Putting Your Donor-Advised Fund Fees to Work

A donor-advised fund (DAF) is a philanthropic giving vehicle administered by a charitable sponsor, such as a community foundation (like The San Diego Foundation) or commercial institution. Donors establish donor-advised funds with a charitable sponsor and fund the account with an irrevocable, tax-deductible contribution.

The charitable sponsor is responsible for investing and growing the funds, so the donor can recommend grants from those funds, over time, to other charitable organizations.

As you’re considering opening a donor-advised fund and determining which organization to invest with, it’s important to note that all charitable sponsors have one thing in common: Administrative Fees.

However, rarely are two fee structures the same.

Some organizations design their fee structures based on fund type, while others charge based on fund longevity or level of fund support.

When assessing fees, charitable sponsors typically charge donors a percentage of the fund size for administering the fund, calculated using basis points. Additionally, they charge minimum fees and/or transaction costs.

Other variables that impact fee structures include spending policies, timing, capacity and fund activity.

The Differentiator is Impact

While fee structure may differ from one organization to the next, partnering with a charitable sponsor solely based on fee percentages is shortsighted, especially for philanthropists seeking to make the greatest impact in their communities.

Fees generated from funds at commercial institutions become revenue that can be used at the firm’s discretion and primarily benefits stockholders.

Community foundations, however, are geographically housed and focused, and committed to sharing fee income with local nonprofits strengthening communities. They provide valuable community insight, research and resources to help maximize impact for philanthropists. Also, community foundations are often one of the first to get involved in regional challenges and solutions that shape the future of people who live in the community.

Not only do fees cover the cost of fund support, such as tax receipting, grant due diligence, research, and other donor services, they also play a large part in funding back office administration, including accounting, audit, legal and insurance expenses. Most importantly, fees provide funding for the programmatic work of community foundations that leads to improvements in education, health & human services, the environment, arts & culture and youth development, a major differentiator compared to the more limited service offerings of commercial DAF providers.

At The San Diego Foundation, for example, our administrative fees fund staff salaries and training opportunities as well as our programmatic work, including the Malin Burnham Center for Civic Engagement facility in Liberty Station that hosts more than 4,000 meetings a year for nonprofit organizations.

The San Diego Foundation Regional Affiliate Program provides a philanthropic presence throughout the San Diego region, comprised of eight neighborhood foundations with more than 1,000 members county-wide who work together to strengthen their local neighborhoods. Together, affiliate members have granted $4.6 million to nonprofits and built community endowments of more than $5 million to improve the lives of future generations in 4SRanch and Del Sur, Carlsbad, Chula Vista, Escondido, La Jolla, Oceanside, Ramona and Rancho Bernardo.

Donor-Advised Funds & Fees

Speak to our Development & Stewardship Team to learn more about the benefits of donor-advised funds and how we put your fees to work to benefit the entire San Diego region.

Contact our Development & Stewardship Team today!

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