The other day I was having dinner (Dino’s Grotto on 9th Street, near U – it was fabulous) with Cathy Grams, Deputy Vice President for The Wilderness Society. We got so loud that the next table asked us to move.
Now, Cathy and I have known each other for over twenty years, when we both started our direct marketing careers with Craver, Mathews, Smith and Company. So, when we get together, we have a lot to talk about—families, sports, mutual friends…. Of course, that’s not why we were so loud and excitable.
What were we talking about so passionately?
It’s not as ridiculous as you might think. You see, both Cathy and I (and a few others here at The Harrington Agency) think that our industry is not paying enough attention to these giving vehicles. Last year, Fidelity Charitable, the nation’s largest donor advised fund, brought in $3.7 billion from donors—making it the country’s second largest nonprofit, just behind United Way.
If you’re not paying attention to how donor-advised funds are impacting your campaign, you are missing a critical component of your fundraising program.
Despite some of the risks involved with investing in these funds, donors are flocking to donor-advised funds to take advantage of additional tax incentives, eliminate accounting headaches and allow their charitable dollars to grow—tax free—so donors can make larger charitable contributions (and ostensibly bigger impact) in later years.
Fundraisers must be paying attention as more and more donors are using these vehicles for their charitable planning. Donor-advised funds are not just for the wealthy anymore; they’ve entered the lexicon of most well-off baby boomers (think not just your major donors, but your mid-level donors). That means that every development officer needs to be trained on how to respond to a donor who wants to use this type of giving vehicle—and what to do when the organization receives a contribution.
Kudos to Cathy and her team for working with their database company to ensure that the donor behind the Fund is receiving the proper credit—and pulled into the appropriate next solicitation (often these donors are missed because they are soft credited to the gift and many organizations eliminate soft credits when pulling for direct mail or other types of appeals).
Because these gifts are received from the Fund itself, there’s rarely a “reply slip” or “source code” to attach to a contribution. That means promotion tracking is incredibly important—so you can understand what motivated the donor to contact the Fund to give (or at least understand seasonality) and steward the donor appropriately.
Of course, that means that there was a donor’s name attached to the gift. So many of these gifts are anonymous, which makes it difficult for us to cultivate the relationship and show the impact of the gift. As fundraisers—especially direct marketing fundraisers—we need to do some serious testing to see if we can get donors to acknowledge they made a contribution through their Fund.
In addition, according to the National Philanthropic Trust, contributions to donor-advised funds grew by 35% in 2012, yet charitable grants grew by only 7% -- leaving billions of charitable dollars parked in investment funds. How do we as an industry work to get these dollars to flow more quickly to our organizations?
By the end of the night, I was still grumbling about how these funds take fees to manage the contribution—from the same donors complaining about wanting 100% of their philanthropic contribution to go directly to program! Cathy had, thankfully, moved on to talk more rationally about looking holistically at a campaign’s success, so as to take into account the donor-advised fund “halo” effect.
Cathy and I didn’t have the all answers, but we definitely are on the hunt for how to address this billion dollar question!
Have ideas? Thoughts? Email me! Let’s keep this conversation going!