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- [00:00]
Adam Nash
Foreign.
- [00:11]
Podcast Host
Welcome back everyone to another episode of the Practical Planner podcast. We have a very special guest today. So I think if you're in this space, you probably know him. His name's Adam Nash. He is the CEO and co founder of Daffy. But you know, he's done a lot of really cool things, run a lot of really great businesses. I mean, if you go through his LinkedIn, it's like, okay, you probably aren't going to find anybody much more impressive than him. President CEO of Wealthfront. He was at LinkedIn, he's at Stanford. Just a bunch of really cool things. And we're going to talk today a lot about donor advised funds. But before we get into that, Adam, anything that you want to kind of introduce or say about yourself and then let's go into talking a little bit about Daffy and the company.
- [00:53]
Adam Nash
No, it's wonderful to be here. You know, and this is one of those topics that's very important but probably doesn't get discussed enough until people realize that they have to make important decisions. And you know, for me, you know, founding dafi and building out this platform, really oriented around giving and thinking about giving both in your lifetime and multi generational giving has been a great joy for me. So very excited to be here and talk about things. Yeah.
- [01:20]
Podcast Host
And I'm curious how the company came about, right? Because I think a lot of, you know, the origination of people in their companies came from some life story, Right? I mean for wealth it's, you know, Roth went through his, you know, estate planning was like, there's got to be a better way to do it. And that kind of sparked this whole company, this whole idea. So I'm curious for you, what sparked the want to create a business around donor advised funds?
- [01:43]
Adam Nash
Yeah, well, it's funny because, you know, these, these founder journey stories are always interesting because the truth is a company doesn't come from one place. There are these different threads that come together. It makes sense, looking backwards, connecting the dots, but not always going forward. And the truth is, the Donor Advised fund was always on my list of kind of amazing financial products that most people have never heard of.
- [02:08]
Podcast Host
Right.
- [02:08]
Adam Nash
So it was always in that list of great opportunities to do something new. But Daffy came from a very simple place. Actually, you know, with my co founder Alejandro, we were thinking about different products and services and platforms to build. And it really just struck us that, you know, last 10 or 15 years you've seen all this incredible innovation, all these new features and platforms and apps and services to help people spend Better to help them save, better to help them invest better. But where, where was giving? I mean, and giving isn't just a normal financial task. It's not just an item on your budget. I mean people deeply about giving, they teach their children to give. It's a moral and ethical, it's a question, it's a way to live your life. And so this idea of taking all this incredible technology, all this innovation of the last 10 to 15 years and focusing it on giving is really the heart of where Daffy came from. And we were struck by the fact that there's about 60 million American households who give to charity every year. But at the time, you know, less than a million people had donor advised fund accounts. And so that was where Daffy was born. That idea, Daffy stands for the donor advised fund for you. There's always a little bit of a thing that happens when you have an engineer do the naming. They kind of, it's like right on the nose.
- [03:34]
Podcast Host
I didn't know the FY was for you. I thought it was just kind of like a play on daft. But that makes a lot of sense. I'm curious on that stat you just said about number of donor advised funds, do you have any idea what that average balance is?
- [03:46]
Adam Nash
You know, I actually don't. That data doesn't get often reported, although I do know it for some of the larger platforms. And the accounts do skew a little bit large. So the median account I think in the industry is tens of thousands of dollars. Yeah, where. But I don't think that tells the whole story. And we all know because the press loves talking about billionaires. There are quite a few nine figure and even larger donor advised fund accounts out there on the major platforms and others. But there's also quite a few small ones. This is one of the things that dafi really specializes in is that we cater to accounts of all sizes, our minimum to get started. We really believe that giving is one of these things that once you start and you find a good platform, you tend to keep doing it. So we make it very easy to get started. I think the minimum contribution on DAFI is only $10. It's free for under $100 just to get started. But just in the years that we've been operating, we've seen accounts six figures, seven figures, even eight figure accounts coming in. And so we see this across the board. I mean, I'll give you an example. Our stock contributions, our largest stock contribution to date has been over 12 million. But the median is only about $6,000.
- [05:05]
Podcast Host
Right.
- [05:05]
Adam Nash
And so I think that reflects the fact that depending on where you are, time of life and what the situation is, giving is something that people mostly do on an ongoing basis.
- [05:15]
Podcast Host
Right.
