Maximizing Charitable Impact Through Donor-Advised Funds with Fred Kaynor

So for those who aren't familiar, can you tell us a little bit about donor-advised funds and DAFgiving360?

[00:00:29] Fred Kaynor: Sure. Absolutely. DAFgiving360 is one of the largest national donor-advised funds in the country today. And, donor-advised funds, generally speaking are at their very most basic definition an account for charitable giving. It's a way by which people can take a really efficient tax smart approach to managing and maximizing the impact of their charitable giving and overall philanthropy.

Donors would give a variety of different kinds of assets for charitable giving, but they can contribute them not just to a direct charity, but through a donor-advised fund, like DAFgiving360. It could be cash, it could be securities, it could be other non-cash assets like real estate, collectibles, private business interests and such. And generally, when they do so, they receive a fair market value tax deduction at the time of the contribution. We liquidate those assets on their behalf if they aren't already liquid. And by us liquidating them, they potentially, they being the donors, potentially avoid capital gains exposure, which means whatever they would've been subject to in capital gains, which can be as much as 20% of the value of the asset that they contribute, means 20% more is going to support the charities that they ultimately want to support. And so a donor-advised fund and DAFgiving360 in particular is really created as a threefold proposition.

A donor contributes an asset. Once the assets are contributed and liquidated, the assets are then invested in the account for potential growth, and then so contribute the assets, invest the assets, and ultimately grant the assets to charity when they're ready to grant those assets to a charity that they wish to support, it's a very efficient way of doing so through a couple of clicks of buttons. Essentially that is the process. And just for perspective, Doug, since 1999 when we were started, our donors have granted more than $44 billion to charity and they've supported over 280,000 organizations.

501c3 nonprofit organizations. It's really remarkable to see how people have really embraced this kind of a vehicle to really maximize their charitable giving.

[00:02:56] Doug Heikkinen: Wow. $44 billion to charity since inception is an incredible milestone. Can you speak more about some of the impact that DAFgiving360 has seen in the last year?

[00:03:07] Fred Kaynor: Yeah. Boy, it's, it has been pretty remarkable and it's inspiring really to see that in the face of all kinds of uncertainty, whatever that might be, economic, more market volatility. Our donors are resolute in their support of charities that they really embrace. In our fiscal year 2025 alone, donors granted $8.9 billion to charity.

That was a 34% increase in grants from the previous year. So if you think about that for a minute and all of the activity that has gone on in the past year, in spite of that sort of volatility and uncertainty, a 34% increase in the amount that they gave suggests to us that not only are they committed to charitable giving, but they're committed to doing it in a way where they're gonna maximize their impact. Because they see that the impact they need to have is greater now more than it ever has been.

So it's a pretty remarkable number. And to suggest that there was that much of an increase during a period of uncertainty that we've seen, would suggest to us and suggest to many that these donors really recognize the role that they play and how important it's for them to rise to the occasion.

So that $8.9 billion was spread across 1.4 million plus grants, and again, went to more than 155,000 charities. And for perspective, if you look at it this way, this averages more than $24 million granted to charity every day in our fiscal year. It's a pretty remarkable statistic.

And on giving Tuesday alone back in November, giving Tuesday is the unofficial kickoff to the season of giving. That one day alone DaFgiving360, saw over $69 million go to charity. So again, remarkable generosity and remarkable commitment to doing whatever they can to achieve maximum impact with their philanthropy.

[00:05:09] Doug Heikkinen: Those are really staggering numbers. Were there any trends that arose from giving data in the past year?

[00:05:16] Fred Kaynor: I think so, yeah. Generally we see that there is a traditional giving season, meaning from during the holidays, after giving Tuesday, that's when we see donors really significantly increase the amount that they contribute to charity.

