Donor-advised funds (DAFs) have become the fastest-growing giving vehicle in American philanthropy. Assets in DAFs exceed $200 billion nationally and grow at double-digit rates annually. Yet most nonprofits treat DAFs as afterthought in fundraising strategy. They don't understand DAF mechanics, they don't know how to identify DAF holders, and they don't position themselves to capture this growing source of nonprofit revenue. The result: enormous sums in donor-advised funds go unrecommended to nonprofit organizations because those organizations haven't educated the donors or made the ask.
Understanding DAFs is essential for 21st century fundraising. DAF holders are typically high-net-worth donors who are already philanthropically inclined. They have capital to give. They're primed to fund nonprofits. The question is whether your organization is on their radar when they sit down to make recommendations to their DAF provider. Organizations that understand DAF mechanics and actively cultivate DAF donor relationships typically receive 15-30% more from these donors than organizations that don't specifically address DAFs.
How Donor-Advised Funds Work
A donor-advised fund is a charitable investment account. A donor opens an account at a DAF sponsor (Fidelity Charitable, Schwab Charitable, Vanguard Charitable, or community foundation), deposits assets (typically securities or cash), receives immediate tax deduction, and then over time recommends grants to nonprofits. The DAF sponsor holds the assets, invests them, and executes donor's recommendations to nonprofits.
The fundamental advantage for donors: tax benefit arrives immediately, but giving can happen later. A donor with $100,000 in appreciated stock can transfer it to a DAF today, receive $100,000 tax deduction immediately (avoiding capital gains tax), avoid selling pressure to satisfy charitable goals, and then recommend grants to nonprofits over the next year or ten years. This separation of tax benefit from actual giving is powerful and explains DAF growth.
From the DAF sponsor perspective, they receive assets to invest, charge annual fees (0.5-1% of assets managed), and maintain significant control over final distribution (though donors advise strongly). Sponsors want donors to recommend grants frequently; slow-distribution DAFs generate ongoing management fees.
From the nonprofit perspective, receiving a grant from a DAF is similar to receiving an unsolicited grant from any source. You receive the funds, generally with minimal reporting requirement (though DAF sponsors increasingly ask for impact reporting). The difference: the grant came from a DAF-holder's "account" rather than from a foundation or individual directly.
The challenge from nonprofit perspective: DAF donors are often "hidden." You may receive grants from Fidelity Charitable that you correctly identify as DAF grants, but the actual donor recommending the grant is unknown to you. You can't steward the actual donor because you don't know who they are. This anonymity is structural to the DAF system and requires nonprofits to think differently about cultivation and engagement.
Identifying Current and Prospective DAF Donors
Some of your current donors likely hold DAFs. These donors give to you from their personal funds. They also likely have DAF accounts with substantial balances they could recommend to your organization. Identifying these donors requires asking a direct question.
Add to your annual giving survey or major donor survey: "Do you hold a donor-advised fund through Fidelity Charitable, Schwab Charitable, Vanguard Charitable, or another provider?" Simple question flags DAF holders in your database. Once you know who holds DAFs, you can cultivate them specifically for DAF grants.
Research major donors and prospects for DAF likelihood. DAF holders skew toward older, wealthier, more sophisticated investors. If your major gift prospect is 60+, net worth $2 million+, and active philanthropist, they likely have a DAF. You can find some public information about DAF holders through foundation research tools or by asking peers. Many donors don't hide their DAF status; they mention it in conversation if you ask.
Look at your grant history for patterns suggesting DAF grants. Grants from Fidelity Charitable, Schwab Charitable, or Vanguard Charitable that are roughly aligned with your mission suggest a DAF holder somewhere recommending grants. Follow up on larger grants from these sources to determine if you can identify and cultivate the actual donor.
Consider prospecting entirely new donor segment: people who've created DAFs but haven't yet given to your organization. Wealth research and screening tools can identify individuals with DAF holdings. These people have already made decision to give philanthropically; they've moved capital into charitable vehicles. Reaching out with specific program or funding opportunity is highly targeted fundraising.
Cultivating and Soliciting DAF Donors
Cultivating DAF donors follows many of the same principles as other major donor cultivation. The distinct challenge is that DAF decisions are often annual or episodic: donors sit down to recommend grants from their DAF on a specific timeline, often once yearly. Understanding your prospect's grant-recommendation timeline is critical.
Ask directly: "When do you typically recommend grants from your DAF?" Some DAF holders make recommendations every December during tax-planning season. Others make quarterly recommendations. Others respond to specific funding opportunities as they arise. Understanding the timeline helps you position funding requests appropriately.
Position specific funding opportunities when aligned with donor's timeline. If a DAF holder makes annual recommendations in November, send proposal in September or October, not March. Timing dramatically affects likelihood of recommendation. A proposal sitting in someone's inbox in March won't be recommended until next annual review.
Make DAF recommendations easy. If you're soliciting a grant from known DAF holder, provide specific funding request with exact amount. "We seek $25,000 from your DAF to fund our scholarship program for 25 low-income students." Specific, concrete, and easy to recommend. Compare to vague request: "General support for our organization." DAF donors will recommend specific projects much more readily than general support.
Acknowledge the DAF advantage in your solicitation. When soliciting from known DAF holder, mention it: "As a DAF holder, you've already taken the strategic step of moving assets into charitable vehicle. We'd love to be among your recommended grantees. A $25,000 grant to our scholarship program would transform 25 students' lives." This positions your request as natural extension of their existing philanthropic strategy.