- [05:15]
Adam Nash
We tend to support the same organizations year in, year out.
- [05:19]
Podcast Host
Right.
- [05:19]
Adam Nash
It might be our kids school, it might be alma mater, it might be, it might be a national organization, it might be a religious organization, you know, a church or synagogue. And so those amounts tend to be regular. And then when special things happen, the opportunity presents itself to have a bigger impact either during our lives or afterward, you tend to see those larger donations go out.
- [05:42]
Podcast Host
Yeah, that makes a lot of sense. I was asking because I most often see they're small and I think they're underutilized in the right way. I mean, I serve very high net worth clients. So it's a tool that we talk about every single year. But I think before I go into this, let's just talk about the benefits of using a donor advised fund.
- [06:01]
Adam Nash
Oh yeah, happy to. And I think there's quite a few benefits both for individuals and for financial advisors in terms of their relationship with their clients.
- [06:10]
Podcast Host
There's the financial side. Right. And then there's the like impact side.
- [06:14]
Adam Nash
Yeah. The biggest advantage I think to the donor advised fund is frankly that it's just a better system for giving. I mean, you and I both know that people would have a lot of trouble, even wealthy people saving for retirement or planning for long time goals if they didn't have separate accounts, separate plans for those goals.
- [06:35]
Podcast Host
Right.
- [06:35]
Adam Nash
So the 401k and the IRA really have increased retirement savings.
- [06:39]
Podcast Host
Right.
- [06:39]
Adam Nash
529 plans help people save for college. Because when you put money aside for a goal, you tend to not touch it and then compounding works for you. The donor advised fund, you know, just is a great tax advantaged account to do these things. And so when you put money aside in a donor advised fund, it's really the perfect experience. When you put money into a donor advised fund, you get the immediate tax deduction for that charitable contribution. So it's perfect for people who want to put money aside for charity, but don't know which charity to give it to right now. Or maybe they're putting money aside that they're going to give to an organization over the course of years.
- [07:17]
Podcast Host
Right.
- [07:18]
Adam Nash
And have that compounding work for them. I mean, a lot of our members are actually just excited that they can find their tax receipts anytime they want. So there's just a real advantage to having a focused place for your giving. A lot of people Love just being able to see what they gave to an organization. What did you give to your children's school last year? Common question, but how many people dig through their receipts or their email to find it? Now the donor advised fund becomes even more impressive when you start thinking about donating things other than cash, right? So it turns out if you donate appreciated stock, ETFs, mutual funds, even crypto, if you've held that investment more than a year, you get a deduction for the full market value of those securities, right? And that's a deduction off income. Those are the highest tax rates. And you, the second bonus is you never pay the capital gains taxes, right? So if you've been fortunate enough to have investments that you've held for years or even decades, the ability to not sell those shares but instead donate those shares to charity is phenomenal. The problem is most charities aren't set up to take stock, to take ETS mutual funds, crypto. And so a donor advised fund is like that helpful assistant there who can take whatever investment you have, get you those tax benefits and then deliver cash to any charity in the U.S. dAFI supports basically almost every legal charity in the U.S. over 1.7 million. And so that's, it's really phenomenal. But you know, the biggest benefit for the donor advised fund, I think is often not talked about, which is it allows you to actually, because you've put money aside for giving, it allows you to actually focus on the problem that most people want to focus on, which is giving. Who do you give the money to?
- [09:05]
Podcast Host
Right.
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Adam Nash
If you see people in need, if you, if you see an event, right. You know, last year you had the Maui fires, right? A lot of people wanted to act. The benefit of having put money aside for giving is it's there when you want to give. And so I think that there's a lot of benefits, like I said, you know, retirement, saving, college saving, all these financial goals would be in a very different place if somehow is in one giant pot that you had to sift through. And so a lot of the advantage of the donor advised fund, especially from a financial advisory standpoint, is just having a separate area to talk about that problem, to talk about those goals, and then having a plan behind it. Just like any other financial goal, how much money do you want to put aside for giving? And that problem sounds like a hard problem, but the truth is people are doing it anyway. You can look at a client's giving over the last few years and actually assess is this the amount you want to Give every year. Do you want to be more generous? Are you thinking that in future years maybe when you retire you're going to spend more time on philanthropy? These are amazing conversations to have with a client about something that really matters to them and their families and it even crosses over into multiple generations.
