The Problem with Donor Advised Funds
The renaissance in Donor Advised Funds and how hard it is to unlock dollars.
We’ve spent considerable time in the last six months researching the Donor Advised Fund (DAF) market and how Uncharted might better partner with DAFs to drive funding to our portfolio of social ventures. It’s becoming clear that a DAF renaissance is afoot: the assets in DAFs have more than doubled in the last five years to $110 billion, the number of DAFs outnumbers foundations 5:1 (460,000 DAFs in the US), and the largest charity in the United States is not the Red Cross or another household name; it’s Fidelity Charitable, the DAF-provider arm of Fidelity. But even with such a meteoric rise, DAFs are still vastly unknown, misunderstood, and underutilized.
Money is being aggregated into DAFs at a staggering rate, but once deposited inside, there is little incentive (and some disincentives) for dollars to be put to work creating impact in communities.
Before you can mobilize capital, you need to mobilize humans. Underneath strategies and behind bank accounts, there are humans making decisions. DAFs have the potential to be one of the most powerful financial vehicles available to create impact, but ultimately everything hinges on a fundamental human behavior question: how might we compel people to take full advantage of their DAF and use it more actively?