And what we found most recently is there's less and less of a giving season. It really isn't seasonal. It is becoming more and more of an integral part of their overall management of their finances, and it happens throughout the year. So that's a pretty remarkable twist. Normally we have seen that the lion's share of contributions that are made through DAFgiving360 happened between end of October, beginning of November through December. And we have seen that that still is the case. It's certainly the time when people give most, but it's certainly spread more evenly now, across and throughout the year, which again, is a testament to their generosity and the recognition of the efficiency of this vehicle. Because again, with this vehicle, many people give at the end of the year because they want obviously to get the money to the charities they support before the years end. They also want to make sure that they get a tax benefit for giving before the year end. But the beauty of our solution is you can give it anytime. You can contribute whatever you want, whenever you want, when you have it to contribute, and you can grant it out.

And at that point, that's when you get the fair market value tax deduction and potentially avoid the capital gains if you're giving a non-cash asset. But the beauty of the solution is you can contribute when you have it to give and you can grant to the charity whenever you choose because you've already derived the tax benefit at the time of the contribution.

So that's something that we've really seen as a significant newish trend. Then secondly, with respect to disaster relief, boy Doug, there have been a lot, I think you'd agree, there's been a lot of, a lot of things going on this year that have been really tragic. Whatever it is, humanitarian crises, natural disasters, hurricanes, floods, tornadoes, earthquakes.

Boy, it just seems like they're ongoing. And despite it all, people have really embraced their DAF accounts, not only to support their ongoing sustained charitable activities, their alma mater, their house of worship, their favorite charity locally, but they have significantly increased the amount that they give to support those in need when those disasters occur. And that very much is incremental to what they already gave to their ongoing charitable goals. So that was pretty remarkable too. And then another trend we saw was that donors are generally, the way it was phrased to me is: I want my charitable dollars to go to work before I even grant them to the charity that I support.

And by that they mean, in that second part of the equation, contribute, invest, and grant. In the investment section, we're seeing more and more people being very deliberate and thoughtful about how they choose to recommend a strategy for investing those assets while they're in the account. And that means many people want to invest it for maximum financial growth.

But now we're seeing in addition, people recognize that they want to balance their investment strategy so it combines an approach that is, that has a significant financial return, but also has a significant social return. Not necessarily the highest financial return that a traditional aggressive fund would have, but it's investing in a fund that has a social impact component.

So we're seeing a lot of that as a growing trend among our advisors, particularly the younger generations. And then finally, and definitely not least important, we are seeing significant growth in financial advisors who are embracing philanthropy and charitable giving as a priority on behalf of their clients across their entire wealth planning and financial planning process.

So a couple of really neat trends that we're seeing, and it makes sense and it illustrates why we're seeing such a significant growth in overall granting.

[00:09:33] Doug Heikkinen: Let's talk about that last point in more detail. Can you give a bit of insight into how advisor relationships are impacting giving?

[00:09:42] Fred Kaynor: Sure. So we work with over 4700 advisors, financial advisors, RIAs, family offices, and the like, throughout the country. And we have always supported advisors in a very meaningful way because we have seen, on an ongoing basis, a significant growth in advisors that are embracing charitable giving as a value add practice to differentiate their firm and what they do and how they support their clients relative to others.

And we are absolutely rising to the occasion and engaging very deeply and in a very consultative way with those advisors. And, as a demonstration of that engagement, 78% of accounts at DAFgiving360 in this past fiscal year were associated with an advisor.

So that means that of all of our accounts, almost 80% of all of those accounts, are with an advisor and part of an advised practice. A benchmarking study identified charitable planning as consistently one of the highest value add service that advisors offer to their clients to elevate their support and ultimately differentiate their service relative to others. So yeah, the advisor business is critical to our model. It's critical to our overall structure. And supporting them in the best possible way is our, arguably one of our largest priorities. And we also saw other things come as a result of some of the consultative work that we've engaged with these advisors on.

For example, 38% of our grants are now scheduled as recurring. Advisors regularly engage with their clients to say, what are your charitable goals for both short and long term? Do you have one, an immediate need to do something now? Do you have an ongoing need to support a cause that you want to really support in perpetuity or for the long term. And so they take an approach of both the short term and the long term, and they set up recurring grants to ensure that it's sort of a set it and forget it process, whereby they recognize what they want to support on a sustained basis. They know the charity they want to support, they set up their grants so that they really don't have to think about it anymore.

