#151 The Ins and Outs of Donor-Advised Funds with Andrea Rush, Senior Vice President of Philanthropic Solutions for National Philanthropic Trust
Oct 22, 2023
Donor Advised Funds (DAFs) are on the rise in the United States. Andrea Rush joins us to share her expertise as the Senior Vice President of Philanthropic Solutions for the National Philanthropic Trust, one of the oldest and most established DAF institutions. Andrea explains the benefits of DAFs and why they are increasing in popularity. She also addresses the criticisms surrounding DAFs.
Episode Highlights:
- The growth of DAFs and why they are popular
- Addressing criticism surrounding DAFs
- Types of DAFs
- Future trends for DAFs
Andrea Rush Bio:
Andrea Rush is Senior Vice President of Philanthropic Solutions and has more than 22 years of experience handling all aspects of philanthropic and specialized grant-making services, including direct international grants and grant agreements. Andrea is responsible for the oversight of NPT’s various philanthropic vehicles such as Supporting Organizations and Special Projects. She is a member of the NGO Source Advisory Council and a graduate of the Leadership Philadelphia Core Class of 2011. Andrea was formerly an elementary school teacher for the School District of Philadelphia. She received her B.S. with honors in Education from Temple University and holds a certificate in Nonprofit Executive Leadership from Bryn Mawr College.
Links:
- National Philanthropic Trust https://www.nptrust.org
- DAF report https://www.nptrust.org/reports/daf-report
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Full Transcript:
Andrea, I am just so pleased you're on my podcast. So, here's the deal. You and the National Philanthropic Trust are like the rock stars of donor-advised funds. I have to laugh. I'm so honored that you will spend this time with me to discuss something called a donor-advised fund. And you know, the word just sounds like, Oh, my God, yawn, right? But it's not. It's this interesting vehicle that donors use to give to charity. Let's unpack it a little bit.
And the National Philanthropic Trust also has yearly reports where you assess donor-advised funds. In the report you most recently put out, you will have another one that talks about how donor advice funds are just on the Rise like crazy. And so that's why I thought my listeners would be interested to hear more about what this vehicle is and also a little bit more about you and the people behind the scenes in this kind of work.
So, before we get Into the nitty-gritty of what a donor advice fund is, What the benefits are, and all that kind of What can we do? Talk about who you are and what interests you in this work, Andrea.
Thank you so much, Sybil, and thank you for the opportunity to speak with you today and talk with you about donor-advised funds, with which I'm very passionate about working here at the National Philanthropic Trust.
The National Philanthropic Trust was established in 1996. I joined MPT (we called it the National Philanthropic Trust) In 2001.
So, the organization was still very young. When I joined, there were about 6 employees at that time, which is amazing to look back on. When I joined, I became MPT's first grants administrator and am currently the Senior Vice President of Philanthropic Solutions. Here at MPT, I've worn several different hats over the years.
When I came to MPT, I had previously been an elementary school teacher here in the school district of Philadelphia. So, when I left teaching, I knew I wanted to do something still in the sector. I knew that I still wanted to find a way to continue doing good in society, which gelled nicely with MPT's mission, which is to increase philanthropy in society. And it was a fortuitous moment for me to join the organization. And become their first dedicated grant staff person.
So, in the first nine years, I was here, I got to focus on grant-making within the organization and see all the good that can come from a donor-advised fund. So, thank you for focusing and sharing with your listeners information about all the good donor-advised funds are doing.
I wanted to focus on DAFs because of the rise in DAFs and, like, let's unpack. We have a report coming out in November, which will air in October 2023. You have a new report coming out in November 2023, so all my listeners should look out for that, and we'll make sure that they know when it's out. They can click on it. And look at it.
But you reported in 2022, and it was so interesting. We'll have a link to that in our show notes as well. In that report, you reviewed 995 charitable organizations that sponsored DAFS, which is really interesting. You talk about the dramatic increase in grants from DAFs to charities. How dramatic that increase is—it's 60% in the past two years—is how, if I Am right? So, DAF grants have grown over 400% in the last decade.
So, wow, I'd love for you to talk to me a little more about your research, what MPT's research on DAFs is showing you about these trends, what that means for charitable giving in the future, and how we should think about this.
Yes, our DAF market report. We've been putting that out for over 15 years, and each year, the numbers are even more surprising to us when we see the uptick and surge in charitable giving via donor-advised funds. It's the quickest-growing charitable vehicle. In the United States, DAF granted out $45 billion in 2022, for example, and although that's half as much as private foundations, we only fund 18% of the assets of private foundations.
So that's a good indicator to show you how much giving is taking place—all in total grant dollars from the donor-advised fund. In 2022, it was $45 billion, a change of 28% from just the year before, an increase of 28%. So that gives you an example of how the growth of donor-advised funds is taking place, and we continue to see that trajectory year over year.
And this is interesting, too, because I did want to unpack a little more with you about this comparison between private family donations. I've been doing research for this work. I've noticed that some folks are concerned about the increasing trend of gaffs because donors can get a charitable or a tax deduction when they put all the money in, but they're not required to. Necessarily, give it all out. And there are more rules around private family foundations. And then, if you just donate immediately to the charity, that's more direct.
