Community Foundations: Your First Stop when Shopping for a New Donor-Advised Fund?

There is an ongoing conversation in the philanthropic sector and in certain mainstream media channels about the role of donor-advised funds (DAFs) and their impact on the nonprofit sector. Some folks have expressed concerns about lack of regulation, while many are optimistic and enthusiastic about the potential for billions of new grant dollars flowing through DAFs.

Regardless of your position, you probably know at least a few people that have their own DAF. And, it makes sense: starting a DAF is often pretty easy! Most financial institutions now offer fund management and a low minimum for setting up the fund, and donors are not weighed down by large amounts of paperwork.

Once a donor has decided that a DAF is the right giving vehicle, she has to make a very important decision: where is she going to house her fund? A donor could choose any number of charitable organizations to house her fund. Mark Neithercut, a donor and philanthropic advisor with offices in Traverse City and Chicago, shares four reasons why he chose to house his DAF in his local community foundation.

• Competitive management fees. “There are plenty of great reasons to choose a community foundation to host your fund. First, the fees are usually competitive.” Nearly all DAFs charge an administrative fee to help cover the cost of managing your fund; these fees are often tiered but typically range from .5% to 1% for the first million dollars.

• Access to local expertise. Even if the fees are a little higher at a community foundation, Mark points out, “Community foundation staff are experts on your local community and can provide relevant information, expertise, and guidancewhile you are contemplating a gift recommendation.” Community foundations have existed across the US for more than 100 years, amassing a wealth of knowledge about their service areas that they are excited to share with you.

• Fees support local grantmaking. Additionally Mark comments, “The fees charged to the DAF support their continued work in your community.” In 2013 alone, community foundations gave back nearly $5.3 billion.

• Investing in your community. “Community foundations offer so many other great resources that can be useful as donors learn more about charitable giving.” Community foundations often offer events, connections with support organizations, service opportunities, and even programs for youth. Choosing a community foundation host doesn’t simply mean a place to invest your money, it’s also a place to invest in yourself and your community.

Has your family – or a family you’ve worked with – established a DAF at a local community foundation? If so, what were your main reasons for doing so? If you used an alternate vehicle, why?

NOTE: If you’re a community foundation staff member or donor who is interested in connecting with a national network of community foundations working to support intergenerational family philanthropy in local communities, consider joining NCFP’s Community Foundations Family Philanthropy  Network. To get involved with this initiative, learn more here.