

• Donors who gave to participating organizations via DAF grants increased their annual giving in subsequent years by an average of 96%. More than a quarter of those retained DAF donors actually increased their annual giving by 200%, thanks in part to the convenience of this method of giving.
• Growth in revenue from DAFs among participating organizations outpaced non-DAF revenue by a staggering 214 times.
• The total number of DAF gifts given to participating organizations grew by 83% between 2019 and 2023, from 30,000 to 53,000.

National Philanthropic Trust’s 2024 DAF Report

• In 2023, DAFs held over $251 billion in charitable assets and disbursed nearly $55 billion in grants. Their payout rates have slightly declined from 2022 but remain elevated at 23.9%.
• The average size of an individual DAF account reached a record high of $141,120 in 2023, a 9.2% increase from the year prior.
• Total grants from DAFs in 2023 ($54.77 billion) declined slightly from 2022’s record high ($55.53 billion), only the second year-over-year decline on record, and likely a signal of a return to pre-pandemic giving patterns. However, both the total assets held by DAFs and the total number of DAF accounts grew in 2023, indicating continued strong financial performance and interest among donors.

Metrics like these make it clear that DAFs are a game-changing trend in the philanthropic landscape. Despite year-to-year fluctuations, DAFs consistently demonstrate an upward trajectory as a preferred giving method for many donors. They hold an immense amount of wealth set aside expressly for philanthropic purposes, and it’s much easier to see early success with DAF fundraising than newcomers might initially assume.

Why prioritize DAFs: The talking points

Numbers alone aren’t enough—when you make a pitch, your numbers need contextualization and compelling framing. (If you’re a gift officer or other fundraiser, you know the importance of effective communication and storytelling all too well!)

So why is DAF fundraising such a savvy investment for nonprofits now? Consider these talking points:

Nonprofits’ highest-impact donors heavily and increasingly prefer DAFs as a primary giving method.

Following the 2017 Tax Cuts and Jobs Act, the US tax environment has encouraged wealthy donors to use DAFs to simplify and frontload their philanthropic activities. With the incoming presidential administration, we’re almost certain to see the TCJA extended and potentially expanded in 2025.

DAFs make non-cash giving easy for donors—and non-cash giving should be a priority for nonprofits anyway. It has been shown to dramatically accelerate nonprofit growth.

• FreeWill’s survey respondents reported DAFs as their most commonly received non-cash gifts, and 60% said that DAFs make it easier for their donors to give complex gifts like gifts of cryptocurrency, stock, and other assets. 

• The majority of stock gifts have flowed into DAFs ($76 billion in 2019-2021) rather than directly to nonprofit organizations ($40.7 billion in that same period).

Even when they rise or fall year to year, DAF payout rates remain very high at over 20%. In comparison, foundation payout rates tend to hover between 5% (the mandated minimum for most foundations) and 8%.

DAF donors are often quite loyal and easily retained. You’re likely to have relationships with your future DAF donors already, and these donors create DAF accounts because of their convenience. Tap into that ease of giving to boost your retention rates and donor lifetime values!

• Fidelity Charitable found that nearly 80% of grants they facilitated in 2023 went to a nonprofit the donor had previously supported. Nearly a third of those grants were pre-scheduled or recurring donations.

• Plus, look back at the incredible statistic above—Chariot found that DAF donors increased their annual giving by an average of 96% and as much as 200%.

Every nonprofit leader or board will have different concerns about expanding into a new fundraising initiative—whether those concerns have to do with cost, time, complexity, or just unfamiliarity. 

Using these talking points and the data behind them, you should be much better equipped to lay out a compelling case for your organization to step into the future of fundraising with these wildly popular philanthropic tools.

Our biggest takeaway

As you craft your DAF pitch, don’t forget our single most important takeaway: You won’t secure DAF gifts if you don’t ask for them.

The FreeWill DAF report found that only 2% of nonprofits that actively promoted DAF gifts in 2023 ultimately didn’t receive one. In contrast, 20% of nonprofits that didn’t actively promote DAF gifts ultimately didn’t receive one.

This means that 80% of nonprofits that didn’t promote DAF gifts did receive one (thanks to savvy, proactive donors). But would you rather be part of the 80% that leave these gifts up to chance or the much surer 98% that make the effort to ask donors about DAFs?

Asking for DAF gifts is easy once you understand how to identify these donors. 

To get started, begin actively asking your top donors and prospects whether they have DAFs. Some likely already do. Send surveys to your broader donor base to cast a wider net. Add mentions of DAFs to your Ways to Give page and newsletter. Keep organized records of all your findings as donors express interest. Begin building your donors’ awareness of this method of giving and your nonprofit’s current opportunities bit by bit.

One important note: DAF gifts sometimes arrive anonymously. As your donors become more aware of them, ensure that you have an easy-to-use tool set up that helps you capture the information you need to thank and steward them effectively. 

Then, with a clearer understanding of where you stand, you may be surprised at how your DAF giving efforts take off. After all, these donors want to give. Donors who have DAFs through Fidelity Charitable reported these as their top reasons for creating their funds:

• 76% use DAFs to donate appreciated assets more easily.
• 68% use DAFs to give themselves more time to decide where to donate.
• 62% use DAFs to sustain their giving through retirement.

With buy-in from your organization and some upfront identification effort, you can reach these donors and build a robust pipeline to fuel your nonprofit’s growth. Best of luck!