So, can we talk about this criticism that I've read about a little bit and sort of? What are you thinking? About that. What are the pluses and minuses of staff within the context of that concern?
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Definitely, and we hear these concerns as well. But we think that donor-assisted funds are the most nimble and efficient way for individuals to achieve their philanthropic goals, and they can be set up very simply with a much lower threshold. And people would never be able to consider establishing a private foundation.
For example, here at the National Philanthropic Trust, individuals can set up a donor-advised fund for as much as $10,000. And make grants to nonprofit organizations they wish to support by going on their portal and recommending a grant; they can choose a purpose for the grant they wish to support, and in many cases, the grant will go out within 24 to 48 hours.
So, we feel that donor-advised funds are a handy tool to help democratize philanthropy and make it more accessible to everyday people. And I think that is a big differentiator because most people can't imagine establishing a private foundation. However, we do hear the criticism regarding there not being minimum distribution requirements from donor-advised funds in how private foundations must give 5% of their assets each year. The DAF payout rates across the board that we are seeing, especially here at the National Philanthropic Trust, far exceed that; on an annual basis, we're typically giving away between 20 and 25% of our assets yearly.
This is very helpful, and one little pushback.
So, let's say you had $10,000 or even $5,000. Whatever amount you have, why wouldn't you just give it straight to me? The nonprofit. So, you just gave, I think, a good description of why the comparisons is between private family foundations and the donor-advised fund. How about giving straight to the nonprofit? Instead of going through any kind of intrigue.
We encourage donors who know that they want to give their assets directly to one particular organization to do so directly. A donor-advised fund is a great solution for individuals and families who wish to set up a fund to support their charitable giving over time. Donor-advised funds are versatile vehicles so donors can put cash or non-cash assets into their DAF. And get an immediate tax deduction for the gift that they're making, one of the most beautiful things that we can.
What we can do is, especially for non-cash assets, turn them into charitable dollars that the donors can use to support various organizations they may wish to support.
Yeah. And Andrew explained more non-cash assets to folks; what does that mean?
Sure. Typically, we would receive non-cash assets from donors, which would be securities, public securities, mutual funds, or restricted stock that may have selling requirements where we need to hold it for some time before we can liquidate it.
We've received non-cash assets that are pretty complicated and give real estate gifts of actual property. We had antique furniture gifted at one point. Gold coins were gifted at different times, and we can accept them. We don't want to hold them for some time, so we liquidate those assets and turn them into real cash assets that the donor can hold in their donor-advised fund and grant out to nonprofit organizations they want to support over time.
And I just think that's an important point to underline. I worked in the nonprofit sector before I did what I do now. And when I was in the nonprofit sector, I saw donors try to give some of those assets directly to the nonprofit they love. Sometimes, it works, but other times, it ends up that the nonprofit itself doesn't have expertise in real estate or navigating those things. It ended up being what I've observed it would cost the nonprofit a lot of time trying to navigate a house gift, for example, or other things.
And so I guess it's not always the case that that would be the situation, but I like that you brought that up because you have expertise there. Let's just go into all of this in a little more detail. Yeah, in terms of the donor-advised funds. Do you see them continuing to rise? What do you see for the future of this particular vehicle? For people who might want to contribute.
We see it as a growing trend for the reasons I described. Because they are so nimble and versatile, they're a low-cost option for charitable giving. With the rise in technology, accessing your donor-advised fund and the portal has also become very easy.
So, as we see technology increase, we have mechanisms where donors can just log on and recommend a grant as quickly as you would, you know, check on a purchase you made through a site like Amazon. You can go to your favorite charity list. Select the amount that you want to grant. What is the purpose of that? Grant it and submit it, and immediately, in real-time, we start working on that grant and getting it processed out the door.
We do think this is a trend that will continue, year after year. The grant numbers just continue to grow. We also pride ourselves on donor education here. So, we are encouraging donors to set up and contribute to their DAFs and educating them about investing their DAF assets while they are here with us.
We also offer impact investing as an option for donors, advised fund donors. We have some Pools so that, in between grants, the donor's assets can be put to good use, whether that is something to invest in Our broad social impact pool or a pool focused on environmental Investment, gender, and equity investing.
So, we pride ourselves on educating donors and making them philanthropists.
Great. OK. So, let's take a step back here, and there are so many different kinds of donor-advised funds. And when I do the research, I see that I categorize it into three different categories, as folks who listen to me know. I know I won't get into my stuff right now. This is all about you.
But can you tell me how you see donor-advised funds, like the different types? There are investment firms that have them. Some banks have them. There's NPT; there's community foundations. Tell me a little about Your observation on the spectrum of DAFs.
Sure. And our DAF market report is a good indication of that. We surveyed, as you said, almost 1,000 different donor-advised funds.
