Donor-Advised Funds Exceed One Million As Everyday Donors Give

The 2021 DAF Report from NPT notes record-breaking growth in popular philanthropic tool, the donor-advised fund, with increased use amongst everyday donors and greater granting activity.

Each year, the National Philanthropic Trust (NPT) releases a comprehensive report on the state of donor-advised funds. Released earlier this month, the 2021 Donor-Advised Fund Report indicates that by all key metrics DAFs are growing.

A donor-advised fund (DAF) is a charitable giving account from which a donor can recommend grants to causes and non-profit organizations that they care about. Hallmarks of the tool include tax-efficiency and flexibility, as donors can grant from their pool of contributed assets to charitable organizations over time. Donors can also invest DAF assets to grow tax-free, increasing the impact of contributions.

Just as last year saw tremendous growth in the DAF market, this year reports the same. DAFs have been gaining popularity as a way to donate over the past decade, with 2020 as no exception to their ongoing growth trajectory.

Amid the pandemic, 2020 saw notable growth across DAF contributions, grants, and accounts. This indicates increased charitable activity and utilization of DAF as a reliable giving tool.

By the Numbers

 

2019

2020

Annual Growth

5-Year Average Growth

Grants

$27.29 B

$34.67 B

+ 27%

+ 21.4%

Contributions

$39.69 B

$47.85 B

+ 20.6%

+ 17.4%

Charitable Assets

$145.49 B

$159.83 B

+ 9.9%

+ 16.6%

Payout Rate

22.3%

23.8%

+ 6.9%

 

Accounts

864,187

1,005,099

+ 16.3%

+ 36.4%

 

Average Account Size

$168,355

$159,019

- 5.5%

- 7.7%

 

What the trends say about the future of DAF 

Two key trends have emerged from National Philanthropic Trust's 2021 Donor-Advised Fund Report:

  1. More donors from a wider range of financial backgrounds are using donor-advised funds to support their charitable efforts.
  2. Donors are accelerating their impact as assets granted to non-profit organizations rapidly increases.
Democratization of Donor-Advised Funds

For the first time, DAF accounts have exceeded one million, marking their undeniable popularity as a vehicle for charitable giving. While accounts grow in number–with an annual increase of 16.3%–the average size of the accounts continues to decrease.

Smaller account size tells us that the usage of DAFs as a tool for philanthropy is becoming increasingly democratized. This year, account size decreased by 5.5%, nearly double the decline from the previous period.

This indicates greater accessibility of the tool as accounts are no longer limited to high-net-worth or ultra-high-net-worth individuals. This is a result of greater digitization of the space.

More digital providers–such as Amicus.io, Benevity, and Charityvest–are stepping into the DAF space, bringing lower fees, simplified administration, and greater accessibility. As traditional DAF providers similarly remove barriers to account opening–namely lowering or eliminating fees and minimums–individuals of a wider range of financial backgrounds are able to leverage the charitable tool.

Increasing Donor Impact

In 2020, the growth rate of contributions and grants outpaced the average growth from the previous five years. Contributions totaled $47.85 billion, increasing by 20.6% from the previous year and exceeding the 5-year average growth rate is 17.4%.

Similarly, the payout rate reached a decade-long high of 23.8%, just under 2011’s record of 24%. The payout rate is a function of 2020’s grants divided by 2019’s year-end assets.

Grant-making was up 27%, with nearly $35 billion directed to non-profit organizations. This growth rate is distinctively higher than the five-year average of 21% and nearly double the 10-year average of 14.8%. This jump can be in part correlated with increased giving during the pandemic.

Given that most nonprofits run on a fiscal year that ends in June, this does not yet account for giving that occurred during a summer of increased support for racial and social justice.

Charitable giving using a donor-advised fund is accelerating at the same rate as giving using a foundation, with each vehicle seeing approximately 10% annual growth in charitable assets. However, the annual growth in grants from DAF nearly doubles growth in grants from foundations, with increases of 27% and 17%, respectively.

Also, the $34.67 billion granted from DAFs in 2020 is more than half what private foundations gave despite the fact DAFs have only 14.5% of the assets in foundations, according to the report.

NPT’s grant metrics include DAF-to-DAF transfers, which may slightly inflate the reported values. Such transfers may include COVID-19 relief funds or other emergency funds, though this particular study does not account for the purpose of grants in its metrics.

The growth in grants distributed from DAFs has exceeded the growth in contributions in six of the last ten years. As the flow of grants to non-profit organizations continues to increase, it is evident that donors of any means want to make an impact and are putting their dollars to work.

For firms looking to connect with their charitably-minded clients, consider donor-advised funds as a vehicle for impact.