That's a great tactic to take, and something that has grown significantly among our advisors that are supporting these philanthropically minded clients. Here's another thing. it's not just how they give, but it's what they give.

Obviously everybody can give cash. It's great, but cash isn't necessarily the best way for these donors to achieve maximum impact. So if they have shares of highly appreciated stock that they've had for a year or more, those generally are much more impactful. By donating that kind of asset in lieu of cash, they are in effect increasing significantly the amount of charitable impact that they're having versus just giving cash. So again, advisors spend a lot of time advising their clients on not only how to give, but what to give. The type of asset to give in order for them to achieve maximum impact with what they're trying to do philanthropically.

 70% of donors say that they give more because they have a donor-advised fund account like DAFgiving360. So the suggestion is, people are really prioritizing philanthropy in a way that they never have before.

They're making it a priority in their overall approach to wealth planning and financial planning. And similar to what they want to achieve with their investments and savings, they want to achieve that same level of maximum impact with their charitable giving, and they're turning to donor-advised funds to help achieve that objective.

[00:13:30] Doug Heikkinen: That's all so great to hear. It seems while charitable planning has not historically been a major component for advisors, its role and significance is rapidly expanding. So what key role do advisors play in working with their clients with DAFs? And I imagine there's tax considerations to keep in mind and be aware of.

[00:13:50] Fred Kaynor: Great question. And it's an ever evolving one too, because there's different types of donors. There's generational wealth. So now we're doing, we have baby boomers who are on the cusp of retiring, Gen Y, Gen Z. And doesn't the alphabet start over again? I think it, I can't remember what the, double A or, but maybe that's a battery.

But anyway, we have, there's a whole lot of different strategies that advisors are employing, because. The philanthropic goals of these clients, depending upon who they are, their demographic makeup, they're evolving. What's really interesting is if you see, a study recently done suggests that Gen Y and Gen Z investors are more likely to seek advisor guidance that goes beyond investments than previous generations.

And what's also very interesting from that same study is that 57% of next generation, those are the individuals from age 18 to 24, of those sort of high net worth individuals have expressed a desire for, specifically for philanthropic guidance from their financial advisors. So the suggestion is advisors have already, many advisors have already recognized the benefit to those client relationships beyond the current generation of philanthropy. When one incorporates philanthropy into the support that they provide, it elevates the value to the current client and also elevates the appeal to future generations to remain with them.

But it is really remarkable to see that, intuitively, I would think the next generations are more independent. They can do it themselves, or they want to more or less do it themselves. And interestingly, that's not the case. They are looking for specific guidance and information on how to really maximize the impact of their philanthropic giving.

And in addition to that, the variety of options of giving vehicles. There's so many different kinds of vehicles out there. There are donor-advised funds, there are private foundations, there are remainder trusts, annuities. And then within private foundations, there are community foundations.

There's single issue funds. And so the idea is that the advisor will really engage in a thoughtful way on trying to establish all of the philanthropic goals that these clients have. Whether they want to have both a short term and long term vehicle, whether they want to have something that might generate income in addition to addressing some of their charitable giving goals.

Whether they want to do some things that would reside appropriately with the donor-advised fund, like DAFgiving360, but others would be with a private foundation based on what they want to fund. And so there's a whole lot of different options out there, and advisors more and more are becoming very conversant in what those giving vehicles are, so that then when they engage in those discussions with clients, they can really give them a landscape, a full landscape of what the options are and identify what the best choices would be for them.

And then, lastly, and probably not, certainly not least important is advising on tax strategies. Our experience is that these clients are inherently generous and they embrace, philanthropy and charitable giving as a priority. But that doesn't mean that they don't want to see that the strategy that they employ around their charitable giving isn't tax smart.

They certainly want to see a benefit from a tax exposure perspective, not only for themselves, but ultimately to make sure that what they would otherwise have to pay in the way of tax would now be something that the charities they support could benefit from. So they advise on a variety of different types of strategies related to how they could minimize their tax exposure and maximize their charitable impact.

