Carolyn's Nonprofit Blog

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Advisors in Philanthropy | AIP

A trend discussed in my popular blog article, Baby Boomers and Seniors is that older generations – the age groups often interested with planning for and making significant charitable donations – are growing sectors of the population. In fact, they hold the majority of disposable income. These age groups are charitably-inclined and increasingly active online.

With this in mind, planned giving certainly should be a more significant focus for forward-looking nonprofit organizations. In terms of all types of charitable donations, however, nonprofit organizations should be educating and cultivating professional advisors, as well as the donors themselves.

Why

Erich Hamm of Bank of America suggested a few years ago that regardless of where your organization stands in terms of fundraising, it is an excellent idea to build relationships with professional advisors like bankers, trust officers, attorneys, insurance professionals, accountants, and the like. An ever-growing number of donors prefer consulting professional advisors before making significant charitable commitments during their lifetime, and later via estate plans.

While Erich’s article is no longer available online, you might enjoy PlannedGiving.com, “Enter the Advisor.” As the website notes, “Savvy charities and community foundations are beginning to understand that an advisor-centric approach is beneficial to their efforts.”

One long understood role of professional advisors has been to work out an “orderly and desirable arrangement” for the disposition of a donor’s estate. The ultimate result is a plan that fulfills the donor’s wishes regarding their family and others they wish to benefit (which could include your charity).

In addition, professional advisors are asked to conduct research for prospective donors regarding the financial health and operational activities of nonprofit organizations, in preparation for giving major gifts. They are also charged to follow-up as a funded project progresses, to ensure the original intent of a donor’s gift is met.

In my work, I have found many of these trusted professionals use such services as GuideStar, a division of Candid. It goes without saying that claiming and fully completing your Candid GuideStar profile will help donors and professional advisors understand how your nonprofit works, and inspire them by your professionalism. By proactively taking this simple step, you will demonstrate your organization’s commitment to transparency, and you will help professional advisors recommend your nonprofit for funding. The process of claiming and completing your profile on GuideStar is free of charge. It simply takes a bit of your time to flesh out your nonprofit’s profile.

Some nonprofit organizations balk at donor-advised funds. See for instance Rebecca Koenig’s article for Philanthropy, “Backers and Critics of Donor-Advised Funds Debate Their Merits” (June 17, 2015). But whether or not nonprofits approve of these trends, it is an excellent idea to include professional advisors in their education and cultivation plans.

The more professional advisors and those managing donor-advised funds know about your good work, the more likely they will view your organization favorably when the time comes to advise their clients about making significant donations and preparing planned gifts. Keith Curtis provides advice via The Giving Institute that urges nonprofits to do careful research, to market donor-advised funds as a giving tool, practice good stewardship of donor-advised fund holders, speak to donor-advised fund holders about planned giving, and to document their intent to give.

On a personal note, I do know of a substantial seven figure grant awarded to a community foundation by a family based solely on the advice shared by a trusted investment professional. I think I’ve made my point about the importance of professional advisors.

Knowing donor-advised funds frustrate some nonprofit organizations, I wanted to share an article by Rebecca Moffett of Vanguard Charitable. She shares her insights on donor-advised funds for GuideStar (now Candid) in, “Partners in Philanthropy: How to Work with Donor-Advised Funds” (September 19, 2018).

“In removing the administrative burdens of charitable giving, DAFs allow their advisors to pursue a comprehensive, long-term strategy. For nonprofits, this means your donors with DAFs may well be repeat givers. At Vanguard Charitable, the vast majority of our advisors are involved in philanthropy beyond financial contributions. Ninety percent of our advisors also volunteer, serve on a board, or otherwise lend expertise, time, or resources.”

The convenience of donor-advised funds is impossible to argue with. And as my blog article suggests, this form of charitable giving is not slowing down anytime soon. The nonprofit sector must adjust.

The National Philanthropic Trust keeps track of donor advised funds through annual reports like, “The 2022 DAF Report.”

