What are sponsor organizations and what are the different types of sponsor organizations for donor-advised funds?

In the 1930s, community foundations and Jewish federations were the first to offer donor-advised funds. Over the last three decades, countless institutions have caught on, and DAFs have been booming ever since. Today, there are an estimated 1,000 or more DAF sponsor organizations in the U.S. Broadly, these sponsor organizations fall into three types: community foundations, single-issue non-profits, and national non-profits (which include both commercial gift funds and noncommercial organizations).

It’s important to note that there can be big differences both among sponsor types and the individual organizations that fall under those types. Some of these differences are by law and some are by policy. Always ask about the services, fees, and restrictions of your chosen sponsor organization before opening a fund. Here’s a description of each of the three main sponsor organization types:

Community Foundations…

What they are: Community foundations are independent, non-commercial organizations created by and for the people in a local area. They allow donors with a wide range of interests and means to support the issues they care about, creating long-term assets to help and sustain people and places within a certain geographic area.

There are more than 860 community foundations throughout the U.S., with at least one in each state.[1] Indiana currently boasts the largest number of community foundations, with more than 90. Community foundations vary in terms of asset size, capacity, geographic reach, and options for donor-advised funds. They also offer donors other types of funds in addition to DAFs, including field-of-interest funds, designated funds, and scholarship , to name a few.

As of 2017, community foundations held nearly 70,200 individual donor-advised funds with charitable assets totally more than $38.6 billion across the U.S.[2]

Why donors like them: Because community foundations are deeply rooted in place, they can be a good choice for families who have personal ties to a certain town, city, or region, or those who wish to give where they live. Community foundations have deep knowledge of community needs and organizations successfully addressing those needs. They have the ability to vet local non-profit organizations, and they freely share their local knowledge, expertise, and connections with donors.

What to know: Investment fees and fund minimums on DAFs will vary widely across community foundations, as will the ability to accept complex assets. Many community foundations have full online functionality—making it easy for donors to go online and manage their DAF. In smaller or more rural communities, community foundations may have more limited online capabilities.

“Our community foundation has the resources and knowledge to help us make intentional gifts in this community. They go the extra mile to research initiatives and ideas before we step into a specific area. It’s a smart way to help local non-profits in need.”
Melisa Ambers, Donor, Communities Foundation of Texas[3]

Single Issue Non-profits…

What they are: Single-issue non-profits are tax-exempt organizations that work in a specific topic area. These non-profits create DAF programs to mobilize their members around a certain identity, faith, or cause. The most common include universities and hospitals, faith-based non-profits (e.g. Jewish federations, Catholic community foundations), Rotary foundations, and issue-specific non-profits, such as those focused on the environment, health, social justice, or international relief. Other donor-advised funds focus on giving to certain groups of people, such as people of color, women and girls, LGBTQ, etc. Note: some single-issue non-profits have “community foundation” in their name, yet unlike community foundations that focus on a certain geographical area, single-issue non-profits organize themselves specifically around an identity, religion, or issue.

In 2017, single-issue non-profits held more than 55,000 DAFs with charitable assets totaling $12.82 billion. Single-issue non-profits typically have the highest payout rate of all types of charitable sponsors, but comparatively slow rates of increase in new funds and assets. [4]

Why donors like them: Single-issue non-profits connect donors with a community of people of like-minded interests or identity. Donors use them because they care about the organization’s mission, and they see the DAF as a way to give to their passion within an organization they already trust. For example, one donor says she started her family donor-advised fund at a local Jewish Federation because she “wanted to establish a long-term connection to the Jewish community.” Another donor opened a DAF at the Sierra Club Foundation because he “cares deeply about funding climate solutions, and wants to join other donors who do as well.”

Some local or regional single-issue non-profits (such as the Jewish federations or United Ways) can provide expertise on local non-profits, and may have advantages of connecting DAF grants to other giving by the donor or family.

Additionally, some of these single-issue non-profits help a donor achieve a more specific goal, such as international giving (e.g. CAF America, Global Greengrants), impact investing (e.g., RSF Social Finance, ImpactAssets), or protecting free enterprise values (e.g., Donor ).

What to know: DAFs at single-issue non-profits vary as widely as their missions. The focus can be broad or narrow, serving large communities through many programs, or supporting a single issue or place through a targeted program.