[00:17:46] Doug Heikkinen: Can you tell our listeners the advantages of donor-advised funds to consider over the traditional route of donating directly to the charity.

[00:17:55] Fred Kaynor: Sure. Giving through a donor-advised fund, is a way that they can, I would just say in its simplest terms, it's a way that they could really maximize the impact on the charities that they choose to support.

And, what do I mean by that? First of all, we accept a variety of different kinds of assets. Not just cash, but again, as I said, real estate, collectibles, securities, restricted stock, private business interests, all different kinds of assets. And frequently, many charities, particularly the smaller ones, don't necessarily have the capacity or the resources to be able to accept those effectively.

They have to outsource that to a financial institution, pay a fee, and then ultimately they would receive the assets once those assets are, or once the contributions are liquidated. And we do that for them. So they don't have to worry about the headache or the complexity associated with accepting those complex non-cash assets.

We take those. The donor theoretically avoids the capital gains that they would otherwise incur if they sold them directly and gave them to the charity. That means more that's available to go to the charity. And in that way, it is a tremendous value add to those charities.

They have, theoretically, a larger grant that comes from the donor. They don't have to go to the expense and the headache of having to figure out how to accept, liquidate, and then ultimately make accessible the dollars from those contributions. So it really makes the process for them a lot more efficient. A lot more efficient.

That's just one really critical way I think that we've really been able to make it more efficient for the charities ultimately.

[00:19:46] Doug Heikkinen: It seems like donor-advised funds are growing in popularity and becoming a widely used charitable giving vehicle, and certainly DAFgiving360 is part of that movement.

Why do you think that is?

[00:20:00] Fred Kaynor: I mean, we're so grateful to the growing number of donors and financial advisors that are supporting them, that they turn to DAFgiving360 as their sort of giving vehicle of choice. Why do I think that is?

There is a really really heightened desire to maximize the impact of their charitable giving, and at the same time, mitigate tax exposure. And our solution, Doug, is just so simple and efficient and it enables them to tick both boxes effectively. It really does. Again, contribute, invest, and grant.

All they need to do is identify an asset that they want to contribute. And let's say they have, for example, a wealth event. They take a company public, they retire, they get a large inheritance, something like that. There's, theoretically a not insignificant tax exposure to that.

And a donor-advised fund is just such an efficient way for them to identify a certain proportion of those assets, contribute them into the account. We, again, liquidate them on their behalf. They get a fair market value tax deduction at the time of the contribution. They invest them for growth and they can give those or grant those to the charity whenever they choose to do so.

I guess it's in the efficiency and in the low cost and in the tax smart approach that donor-advised funds offer that they have become so increasingly turned to for many people's charitable giving.

[00:21:27] Doug Heikkinen: You mentioned disaster relief a little bit ago, and I want to circle back to that. Can you speak to how that has been a major motivator for donors?

[00:21:35] Fred Kaynor: Absolutely. And this is again, an area that is just so inspiring for all of us. Our donors have utilized their DAFgiving360 accounts actively in support of these disasters as they occur. What we do, Doug, is we engage with an organization called the Center for Disaster Philanthropy. And Center for Disaster Philanthropy is a remarkable organization that is essentially responsible for identifying operating charities that provide boots on the ground service immediately when these disasters occur. So they're responsible for identifying, vetting, and then making accessible information about these organizations. And when that happens, let's say for example, the, those tragic floods in Texas. Within a 24 to 48 hour period, we had a list of 10 charities that were providing relief and recovery efforts to the people who were impacted there. And we posted those charities right away to our website and in social media saying if anybody wants to utilize their DAFgiving360 account to support these disasters, by all means, take a look at this list.

And so we're seeing, again, this remarkable generosity of our donors. It's not taking away from their sustained charitable giving goals, but it's incremental to them. So they're giving more to their donor-advised fund because they see it's not only a solution for addressing their long-term goals, but their episodic ones when these disasters occur.

And we saw a hundred, and I still think about this, $148 million in the past fiscal year were distributed for disaster relief purposes, $148 million. And I go back to that, the floods in Texas alone. Within a week, people had utilized their donor-advised fund to give over $6 million for relief and recovery just during that incident alone.