DAF donors were highly active in 2021. DAFs reached a new record for grantmaking and experienced the fastest growth rates on record for contributions and charitable assets. The sharp increase in grantmaking—over $10 billion more than the prior year—is larger than what occurred at the beginning of the COVID-19 pandemic. Grants from DAFs to qualified charities increased more than 60 percent in the past two years, accelerating an upward ten-year trajectory. DAF grants have grown over 400 percent in the last decade. We also observe that donors who have DAFs can and do respond quickly and generously in the face of pressing challenges and serve an important role in sustained giving.

I close by urging more of our nonprofit support organizations to hold educational sessions at conferences on this topic. I find many nonprofits are behind the curve when it comes to professional advisors and donor-advised funds, and we all need to get, “up to speed.”

Additional Resources

• DAF Direct is a service that links donors to donor-advised funds with nonprofits via widget. “DAF Direct welcomes donors to recommend grants from their donor–advised fund, also known as a DAF, directly from your website. Neither you nor your donors will incur any download or transaction fees.”

• DAF Giving Summit: you might enjoy the on-demand webinars. I learn a lot from them.

• Fidelity Charitable, “A Guide to Working with Philanthropic Advisors” (n.d.) includes a variety of additional helpful resources at the conclusion.

• If you are considering or looking for a community foundation to help manage your charitable giving, you might refer to the Council on Foundations website, “Community Foundations” (which includes an online locator).

• Institute for Policy Studies, “The Rise of the Monster DAFs” (2022).

• Pew Research Center: The Data Bank provides statistics on Retiring Americans. The report notes, “for every day for the next 19 years, 10,000 baby boomers will reach age 65. The aging of this huge cohort of Americans (26% of the total U.S. population are Baby Boomers) will dramatically change the composition of the country.”

• Pamela Norley and Elaine Martyn of Fidelity Charitable for Stanford Social Innovation Review, “How Nonprofits Can Help Donor-Advised Fund Philanthropists Listen and Learn” (February 6, 2019).

• U.S. Census Bureau, “The 2020 Census will provide the most up-to-date count of the baby boom generation, now estimated at about 73 million. “Data from the 2020 Census will show the impact of the baby boomers on America’s population age structure.” Born after World War II, from 1946 to 1964, the oldest boomers will turn 74 next year.” I know some of my younger colleagues fret about this, but have a look at GreatNonprofits and “Generosity by the Numbers.” Baby Boomers gave 70% of all donations in 2022.

• WealthX, “New Wealth-X report reveals a staggering level of wealth transfer leading up to 2030” (2021).

Personal Notes and Observations

• A colleague from The Netherlands at Kinderhulp shared with me a hard copy reference book published periodically by a consortium of nonprofit organizations, of which Kinderhulp is a part. The nonprofits band together to fund the publication, which is then distributed to professional advisors. The book contains each organization’s mission and contact information, separates groups into sections by overarching focus, and it is designed to be a handy reference resource for trust officers, attorneys, accountants, foundation executives and the like. This is a marvelous idea! Why don’t communities develop similar databases for online reference today, by our professional advisors?

• In 2019, I wrote a blog post, “Baby Boomers and Older Adults: Go For Startups.” In the post, I ask professional advisors and donor-advised fund managers to consider encouraging donations to smaller nonprofits and startups, rather than focusing solely on those with larger budgets. There is a common misperception among philanthropists that a large budget indicates an effective nonprofit. But I know several seemingly small nonprofits run almost entirely by volunteers, and their budgets are therefore apparently small, yet their impact is huge. My message is simply, don’t judge nonprofits solely by budget size. I followed up that blog post with another, “Is Bigger Better?”

• If you are interested in planned giving specifically but you lack the ability to hire a planned giving expert, you should cultivate professional advisors but also, consider Crescendo Interactive. I know the family that founded the company and they are quite trustworthy. What they do in essence, is provide professional, legally sound and well-researched planned giving information that appends seamlessly to your website and social media. Follow the link above to their blog page. They also host conferences you can attend that will give you the “leg up” in terms of planned giving and major gift fundraising.

As donor-advised funds continue to grow in number and influence nationally, you might enjoy watching this video from Vanguard Charitable. In it you will see a first class pitch to someone considering getting start with a DAF from the standpoint of a financial institution.