“I chose to create a donor-advised fund at RSF Social Finance (a single-issue non-profit) as one way to direct some of my inheritance from my mother, who shared many of the same values. I want to be a part of and support an organization that so genuinely holds the question of how we can work with money in a way that serves the common good, rather than one that tears us and this beautiful planet apart.”
Jennifer Ladd, Donor, RSF Social Finance[5]

National Non-profits…

What they are: National non-profits are tax-exempt organizations with a focus on fundraising and grantmaking nationally. A key distinction between national non-profits from other sponsor types is that national non-profits exist for the sole purpose of providing DAFs—whereas other sponsors offer DAFs as a complement to their existing mission or work.

There are two different kinds of national non-profits. Some are tied to financial institutions, and others are not.

Commercial gift funds, which include charitable organizations affiliated with proprietary financial institutions, such as Fidelity, Goldman Sachs, Charles Schwab, and Vanguard.

Independent noncommercial organizations, such as the American Endowment Foundation, National Philanthropic Trust, United Charitable; and national faith-based organizations, such as the National Christian Foundation or the Jewish National Fund.

National non-profits’ DAF programs have existed for more than 25 years, and Fidelity Charitable was the first to establish commercial gift funds back in 1991. Today, national non-profits dominate the DAF industry in terms of the number individual DAFs, charitable assets held, contributions received, and grant dollars distributed. In 2017, they combined had more than 338,000 individual donor-advised funds with total charitable assets of more than $58 billion.[6]

Some national non-profits are tied to financial institutions, while others are independent, non-commercial organizations.

Why donors like them: National non-profits are not tied to one place or issue, meaning donors can open a DAF and give to any charitable organization locally, nationally, or in some cases even internationally. Commercial gift funds, in particular, tend to offer more sophisticated investment options and technology platforms than other types of sponsor organizations—offering a convenient point-and-click platform for grantmaking and investing. Typically, they cost less in fees than other sponsor organizations do. To some donors, saving on administrative fees means they have more money to give away to non-profits.

What to know: National non-profits offer DAFs that vary widely in terms of features and benefits offered, and provide a range of investment alternatives, minimum fund sizes, and disbursement policies. If you have a financial advisor or wealth manager, he or she may only have access to certain DAF sponsors or be compensated differently by different sponsors. Check carefully with individual institutions to compare . Generally, commercial gift funds may offer personalized grantmaking services to higher-dollar donors; however, most do not offer local or funding issue expertise and support, nor do they offer networking opportunities with other donors.

“All our money is hard-earned, and I want to donate smart. I’m much freer about giving money now that I have a donor-advised fund. I don’t have to write checks; I can simply go online and do it. I feel I can give spontaneously when needs arise—such as after the 2015 earthquake in Nepal. People don’t understand they don’t have to give huge amounts. If everybody gave a little bit, it would be a whole lot.”
Lynda Fox, Fidelity Charitable Giving Account holder[7] who supports more than 40 non-profits through her donor-advised fund

Sponsor Benefits Summary Chart

Sponsor organization Type Typical Advantages (in general terms)
Community Foundations Donors give where they live, gaining a high level of community expertise and grantmaking support from staff
Single-issue Non-profits Donors join a community of like-minded donors who come together around a similar mission or worldview
National Non-profits
(includes commercial gift funds)
Donors typically pay less in administrative fees, and may access sophisticated online platforms for giving and investing

Commercial Gift Funds, with a Twist

Not all commercial gift funds are alike. Here are two quick examples of funds that are doing their DAFs a little differently.

  • Early in 2018, Amalgamated Bank, a financial services company and B Corporation with deep roots in progressive politics, created a donor-advised fund service requiring donors to distribute at least 10 percent of their accounts annually to non-profit. This is the first commercial DAF to require this high of a payout. Also, donors have the option of putting one percent of their funds into a communal fund to be administered by Amalgamated advisers.
  • Morgan Stanley offers the Morgan Stanley Global Impact Funding Trust (GIFT) allowing a non-profit, such as a university or hospital, the opportunity to offer a donor-advised fund to its donors without having to manage the program itself. This gives donors the option of establishing a DAF at a nonprofit they care about, with Morgan Stanley managing it on the backend.

Next in the DAF Guide: What services do sponsor organizations for DAFs typically offer?

[1] See a complete list here.

[2] 2018 Donor-Advised Fund Report, National Philanthropic Trust: https://www.nptrust.org/reports/daf-report/

[3] Communities Foundation of Texas: https://www.cftexas.org/melisa-ambers-and-darryl-rose

[4] See Footnote 2.

[5] From RSF Social Finance: https://rsfsocialfinance.org/give/donor-advised-funds

[6] See Footnote 2.

[7] Fidelity Charitable