The Canadian Donor-Advised Fund Market

On the Precipice of Breakthrough Growth

Compared to the donor-advised fund (DAF) market maturity of its neighbours to the south, Canada has not yet seen exponential growth in popularity of the charitable tool. That, however, is poised to change. 

Donor-Advised Funds in Canada

A donor-advised fund is a philanthropic tool that emerged in Canada in 1952 through the Vancouver Foundation as a more flexible and less costly giving alternative to private foundations. However, it wasn’t until recently that DAFs became a more mainstream charitable tool. 

In Canada, DAF accounts held over $5.7 billion in assets in 2018, up from $4.4 billion in 2016, per research from Investor Economics. This marks an annual compound growth rate of 14.3%. Further, the number of DAF accounts exceeds 10,000 and continues to grow. 

Per Investor Economics' estimates, the Canadian DAF market is likely to double to $10 billion by 2026.

With charitable giving on the rise, it becomes increasingly pertinent to understand the donor-advised fund market and the tool's advantages.

Who offers donor-advised funds?

The organizations that offer donor-advised funds are charities recognized by the Canada Revenue Agency. These organizations, referred to as “DAF sponsors,” fall into one of the following categories: faith-based, community, financial institution, or independent. 

While in the U.S., the majority of DAFs are provided by commercial sponsors–namely Fidelity, Schwab, and Vanguard–the Canadian landscape looks a bit different. Until 2004, community foundations were the sole providers of donor-advised funds.  

A breakthrough moment for the philanthropic landscape occurred in the early 2000s when financial institutions such as TD Bank and RBC Dominion Securities began to offer commercial donor-advised fund programs. 

Now, donor-advised funds have reach another turning point. Over the past few years, independent financial advisors have begun to offer charitable services that include donor-advised funds. A growing proportion of people are choosing to open their DAF accounts through financial institutions–particularly financial advisors.

As the Canadian donor-advised fund market is on the precipice of massive growth, financial advisors must consider their role in advancing the philanthropic goals of clients. 

The importance of serving clients’ charitable goals  

While the philanthropic market in Canada lags behind that of the U.S., there is a similarity in the direction of trends. Charitable giving is an increasingly important component of how clients think about their financial goals. When financial advisors proactively align the philanthropic and financial goals of clients, they strengthen those relationships. 

Donor-advised fund accounts are a strategic tool for both tax purposes and social impact, marking them for continued popularity as philanthropists look to be generous with their wealth. 

When donors make a contribution to their fund, they receive an automatic tax receipt. Those assets are then able to grow tax-free as they are invested, which means donors can grant more to the charities they most care about. This also means that financial advisor firms can retain assets under management. 

The administration of these accounts is typically less expensive and burdensome than private foundations, which makes DAFs a more attractive alternative for many philanthropists. DAFs also offer a greater degree of flexibility and privacy than foundations. With that additional flexibility, donors are able to make an impact in alignment with their financial goals. 

Donor-advised funds can be managed by financial advisors on behalf of their clients, similarly to how they would manage any other investment account. The unique advantage of DAFs is that they simultaneously support financial and philanthropic needs by bringing charitable impact into the client relationship. The financial advisors in turn become stewards of charitable impact. 

Companies like Amicus.io and its partnering DAF sponsor, GiveClear, enable financial advisors to introduce charitable services, such as donor-advised funds, often for the first time. You can get an exclusive look at the offering here.

Interested in learning more? Let’s discuss.