Donor Advised Funds

Hi Kim:

We’ve been subscribers for a while, but I haven’t asked an e- question, so here goes!

Our fundraising emphasis is on individuals, including major donors. We work on changing the mental health system, and while we continue to go to approach foundations, the reality is that vast majority of our funding is individuals, a good number of whom are major donors (partly thanks to my taking two of your classes!).

Our board development chair has an idea to reach major donors: He is thinking of pitching specifically for ‘donor advised’ grants VIA third party entities… That is when a well-off person shops for nonprofits from a list provided by a foundation, investment company, etc…

Have you heard of this before? Is it done, or is there a way to do that?

I had thought we could only reach the major donors the old fashioned way — networking, networking, networking. My intuition is to advise our development chair to not bother, but wanted to check it out.

I know it seems more and more well-off individuals use investment- type companies as intermediaries to GIVE their donations, but is there a way to ‘get on the radar’ of those major donors THROUGH ‘donor advised’ services such as foundations and investment companies, etc.?

~ Leaving No Stone Unturned

Dear Stone:

I admire you for asking this question. It shows that you are open to new ideas and you probably have already had the experience of finding donors in all kinds of places. Your board chair has a slightly more “tooth fairy” approach to prospect identification, but he is not wrong. Many wealthy people use community foundation donor advised programs for their philanthropy. They contribute money to a foundation, and they give some of it away every year, usually 5% of the asset, but sometimes using some other arrangement. In recent years, commercial financial management firms have started providing this as a service to the people whose investments they manage. The problem is in your board chair’s idea that these people are shopping for charities, and all you need to do is get on a list which will be put in front of their face. Most people who use investment firms are very clear about what they want to give to, and their firm will provide little or no guidance. Public foundations, such as the Funding Exchange, or community foundations, will create “dockets” of groups that they think their donors might be interested in, and then donors will sometimes pick organizations off of those lists. However, the process of getting on those lists usually involves knowing someone who knows someone.

Your instinct about networking is completely accurate. Since you have an established major gifts program, and it sounds like you do get some foundation funding, what you want to do is use your existing donors to find more donors. Some of them will have friends that use a community foundation, a family foundation or an investment firm to manage their giving, and they will recommend your organization to that friend. Create a program where you call all the people who have helped you with $1,000 or more every year for three or more years, and you ask them to help you find more people like them. Offer them options: Could you host a small house party? Would you introduce us to your investment advisor? Would you be willing to approach some friends individually? Ask program officers if they know other program officers in their own or other foundations that do this kind of advising, and would they introduce you to these people. You can meet them one at a time, or host a funders breakfast on mental health and advocacy.

Work your networks: ask the people who have already shown they care about your cause who they know who also cares, and might be willing to give—that is the fastest, most lucrative and most successful way to raise money.

~Kim Klein