Archive for January 29th, 2019

January 29, 2019

Are Donors Abandoning You, Or Are You Abandoning Them?

Donor retention rates for both new and renewing donors remain pathetically low and, actually, continue to decline. There are a number of reasons for this, many of which I’ve addressed in previous posts. However, just recently, I learned of a situation I had not considered previously. So, I want to make sure you’re aware of the problem and understand how to easily fix it.

I heard about the problem from The Whiny Donor, a thoughtful donor who uses Twitter to generously provide fundraising professionals with feedback and insights from a nonprofit-contributor’s perspective.

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The Whiny Donor wrote, “In December, we gave through our DAF to several nonprofits that we had supported for many years with direct donations. I suspect several of them won’t have the capacity to make the connection, and will now consider us lapsed donors…. Which means they will change the way our relationship moves forward. They will think we didn’t support them; we will think we have. It’s a stewardship conundrum.”

As a philanthropic tool, Donor Advised Funds offer people a number of financial advantages compared to giving directly to nonprofits or not giving at all. At the end of 2018, we saw significant growth in the number and size of DAFs, in part, as a result of the new tax code.

While donors can benefit in a variety of ways from using a DAF to realize their philanthropic aspirations, the use of DAFs can create a stewardship challenge for charities:

  • Should the charity thank the DAF or the individual supporter?
  • Who should the charity continue to steward, DAF or individual?
  • How should the charity track and report the donation?
  • Does the charity’s software help or hurt these efforts?

The Whiny Donor worries that charities will recognize the DAF and ignore the role she and her husband played in securing the gift. She fears some organizations will assume she has abandoned them when, in fact, she has not.

This is a very real concern. As DAF giving becomes more common, I’ve heard many examples of how nonprofit organizations have stumbled. Some thank the individual, but not the DAF. Some thank the DAF, but not the individual. Some thank both the individual and the DAF. Some don’t thank either or thank in the wrong way.

Here’s what you need to know: The DAF is the donor. The individual is not the donor when the gift comes from a DAF. Because of the way DAFs are structured and the laws regulating them, individuals can only make a contribution recommendation to the DAF administrator (e.g., Fidelity Charitable, National Philanthropic Trust, Schwab Charitable, etc.).

Because the DAF is the donor, you should thank and send receipts to the DAF. However, as The Whiny Donor suggests, that’s not good enough. You should also thank the individual who recommended the DAF gift.

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