What a DAF Cannot Do for You (and What Comes After)

The donor advised fund is the tool most often recommended in philanthropy, and honestly, the reason is a good one. It’s easy to open, remarkably tax efficient at the moment of contribution, and flexible in timing, which is a nice combination of features for a financial vehicle to have. For many newly liquid households, the DAF is the first strategic decision after a liquidity event, and it should be. Fidelity Charitable, Schwab Charitable, and Vanguard Charitable together have grown DAF assets in the United States to well over $250 billion, and there is a real reason DAFs are popular. They work.

The DAF, though, is not the plan itself, and this is where a lot of donors get comfortable rather than guided, which is exactly where an advisor comes in.

Here’s what the DAF does. It parks the money in an account earmarked for charitable use. It captures the tax benefit at the moment of contribution rather than at the moment of grant, which for a high-income liquidity year can be significant. It gives you time to think about what to actually do, which is genuinely useful.

Here’s what the DAF does not do. It does not figure out what you want to accomplish, vet the organizations that could accomplish it, build the family conversation about who decides and why, or reposition your giving from reactive to intentional. It does not make sure the giving actually matches the values you meant to express. A DAF has no opinion about your legacy, which is both its greatest feature and its greatest limitation.

This gap shows up in the data. The average annual payout rate from DAFs sits around 20 percent, which means a significant share of DAF contributions stay parked for years, sometimes decades. That’s not because donors don’t care about the causes they meant to support. If anything, they care very much. For many donors, the vehicle was set up before the plan was in place. While seeing a sitting DAF may signal net worth and wealth, it’s actually the opposite. It’s signaling a legacy plan that’s not being built or realized. A philanthropic plan is the solution.

While a DAF is the vehicle, values are the map.

The work that comes after the DAF is the work of turning capital into a plan. That means clarifying what your wealth is for, translating those values into specific outcomes you actually want to see, vetting nonprofits against those outcomes, and building a giving cadence that reflects the shape of your family’s life. This is philanthropic advising, and it is different from wealth management, from fundraising, and from estate planning. It is the work Jonesing was built to do, in collaboration with your existing team.

For advisors, if your client has a DAF but no plan, you are not behind. Most clients are here. The move is to introduce the values conversation, either yourself or through a partner, and start the strategic work that makes the vehicle meaningful. The DAF was step one. Step two is the strategy that turns a parked balance into a plan.

For newly liquid families, the DAF you set up is a good decision. It is not the finish line. It is the beginning of a longer conversation about what you want your giving to be, and how, and who you want in the room while you figure it out.

The vehicle is only the beginning, not the end.

Strategic philanthropy begins with values. That is the work we do at Jonesing for Good.

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