For years, donor-advised funds (DAFs) have been gaining popularity as a vehicle for philanthropic giving. The National Philanthropic Trust recently released their 2020 Report, confirming what we already knew: DAFs are here to stay.
Each year, the National Philanthropic Trust (NPT) releases a comprehensive report on the state of donor-advised funds. Released earlier this month, the 2020 Donor-Advised Fund Report indicates that by all key metrics DAFs are growing.
To preface, the 2020 Report analyzes data from 2019. Therefore, this report does not cover giving trends in the context of 2020’s pandemic and amplified call for social and racial justice. Given the unprecedented nature of 2020, NPT released a separate DAF COVID Grantmaking Survey that noted a 66% increase in grant-making between early 2019 and early 2020. The record-breaking response to the pandemic will be fully analyzed in next year’s report.
That said, the trends of 2019 are notable as donor-advised funds grow in popularity as a tool for philanthropy. The report analyzes data from 993 charitable sponsors of DAFs and together shows that donors are more active and generous in their giving behaviors than ever before.
A $140 billion market that continues to grow
For the past three years, over 10% of all individual giving has taken the form of contributions to DAFs. In 2019, donors contributed $38.81 billion, which comprised 12.7% of all individual giving. This contribution amount indicates a 7.5% increase over 2018’s contribution amounts. DAFs continue to make up a notable segment of all philanthropic giving.
While contributions increased by 7.5% over the previous year, grants increased by double at 15.4% for a total amount of $27.37 billion. Donors are granting more in amount and frequency, rather than investing contributions to grow the assets prior to grant-making. This increased activity speaks to a charitable urgency and intentionality amongst donors.
Assets in both DAFs and private foundations continue to grow rapidly. Assets in DAFs have reached a record $141.95 billion, up 16.2% from the previous year. However, the grant amounts of private foundations are stagnating, while grants from DAFs are accelerating. The 2019 grant payout rate of DAFs remained high at 22.4%, which far exceeds the minimum payout rate required of private foundations. This indicates that assets from DAFs reach non-profit organizations in a shorter amount than assets from foundations.
Of note, the number of DAF accounts increased to 873,228 while the average size of the accounts continues to slowly shrink, this year by 2.7%. This trend is potentially the most important, as it shows us who comprises the DAF donor base.
DAFs have traditionally been limited to high-net-worth individuals due to costly administration and subsequently high minimums and fees. The dramatic growth of DAF accounts–up nearly 20%–coupled with the slow decrease in average DAF size indicates that DAFs are becoming more popular amongst donors outside of the traditionally wealthy profile.
With the rise in no-minimum DAF offerings and the digitization of DAFs, the charitable tool are becoming more accessible to the everyday donor. As processes become more automated, providers are able to eliminate or reduce restrictive fees. This enables donors of more diverse financial backgrounds seize the philanthropic opportunities that DAFs offer.
These trends show that DAFs are not going anywhere. The philanthropic sector will continue to adopt technology to amplify the impact and ease of donations. The digital future of philanthropy, coupled with the charitable response to the crises of 2020, together indicate that next year’s report will likely show a jump in the growth of DAFs.
If you are interested in learning more about the push toward digital DAFs to advance the possibilities of philanthropic giving, download our e-book today.