Trends are a funny thing. As someone who came of age in the 80s, I can very distinctly remember spandex, perms, the Pogo Ball, New Coke, acid wash jeans and, of course, mullets. I always think it's funny how different trends come and go, only to resurface again years later (thanks, hipsters). I can admit there are a lot of styles that seemed cool during those years that look pretty dorky today. I always get a good laugh when I dig up old yearbook pictures.
However, there's one trend in the social sector that's not going anywhere soon: donor-advised funds. These “charitable checking accounts” are allowing social sector institutions to use some creative, outside-the-box thinking to attract and retain donors. Better yet, these funds are helping institutions ride a wave of charitable giving to drive their bottom-line revenue. Because nobody puts social sector institutions in the corner, let's take a look at the coolest charitable-giving vehicle on the block.
Here's a crazy statistic for you: There are now more than $70 billion in donor-advised funds across the nation. With more and more people looking to do good with their money but keep control over where that money goes, donor-advised funds have proven to be really popular charitable-giving vehicles for donors and institutions alike. So what are they?
In essence, a donor-advised fund is an account governed by a charitable or financial institution where individuals can consolidate all of their charitable giving. Individuals can contribute however much money they plan to give to charity to the fund, making that sum tax-deductible for the year it's deposited. The contributors can then decide how they distribute those funds to separate charitable organizations (even those different from the organization which holds the fund) whenever they see fit. It's an efficient system that makes charitable giving easier for individuals, families and businesses.
Providing an Experience
For social sector institutions – especially small- to medium-sized colleges and universities – donor-advised funds help provide a new kind of giving experience for new and old donors alike. After all, while charitable giving has remained relatively constant over the past few decades, the number of charitable institutions has exploded. There's a lot more competition out there for that money. For these smaller schools, there's a different supporting cast for donor development and revenue generation as compared to their Division I counterparts. A lot of folks are wearing many different hats, which can make it pretty tough to compete for all those charitable dollars out there.
In setting up a donor-advised fund, smaller institutions can provide a home for giving that really does supercharge donor relationships. These funds work to capture the hearts and minds (charitable giving is an emotionally-driven action after all) of donors. Universities and colleges can even create new campaigns to drive additional revenue to these funds, all while asking that just a portion of those funds be directed to the institution itself. By providing a home for charitable giving, your institution can ensure it's top of mind when it comes to those dollars doing good. Donor-advised funds are helping give small- and medium-sized institutions the advantage they need to compete.
We're big fans of simplicity around the Two West offices – it's a core part of our mission – so it's no surprise we're also big fans of donor-advised funds. While they can be a little bit complex to set up, donor-advised funds do make the process much more simple for those looking to put all their charitable giving in one place. And when you can make life easy for your donors, you might just find they're able to make life a bit easier for your institution as well.
Ryan Rink is the co-founder and president of Two West Companies, and gets really pumped up about working with the social sector. He's deeply disappointed there's no such thing as Spring Break for those in the “grown-up” working world.