Generosity is at the core of what makes us human. In difficult times, it’s encouraging when I see the challenges we face actually strengthening that impulse to help. For many people, the global pandemic and recent reckoning on racial injustice have only intensified the desire to contribute in a meaningful way.
This generous impulse exists in all of us regardless of means, but there is plenty of evidence that this impulse can be nurtured or crushed by the systems available to express it. Make giving harder or its impact less obvious and people will do less of it. Make giving easier or its impact more transparent, and you can change the world.
Unfortunately, our current financial infrastructure doesn’t make it easy for the average person to make the jump from occasional donor to philanthropist. That’s why an exciting and potentially world-changing philanthropic revolution will be powered by three very boring words: donor-advised funds.
DAF 1.0: A giving vehicle for the very wealthy
Donor-advised funds (DAFs) aren’t new but making them available to everyone is both new and transformative. For more than 90 years DAFs have offered a way to donate to a charitable account and receive immediate tax benefits. Those funds can grow tax free or even be passed on to successors before being granted to designated charities.
With these benefits, it’s no surprise that DAFs are the fastest-growing philanthropic financial product, with the number of the accounts growing 50% year-over-year. Over $120 billion in assets are currently held in donor-advised funds in the United States and Canada, according to the National Philanthropic Trust (NPT). If the current growth trend continues, DAF assets could reach an estimated $1 trillion by 2030. That’s the good news.
The bad news is that the benefits of DAFs have been largely limited to the very wealthy. If you’re not considered a “private banking” client, for example, your bank has probably not offered you a DAF. Administering donor-advised funds has simply been too manual and therefore too expensive for financial institutions to offer them to everyone.
DAF 2.0: Philanthropy for everyone
Like banking and online investment before them, DAFs are being transformed by new technology. At Amicus, we think of this technology as “DAF 2.0” – powering philanthropy that’s as easy as online banking and accessible to everyone who wants to give.
DAF 2.0 enables a giving revolution because it’s a win-win-win for donors, charities and financial institutions. Donors can gain all the DAF benefits previously enjoyed by the very wealthy and become high-impact philanthropists in their own right. Charity turns into philanthropy when it becomes regular and intentional, rather than a random, one-time act. By enabling donors to see and manage their charitable impact online alongside regular bank accounts, DAF 2.0 transforms the way people give.
Charities, of course, are also clear winners in the DAF 2.0 revolution. When donors at all economic levels can give as part of a financial plan, nonprofits will receive much-needed additional funds to drive meaningful change.
These lofty altruistic benefits are made possible by much more down-to-earth business ones. For financial institutions, DAF 2.0 technology automates and puts online the entire DAF administration process: from contribution and investment to final grant. This automation dramatically improves efficiency and cost for banks and wealth management firms, allowing them to cut account minimums and offer DAFs to more customers.
Financial institutions and donors alike also benefit when the DAF 2.0 platform is integrated into online banking. Users get a seamless philanthropic experience right within the website or banking app. Banks strengthen customer ties by bringing the very personal act of giving into the ongoing banking relationship.
The giving revolution: Democratizing philanthropy for a more generous world
Being a high-impact philanthropist for the causes close to your heart shouldn't be an exclusive experience reserved only for the rich. Whether you have a hundred dollars to give or a million, you should have the opportunity to support change in a way that fits both your personal and financial goals.
With so much pent-up desire to help and so many causes worth supporting, DAF 2.0 can help unlock our collective generosity and change the world for the better in 2021 and for years to come.