Chances are it’s being managed by a company like Ren, who keep philanthropic and investing expertise on hand and have a 501(c)3 set up just to host its donor advised funds (DAFs).
- Companies like this are often contracted by brokerage firms to manage their own 501(c)3s for their client’s DAFs.
DAFs make money on the market, which is why investment firms set a minimum amount to start one up.
- Once you start one, you can’t pull the funds away from it. They must be charitably donated, or you can mess up your taxes.
DAFs are touted as an easy way to pay governments less of your income and do good – without a spend-by date pressure and with autonomy.
- You hear about the bigger ones: tech giants and / or their former wives being chased around by every philanthropist (yes, they are also in the fundraising business) and charity on the planet.
But a lot of people quietly have these funds. And once you get one, there’s not a lot out there on what you should do with them, or how to be strategic in your giving. There’s plenty out there on why do it, and almost nothing on the “now what?”. So, here’s some quick tips:
- You can literally donate to any of the ~1.8 million charities registered in the U.S. No one comes knocking on your door to help you decide your own giving approach. You just google a charity, get their tax ID and address, and initiate an amount to them with a statement for what.
- Or, you can sit on it. Let it grow. This do-nothing approach is the smartest one at first. Staying quiet until you decide what kind of philanthropist you are.
- Actively consider what your primary cause is going to be. Sure, use the DAF to give those smaller amounts to the local charities whose boards you sit on. But contemplate what you really want to change.
- What bugs you about the world the most?
- What do you love about it the most?
- Then, do some self-educating via web searching and talking to people who really know the field you want to invest in.
- This helps you understand gaps, how your contributions might start to fill them, and at what scale (e.g., are you going to invest locally, regionally, nationally, globally?).
- The more informed you are by reading and listening, the smarter choices you will make and the farther your dollars will go.
- Consider if you are a lone wolf, or if you can stand the idea of coordinated investing. There’s no right or wrong answer here.
- If you want to work with others, find our who your other like-minded investors are and get in touch with them. Pooled funds can be quite powerful when concentrated on a specific problem.
- You don’t have to like your fellow investors. You just have to agree on who you want to point the funds at to do the work you want done.
- Skip the analysis-paralysis phase. Funders new and old love a good strategy session. Sometimes changing course every 3-5 months. This gives everyone around them whiplash, causes burn out, and results in a cash-out approach that has them leaving the scene before any real impact can be made.
- Change takes time. Be patient and you will be a rare winner of it.
- If you can’t get consensus from your peers, go alone, or around, but go. Make the most of your assets and time on earth by finding people who are excellent at what they do, and funding them to do it.
- Make sure they track tangible impacts against their goals, though. This is the hallmark of these kinds of people / organizations.