So, as you described, there are the major sponsoring organizations of donor-advised funds: Fidelity Charitable Gift Fund, Vanguard Charitable, Schwab Charitable, and NPT, which is the largest independent provider of donor-advised funds here in the US. In the donor-advised fund landscape, you also have several funds offered through community foundations that serve the needs of the communities they support.
You also have religious-based donor-advised funds, so you have the National Christian Foundation, which offers donor-advised funds. Several large Jewish donors advised fund programs that exist here in the US. And then you can have smaller donor-advised funds that are focused. More on universities, for example, I believe Harvard offers their donor advice on programs, and so they are very common.
And you can, as you described, find them in many different settings.
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The other thing that I noticed when I was Researching is there are some donor who advised funds to support and encourage what I call sort of pooled funding, so multiple donors are putting money in, so that's another benefit of a DAF that is because more than one person can put money in, also, it allows for some space if there is a family that wants to give. They want to have time to really talk about their giving strategy rather than just have one person, you know, give money directly. Not all deaths are set up to be able to pull funds, and others are.
And I think that's an important nuance that a person thinking about this probably wants to know. Can you talk a little bit more about, you know, what are the different pieces that you should think about, or maybe ask if you're thinking about a DAFF, if you have more than one donor, or if you have a family that wants to have maybe some authority over how the giving goes? So, it's more than one person.
Or so national philanthropic trust, as you mentioned, is a donor-advised fund that allows and encourages donor collaboratives or funds that can receive gifts from external donors that wish to support the same initiative. Whatever the purpose, that particular donor-advised fund was established. Over the years, we've housed several collaborative funds at the National Philanthropic Trust that pool resources from various donors, individuals, and foundations. These corporations have shared interests around a particular goal.
So, one of our largest was focused on global health initiatives, polio eradication, AIDS, TB, malaria, and family planning, and that pulled together donations from like-minded donors who wanted to move the needle and leverage their combined assets to provide larger grants in those areas, such as polio eradication.
On the other end of that spectrum, we also have had collaborative funds that bring together donors who want to move the needle on issues here closer to home for opportunity youth. Our most recent collaborative is focused on supporting the initiatives around the 250th anniversary of the US that are coming up in the semi-quincentennial of 2026.
We are glad that we can accept donations from like-minded donors who want to support the initiatives of a particular donor or advised fund, and one of the big advantages is that we can set up. They wake up quickly. Within 24 to 48 hours, we can typically open a donor-advised fund for a particular purpose.
So, another question I think my listeners may have been: What's the overhead? It sounds pretty cool, but how much does this all cost you? Talk about that a little bit.
Sure. So, we have a charitable administrative fee, which is the fee that MPT charges for our service and administration. It's typically a sliding scale that's based on the level of the asset. Debts are in the donor-advised fund, and those fees can be found in our donor-advised fund guide, which is available on our website, mptrust.org. So, as the assets in the donor-advised fund increase that charitable administrative fee, it's a basis point schedule so it will decrease over time.
I'm sensing that you don't want to say that.
The exact amount to all. The thousands of people here
It's just because it does vary based on that.
Yeah, it varies, and it varies based on that
But it's public information, and I will say that our fees at MPT for charitable administrative fees are less than 1%.
Is that it?
OK, that's what. I was hoping you'd say a little bit so people wouldn't say she's hiding the ball because it's. There are going to be thousands and thousands.
No, definitely. Definitely. It's one under 1% and usually far under 1%. It is a sliding scale. So, I encourage people to schedule the fee for the asset they might consider gifting to the staff.
Right.
Well, this is. All great. OK. So, everybody, you really should check out their website, the National Philanthropic Trust website. And they're going to have a new one every year. They do this report, and it's coming. It's out in November, so this is the perfect time for this conversation, so please check it out when it comes out.
So, their website has great information about all the research they've already done. Andrea, is there anything else you want us to know before we go? This has been so educational. I appreciate it.
And Sybil, thank you for the opportunity to talk about donor-advised funds. I think we covered a lot of information. I would just encourage your listeners to find out more. Donor-advised funds, as I mentioned, are such a versatile tool. They can live in perpetuity.
So, another big area we focus on is ensuring that current donors encourage the next generation to get involved with the donor-advised fund. We encourage legacy planning. You can leave the DAF to successor advisors or beneficiary charities via the donor-advised fund succession.
So that's another big area of education that we promote, and we just want to make people aware of these versatile tools that they can use to expand their giving.
Oh, and Andrea. So, let's just clarify for our listeners. I just wanted to clarify that for my listeners, who are now your listeners. Each year, whenever you do a report, we're talking about 2022 numbers, but they're looking at 2021 numbers.
So, the next report in November of 2023 will be looking at the 2022 numbers. OK, is that right, Andrea? That right?
We are; thank you for clarifying that.
Yeah, I think it's important for people to Know because, Like with COVID and everything else there was, there's a lot of things going. Each year. So please, please, please. Everybody should check out the report that will come out in 2023. That's going to look at last year's numbers in 2020. Two, we can only do it if you guys can do it. Review the numbers carefully for the year.
Before. Thank you, Sybil.
The pleasure is all mine, Andrea. I hope you have a great day.