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Donor-advised funds and COVID-19: The donor research project that could save your fiscal year

We recently discussed the rise in popularity of donor-advised funds (DAFs) as a key trend for nonprofit fundraising in 2020.

In 2018, the charitable assets in DAFs totaled $120 billion – up more than $50 billion from just five years ago.

Last year, contributions from DAFs made up 12.7 percent of all charitable giving. That means $1 in every $8 donated last year came from a DAF. These were promising numbers as we headed into the new year.

But let’s face it – between a global pandemic and a recession – 2020 isn’t really going as planned.

Where does that leave us?

DAFS DURING THE ECONOMIC DOWNTURN

With a looming recession, the loss of donors is a top concern for most leaders in the nonprofit industry.

Ironically, DAF donors could be a major source of additional financial support during these challenging times.

For the first time, financial institutions are strongly encouraging their clients to make distributions from their DAFs. It appears that the fund managers realize COVID-19 is having a tremendous impact on nonprofit organizations and are encouraging their clients to help by donating the money they have already set aside for charity.

Fidelity Charitable announced that their DAF account holders have given more than $236 million in response to COVID-19 efforts.

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In their annual giving report, they also shared that organizations who sign up for EFT/ACH electronic transfer of funds will receive information such as names, addresses and channel preferences from donors who have made recent distributions.

The good news? These are incredibly promising numbers. And it doesn’t end there.

One couple in California spurred a movement called #HalfMyDAF where they have pledged to contribute up to $1 million to donors’ favorite nonprofits if the donors pledge to empty half of their DAF account.

Some are even suggesting government mandated DAF distributions to help nonprofits during this crisis.

As you can see, now is the time to invest in targeting DAFs like never before. Financial institutions are pushing donors to distribute. Donors are even pushing other donors to distribute.

And nonprofits need to be doing the same. Here are seven suggestions your organization can implement to begin encouraging DAF distributions:

INVESTIGATE, IDENTIFY AND TARGET

1.  Locate every DAF giver on your file

Your donor database will become your best friend right now. Once a donor has given from their DAF, make sure you identify them properly to avoid mis-categorizing them as a miscellaneous donor, or worse, a lapsed donor. We touch on this in more detail in our first DAF blog.

2. Reach out to them

Once you’ve identified your DAF donors, reach out to them directly. Be honest. Tell them the increased need your organization is experiencing and tell them that now is the time for an additional distribution. Use the COVID-19 crisis to create urgency and show them how your cause is relevantly dealing with the repercussions.

3. Create a campaign for DAF donors

Outline goals, milestones and deliverables to keep your organization focused, accountable, and on track.

4. Advertise the campaign in every channel

DAF messaging should not be restricted to any one channel. St. Labre Indian School recently included a P.S. in their COVID-19 email messaging with a special call to DAF donors. This is a great way to incorporate messaging throughout your other campaigns, too.

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5. Make it easy to donate

Link to the DAF Direct widget everywhere. Make it prevalent on your website and in your donor communication. By providing a path to action for the donors, you won’t take the risk of the money sitting unused or going to another organization.

6. Give DAF donors special recognition

We all know it’s important to recognize your donors, and DAF donors are no different. In fact, to try to spur increased distributions, create a special society for DAF donors, complete with custom communication and reporting on the impact of their gift.

7. Offer incentives for making the DAF gift recurring

During uncertain times, recurring gifts will make your revenue stream much steadier. Many people are unaware that you can make a recurring DAF gift. Offer special status and recognition for these committed donors.

Donor-advised funds are continuing to grow. And now more than ever, nonprofits should focus on this important group of donors.

We know that the road ahead can be intimidating. But with a strategic plan to address these valuable donors, reminding them of the impact their DAF distributions will make in this time of crisis, you can set your organization up for long-term success.

Max Bunch

With an MBA and 33 years of nonprofit fundraising expertise, Max Bunch provides RKD Group with invaluable insights from a diverse background. In his role of Executive Vice President, Client Service and Consulting, Max has served a number of leading nonprofit organizations working in a variety of verticals including food banks, animal welfare, hospitals, faith-based, relief and development, cancer care, rescue missions, veteran affairs, healthcare, and human services.

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