Stop treating DAFs like royalty. Instead, understand them.
DAFs are not the magic elixir of fundraising. Here’s why…
By Lindsay Jordan
This article first appeared in Philanthropy Project on November 24, 2025.
If I see one more webinar on "how to win funding from DAFs,” I might actually puke. Do you want to know how to win more funding from DAFs? I’ll save you an hour-long Zoom call: Stop treating DAFs (donor-advised funds) like some mystical new revenue stream and start understanding them for what they are: separate financial accounts advised by charitable donors.
Donors who use DAFs are often the same people who give through other nontraditional means- stock transfers, cryptocurrency, anything but cash. So when nonprofits start freaking out about “not having a DAF strategy,” my first question is: do you have a separate strategy for stock gifts, personal checks, or EFT? For crypto? Probably not. And that’s fine, because we tend to recognize those gifts as simply another currency option for wealthy donors. DAFs are a little different.
The reason we keep fantasizing about DAFs — the endless webinars, articles, seminars, blog posts, and podcast episodes — is that we don’t actually understand them. We don’t understand how DAFs fit into the philanthropic ecosystem.
That’s because, for general operating purposes, they don’t. Let me explain.
I run a fundraising firm. We raise money for nonprofits. So when my clients started expressing frustration about not being able to “win grants from DAFs,” my team started looking into it. Here’s what we found:
Donors move money into DAFs to get an immediate tax benefit. They’re often told that it's a great way to get a tax benefit and put off deciding where to give. The fact that charitable need is met only when the money moves from DAF to nonprofit rather than from donor to DAF is left unsaid.
DAFs are primarily housed at financial institutions and community foundations. And despite their public image, one isn’t necessarily more benevolent than the other (especially considering that community foundations were originally created to help wealthy Americans avoid federal income tax, not to exclusively benefit communities).
Both types of institutions are actually disincentivized to move money out of DAFs. Why? Because they collect management fees while the money sits. These fees are often downplayed as a “minuscule” 1–2%. However, with DAF assets currently sitting at $250 billion, that “tiny” percentage translates to $2.5–$5 billion in fee income annually — dollars that could have gone to benefit local communities, but instead line the pockets of community foundations and financial institutions. Last year, only 24% of DAF assets were actually distributed to nonprofits.
Most DAFs aren’t set up with an intentional giving strategy. While most donors intend for their gifts to support general operating or programmatic needs, those tax-deducted dollars end up held hostage by wealth-hoarding middlemen who abide by no regulation or code on the timely distribution of DAF funds.
Lastly, and perhaps most importantly, the identities of DAF holders and their gifts are largely hidden. Community foundations and financial institutions are not held to the same annual reporting requirements as private foundations, which means they don’t have to specifically disclose to the federal government or the public how money moves in and out of each account, where it goes, just an aggregate list of all DAF transfers.
This loophole to evade reporting and payout requirements creates opportunities for abuse. Bad actors can use tax-deductible gifts to keep money away from nonprofits. For example, a private foundation that’s at risk of falling short of its 5% annual payout requirement can simply transfer funds into a DAF. On paper, this satisfies its payout legal obligation, but in reality, not a single dollar reaches an actual nonprofit or delivers a public benefit, which is the rationale for their tax-exempt status.
Donor makes $100K gift to nonprofit =
Nonprofit delivers $100K impact in community + develops relationship with donor
Donor makes $100K gift to DAF =
Nonprofit receives $24K, DAF makes $1-2K in fees, donor identity kept secret
In short, DAFs strangle the delivery of valuable services to communities so that community foundations and financial institutions can maintain account balances and keep collecting management fees.
So, what exactly am I trying to say here? That DAFs are evil and nonprofits shouldn’t be trying to get their piece of a $250B pie? No. DAFs are here to stay and represent a halfway step to generosity. However, the $250B given by donors is no longer theirs: it is a public trust held by DAF sponsoring organizations – mostly community foundations and the financial services industry. There is no putting that toothpaste back in the tube. However, nonprofits should not be wilting violets here either.
This is the exact position the nonprofit sector finds itself in when determining how to deal with DAFs: Yes, you can play nice in the sandbox for pennies on the dollar with community foundation and financial institution representatives, as countless webinars will instruct you to do. You can add a button to your website to remind donors that they have a DAF and that you are willing and able to accept those gifts. You will raise some money… and you will also perpetuate a toxic giving trend that has positioned Fidelity Charitable, the National Philanthropic Trust, and Schwab Charitable as the largest recipients of charitable donations in the U.S. (as recently as 2022, the top three were Feeding America, United Way, and St. Jude Children’s Research Hospital).
My proposals for how we fundraisers deal with DAFs:
De-center DAFs in our solicitations. Enough of the glitz and glam about DAFs. Yes, it’s the largest growing area of philanthropy — but that’s not a good thing for nonprofits. The more airtime and recognition we as a sector bestow on DAFs, the more they will continue to feel like a special little something. Remember, DAFs are just another giving tool – like a checking account is a tool – and you already have a toolbox FULL of these tools.
Educate donors and ask them to follow through. Donors don’t give to DAFs in order to decrease their impact by 76%. There was no community advocate in the room when they were making their financial plans. In short, they don’t know the collective catastrophic impact that the current structure of DAFs inflict on our sector.
Elevate educational giving opportunities like Half-My-DAF, an annual campaign that encourages donors to tap into matching gifts by pledging to put half of their DAF balance into productive use. Or launch your own “Drain the DAF” annual campaign. Remind donors through these campaigns that those dollars were already committed to the community, and it’s their job (not the community foundation’s or financial institution’s) to make sure the promise is kept.Keep raising money from big and small individual donors. They can give to you in cash, by credit card, by writing a check, by donating stock or crypto, by supporting your event, by using their Qualified Charitable Distribution from their IRA, and yes, from their donor-advised fund. When they want to give, they will choose the vehicle that works best for them.
As charitable giving continues to skew in America to a smaller and smaller group of wealthy individuals, we cannot allow critical dollars to be hoarded by community foundations and financial institutions like dragons on a veritable pile of gold.
Fundraisers — traditionally expected to “friendraise” — now find themselves in the crosshairs between a donor’s good intentions and the profits of major financial institutions, with the mission of their nonprofit at risk. It’s an unfair fight. And it continues the harmful framing of donors as saviors instead of community partners.
We fundraisers must first adjust how we interact with DAFs, understand their place in the world, and respond in ways that realign generosity with the communities it was meant to serve.
