Loving #HalfMyDAF Movement

And hope it spreads like hot butter on cinnamon toast

When David and Jennifer Risher announced their decision to launch The #HalfmyDAF movement, I was immediately compelled to reach out to them to say thank you (and politely suggest that they didn't go far enough!).  Even without going The Full Monty, the Rishers and the #HalfmyDAF movement is the best thing to happen to philanthropy since on-line giving.  

First, some context: The Donor Advised Fund was designed for donors who, for timing purposes, needed to make a tax-advantaged donation, but essentially did not know where to give the money and did not have a private foundation.  It has existed in some form since the 1930s, and over the ensuing decades, favorable legislation designed to prevent the proliferation of administratively expensive private foundations (which can be tracked via this handy dandy PDF at the Council of Foundations) lead to the creation of the DAF, which by 2019 was the fastest-growing charitable vehicle in the US - an unintended consequence of well-intentioned tax legislation. 

Savvy DAF managers have capitalized on this trend.  They sell the DAF through well-capitalized marketing campaigns with snazzy taglines like, "Vanguard Charitable: Change starts here" and Fidelity's perplexing, "Give more. Save more." Since the Tax Reform Act of 1986, there have been several notable attempts to increase IRS oversight of the DAF industry. But these efforts have done little to slow the marketing efforts and astounding fees generated by this specific vehicle. In 2019, DAF assets grew to a staggering $121B, generating close to $1B in fees for the industry every single year. 

Again, nearly a thousand million dollars in fees from charitable donations THAT HAVE ALREADY BEEN MADE!

How genius! Pretend to be a charity, offer the same tax deductibility, yet market like a sophisticated money manager and send statements to donors about "their impact". But the DAF as it operates today needs to be rethought.  For one, the Internet provides the donor community with critical access to information on which organizations are most effectively dedicated to solving societal issues, from research to homelessness, to immigrant rights, to health care and food banks. The cost of moving money between and among institutions, then to non-profit organizations, is easier than its ever been.  But our world faces enormous challenges requiring a more complete partnership between nonprofits and the donor community. Simply put: Ours is a world that needs philanthropy more than ever before.

Thus, I propose overhauling current DAF legislation in the following ways:

1. First, for all assets currently held in DAFs, require full and complete distribution by December 31, 2021; and

2. Require all future gifts into a DAF to be distributed within 12 months (From the current 5-year limit), or during the first full tax year after the DAF contribution is made; and

3. Require all fiduciaries to publish their donor rolls, similar to a public charity (unless the individual DAF donor specifically requests anonymity); and

4. Require DAF fiduciaries to apply their analytical power to the evaluation of charitable programs for effectiveness, so as to better inform clients to potential giving opportunities; and finally,

5. Name whatever legislation that comes from the #HalfMyDAF movement after David and Jennifer Risher (The Risher Act has a ring to it!)

Look, the world has huge problems, many of which are being exacerbated by the COVID-19 pandemic. Charities are struggling, people are sick and out of work, homelessness will inevitably spike, putting more and more pressure on the social services sector.  Museums and theatres are dark, arts organizations are withering, and advocacy groups are threatened.  Part of the solution lies in the DAF industry, and I'm hoping that the Rishers are merely the tip of the iceberg.