And again, our ability to have the resources to help identify how to support victims of these disasters, almost real time has a direct impact on how our donors have embraced an approach to not only funding their ongoing charitable giving, but those episodic ones when these disasters occur. it's pretty remarkable.

[00:23:54] Doug Heikkinen: DAFgiving360 has many resources available to help donors and their advisors leverage financial planning and tax smart strategies to maximize their charitable giving. Where's the best place to start?

[00:24:07] Fred Kaynor: Boy, I could go on. We have a team. our group is called, Charitable Consulting.

And our Charitable Consulting team is a resource for advisors and for donors. It's a group of individuals who are highly seasoned and skilled at providing deep charitable consultative expertise. And it's, again, they engage frequently with our advisors. There are also donor activities that they engage with.

The purpose of that team by design and intent is to make sure that these organizations, these advisors, family offices, or the donors themselves, have all the information that they need to achieve maximum impact with their giving. And on behalf of the advisors, as they embrace more and more charitable giving as a priority, they have the resources and the individuals who can help them to think through what the best approach would be on behalf of their clients. So that's a great resource and it's a really terrific team of individuals. In addition to that, we have a wealth of online resources through our website, DAFgiving360.org.

We have, a charitable giving guide, which, when you, a donor and or an advisor inputs certain things about, what do you want to give? Where do you want to give? What types of charities and causes do you want to support?

It asks all of these questions and it produces for you a charitable giving plan, a guide if you will, that will help you, the, individual donor or you, the advisor, supporting them, to take the most strategic and thoughtful approach to how you can give with maximum impact. We have a host of tools, resources, thought leadership pieces, white papers, really just an enormous resource for people to look at, and it's all accessible and available through our website.

[00:26:01] Doug Heikkinen: Fred, you've packed this podcast with such great information. Is there anything else you'd like to share with us?

[00:26:08] Fred Kaynor: All I would say is, again, I want to thank our advisors for allowing us to support them on behalf of their clients and for donors, thank them for embracing DAFgiving360 as sort of their giving vehicle of choice.

It really, at a time when there is a lot of uncertainty, we are seeing that this efficient tax smart vehicle of ours is really empowering these donors and the advisors supporting them to achieve, if not exceed, their charitable giving goals and supporting these organizations.

I would just say a DAF is a great solution. It's a great way to achieve multiple objectives, in a very low cost, highly efficient way. And I would just encourage anybody who is not using one to look into it, inform yourself. Educate yourself either directly through our website or in conjunction with your advisor.

And we would be delighted to help you in any way we can.

[00:27:09] Doug Heikkinen: Fred, thanks so much for being with us. It was great to have you back.

[00:27:13] Fred Kaynor: It was a pleasure to be here. Thank you very much.

[00:27:15] Doug Heikkinen: Learn more about DAFgiving360, please visit DAFgiving360.org. We are on all social media platforms @Advisorpedia.

Please give us a follow. For our producer and everyone at Advisorpedia, thank you so much for listening.

 

 

DAFgiving360™ is the name used for the combined programs and services of Donor Advised Charitable Giving, Inc., an independent nonprofit organization which has entered into service agreements with certain subsidiaries of The Charles Schwab Corporation. DAFgiving360 is a tax-exempt public charity as described in Sections 501(c)(3), 509(a)(1), and 170(b)(1)(A)(vi) of the Internal Revenue Code.

Contributions made to DAFgiving360 are considered an irrevocable gift and are not refundable. Once contributed, DAFgiving360 has exclusive legal control over the contributed assets.

Contributions of certain real estate, private equity, or other illiquid assets may be accepted via a charitable intermediary, with proceeds transferred to a donor-advised fund (DAF) account upon liquidation. Call DAFgiving360 for more information at 800-746-6216.

A donor's ability to claim itemized deductions is subject to a variety of limitations depending on the donor's specific tax situation. 

Market fluctuations may cause the value of investment fund shares held in a donor-advised fund (DAF) account to be worth more or less than the value of the original contribution to the funds.

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