One in three high-net-worth individuals say they are more likely to choose an advisor who is knowledgeable about charitable giving. Developing that knowledge, and therefore building trust with clients and unlocking donor-advised funds (DAF), is easier when financial advisors, wealth advisors, or community foundations understand the preferences and behaviors of DAF account holders. A recent study by Giving Compass’ Philanthropy Impact Analyst, Madeleine Alegria and Dr. Sara Konrath of the Lilly Family School of Philanthropy offers valuable insights into DAF donor motivations and the power of visual storytelling in charitable giving.

As the fastest-growing charitable giving option in the United States, DAFs now account for over 1.9 million accounts, representing a substantial 17% of all charitable contributions in 2022. The significance of this trend is further underscored by the profile of the average DAF donor, who boasts a household income of approximately $1,361,651. This positions DAF account holders as a key demographic for financial advisors. By gaining a deeper understanding of DAF donor preferences and behaviors, advisors can not only better serve their high-net-worth clients but also play a crucial role in potentially increasing overall charitable giving.

To better understand donor preferences, we surveyed DAF donors who used their DAF to make a donation within the past year. The resulting report, “Donor Satisfaction and Unlocking Public Sector Funding from DAFs” offers key insights for financial advisors, wealth advisors, and community foundations that can help build stronger relationships with clients.

Key Findings for Financial Advisors

  1. Local vs. National Giving: 69% of donors reported they'd be more likely to give to local organizations. Advisors should be prepared to help clients identify impactful local nonprofits.
  2. The Power of Video: A 40-second video about a nonprofit increased donors' willingness to give by 15% compared to reading text only. Consider incorporating video content when presenting giving opportunities to clients.

I felt more likely to donate than I did before watching the video because now I know more about what they do, why they do it, and who's involved. - Research Participant, Female, Age 42

  1. Trust and Transparency: 81% of donors reported having concerns about nonprofit transparency and understanding the impact of their giving. Advisors can play a crucial role in helping clients vet and understand the impact of potential grantees.
  2. Social Influence: 81% of donors said they were more likely to give to an organization recommended by a family member or friend. Leverage client networks to identify potential giving opportunities.
  3. Impact-Driven Giving: DAF donors are highly motivated by the potential impact of their gifts. Be prepared to articulate how donations can improve lives (27%), advance a nonprofit's mission (22%), or contribute to long-term change (19%).

The Importance of Connecting DAF Donors with Grassroots Nonprofits

While many DAF account holders currently give to large national organizations, there's a significant opportunity to connect them with smaller, grassroots nonprofits. The benefits are many, including:

  1. Community Impact: Local nonprofits are the cornerstone of communities, filling crucial needs that may be overlooked by larger organizations.
  2. Diverse Giving: Approximately 88% of nonprofits operate on the grassroots level with budgets under $500,000 annually. Directing DAF funds to these organizations can significantly diversify and strengthen the nonprofit ecosystem.
  3. Increased Engagement: The study found that video content from a small, local nonprofit significantly increased donor engagement, even among sophisticated donors who typically give to larger organizations.
  4. Alignment with Donor Values: Many DAF donors express a desire to give locally and see the direct impact of their contributions. Connecting them with grassroots nonprofits aligns with these preferences.

As a philanthropic advisor, you play a crucial role in guiding your clients' giving journeys. By understanding the latest research on DAF donor preferences and the potential of grassroots giving, you can help your clients make more informed, impactful, and personally fulfilling charitable contributions. Giving Compass for Business is a platform tailored to help you guide clients in giving impactfully. Through integrated AI and conversational assistance features and a deep library of research and articles, our tool equips you with the support you need to direct clients’ generosity. 

Watch: Report Author Madeleine Alegria Explains Report Findings 

For more detailed insights and strategies, download the full report: "Donor Satisfaction and Unlocking Public Sector Funding from DAFs."

Download Donor Satisfaction and Unlocking Public Sector Funding from DAFs