For DAF holders you've identified but haven't solicited, soft education precedes solicitation. Send materials explaining how your organization uses support. Invite them to site visit or program. Build relationship as you would with other major prospects. But recognize that their giving mechanism is different; they're operating from DAF account, not personal account.
Stewarding DAF Grants and Building Relationships
The fundamental stewardship challenge with DAF grants is anonymity. If you receive a $25,000 grant from Fidelity Charitable, you know the grant came from a DAF but not which DAF holder recommended it. This prevents relationship-building with the actual donor. You must navigate this thoughtfully.
Thank the DAF provider professionally. When you receive a DAF grant, you'll receive notification from the DAF sponsor (Fidelity, Schwab, Vanguard). Send professional acknowledgment to the provider and include your tax information for their records. This ensures proper documentation.
If the DAF holder is known to you (because they're already in your database as donor), thank them personally for the DAF grant. "Thank you for recommending [your organization] to receive a $25,000 grant through your Fidelity Charitable account. We're so grateful for your support and confidence in our work." This personal thanks lets them know you recognize and value the DAF recommendation.
If the DAF holder is anonymous, you have limited options. Some organizations send thank-you letters to the DAF provider with request to forward to the recommending advisor. Most DAF providers will forward generic thank-yous. You can also request impact reporting be shared with the provider, hoping they'll share with the donor. But there's no guarantee of communication.
Use DAF grants as research opportunity to identify the donor. If you receive $25,000 from Fidelity Charitable targeting your education program, and only three people you know have Fidelity DAFs, you can educated guess who recommended it. Reach out warmly: "We received a generous grant from a Fidelity Charitable advisor supporting our education work. Was this you?" Some donors will confirm; others won't acknowledge. But confirming identity opens relationship-building possibility.
Create DAF-holder recognition program. Once you've identified DAF holders, offer special recognition: newsletter mention, annual impact report, or special event invitation. Recognition cost nothing but incentivizes recommendation. Donors who feel recognized for DAF giving are more likely to make annual recommendations.
Marketing Your Organization to the DAF Community
Beyond personal cultivation, organizations can market to the broader DAF community through DAF sponsor platforms and educational content. This is sophisticated marketing but creates awareness among high-probability funders.
Fidelity Charitable, Schwab Charitable, and Vanguard Charitable all have grant recommendation platforms where account holders research nonprofits and make grants. Ensure your organization has thorough, compelling profiles on these platforms. Include your mission, impact metrics, financial information, and specific funding opportunities. DAF holders research organizations on these platforms; poor profiles reduce likelihood of recommendation.
Create content specifically addressing DAF-holder concerns. "Is a DAF Right for You? How One Donor Used a DAF to Fund Our Education Program." Share case studies of DAF holders who've become consistent funders. This content reaches prospects who are considering DAFs or already hold them but haven't yet considered your organization.
Advertise to DAF holders through targeted digital advertising. Facebook and Google allow targeting of high-net-worth users, philanthropically-inclined audiences, or people interested in specific causes. Advertising your specific programs to this audience can generate awareness and grant recommendations from existing DAF holders who'd never heard of your organization.
Build relationships with DAF providers and advisors. Fidelity Charitable and similar providers have local representatives and advisors. These advisors work with DAF holders regularly. Building relationships with advisors in your geographic area can lead to recommendations. An advisor who understands your organization well will mention you when clients ask for recommendations on your issue area.
Building DAF Strategy Into Your Overall Fundraising Plan
DAF fundraising should be integrated into overall development strategy, not siloed as separate initiative. DAF holders are donors; they deserve stewardship and relationship-building like other donors. The mechanism is slightly different; the fundamental principles are identical.
Segment your donor database to flag DAF holders. Create a DAF field in your CRM. Track all DAF gifts separately. Over time you'll see patterns: which donors recommend annual grants, which recommend sporadically, which grew their DAF recommending amounts over time. This data informs your strategy.
Set specific DAF fundraising goals. "We will identify 50 DAF holders in our geographic area and cultivate relationships. We will target $100,000 in annual DAF recommendations within 12 months." These goals hold you accountable and drive action. Without specific goals, DAF fundraising drifts and becomes reactive.
Assign DAF cultivation to staff. Who manages DAF donor relationships? Who follows up on DAF grants? Who maintains DAF-holder database? Clear ownership ensures action and continuity. DAF fundraising is not everyone's responsibility; it's specific person's responsibility.
Frequently Asked Questions
Can we see who is recommending DAF grants to us? Not officially. The DAF sponsor will tell you the grant came from their fund but won't identify the donor without donor consent. However, if you're already cultivating a known DAF holder, you can ask directly. Some DAF sponsors allow donors to opt in to donor identification, allowing the nonprofit to know who recommended the grant.
How large are typical DAF grants? Varies widely. Some DAF holders recommend $500 grants. Others recommend $50,000+ grants. Average is probably $2,000-$5,000. The benefit is that DAF recommendations are often repeated annually as holders maintain active DAF accounts, so a $5,000 annual grant from a DAF holder is more valuable than $5,000 one-time gift from annual donor.
Should we solicit DAF holders differently than other major donors? Not fundamentally. They're donors. Solicit them with specific funding requests, at timing aligned with their annual grant-recommendation cycle, and steward them as you would other donors. The difference is understanding their giving mechanism and making recommendations to their DAF easy.
What percentage of nonprofit funding comes from DAFs? Nationally, DAF grants represent roughly 5-8% of nonprofit revenue. However, for some organizations (especially those that market well to DAF community), DAFs represent 15-25% of annual revenue. Most organizations are underutilizing this funding source.