- [10:16]
Podcast Host
Yeah, I think you hit on a lot of points, a lot of great ones. So I'm going to go one by one. The first one I really like you talked about is just like purposes of dollars. I think really good financial planning is every dollar has a purpose. And so like when I work with my clients and even cash, right? We have an emergency fund, we have a travel fund, we have a house down payment fund, we have whatever those things are that we're saving for. Every, every account is segmented for that goal. And you're right, that applies to retirement accounts and it applies to giving and it does lead to more efficient giving. And you know, I want to re highlight kind of the points of the donor advised fund, right? Because I think a lot of times people think about donor advised funds and I think it's okay to give cash maybe early on or maybe you just haven't built up taxable assets and you have assets in other ways. But you really shouldn't be giving through cash. Like almost none of my clients should be giving through cash. Because at the end of the day why would you not donate stock and then rebuy that stock back at a higher cost basis? It's pretty much a no brainer. And for all my clients, we end up pretty much pairing it in their highest income earning years, right. Maybe it's post a liquidity event and you know, we haven't even got into the part about that you can do this with private shares, right? There's plenty of places that you can go with your private stock or the private business ownership you have. You can donate those shares ahead of time. And I think that's something most financial advisors don't know and don't think about. But pretty much I'd say 99% of people who are going to sell a business should use a donor advised fund before they sell that business. But when you're doing this and you can give your gifting in one year becomes really impactful, right? All of a sudden I have a huge bonus or all of a sudden I have all these RSUs of Astor, all of, all of a sudden I sell my business. You can give a lot in those years. I have clients who in those years are going to do the next 20 years of giving in that one year that they're going to be in the 37% bracket. And then I have other clients who they do it and they can't use all of that deduction in that year. So we have a client right now who's doing $10 million of charitable giving through his business. He owns a pretty big C corp, he's very high net worth and he's donating $10 million. And you look forward and say, okay, can you get all of this offset in the next five years? And sometimes the answer is no. But then people don't realize a really good planning tool is you can sell a lot of stock in that period of time. That's going to add to your AGI, which is going to increase your income, which means you're going to get to offset a lot of income in those last couple years. And when we all know that, I think the statistic is 14% of people itemize on their taxes. So that means almost everybody I sit down with, or most advisors sit down with, are not actually benefiting from their charitable giving. And the donor advised fund is the way to make sure that they do. Right. Do five years in one year, just do it through stock. And if you're a high income, high net worth person, that is pretty much a no brainer.
- [13:02]
Adam Nash
Yeah. And that's, you had a lot of good pieces of advice in there. But what I've seen is that for many people that unlock code is just realizing that they don't have to make this incredibly large financial decision all at once. The donor advised fund frees them up to actually plan for the future.
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Podcast Host
Right.
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Adam Nash
So if you, a lot of Americans now have variable income and yes, if you're fortunate enough to have a windfall, that happens too. And that counts as well.
- [13:33]
Podcast Host
Right.
- [13:33]
Adam Nash
Like when your income is higher, there are good years and not so good years. Turns out with our tax system in those good years, one of the rewards you get is a much higher tax rate. And so it's very often that people think about tax deductions and one of the most generous tax deductions is around charitable donations. But the problem is, wow, that's a big decision. You're going to give a lot of money to a single organization in one year. What if that windfall came in November and December? Right. Like that's how you're going to make that decision in a matter of days and weeks. That's, that's very difficult to do. Not to mention the fact that with the advantages of donating stock funds, crypto etc. Most of the charities you want to support can't even take it. And so the idea that the donor advised fund frees you up to do that planning, right, that you can actually say, hey, it's a smart decision now to put this money aside and then I'll figure it out. And give yourself the time to give the diligence it deserves is so powerful. But the second thing you said that I love is realizing it doesn't have to be for one year, right? That we actually tend to give on an ongoing basis. And I'll tell you the secret, most charitable organizations care more about that than the actual dollars, right? Most organizations, charitable organizations, they have a team, right? They have facilities, they have services, and they want to offer those year in, year out, right? That church, that synagogue, that community center could be a zoo. The national organization you're supporting, they have to support the mission that they execute against every year. And so actually by putting money aside in something like a donor advised fund, you are actually freeing yourself up to give the way that those organizations want to receive, which is why, you know, setting up recurring donations, etc. Is so popular. And so, yeah, that idea, if you're fortunate enough to have a windfall, if you are fortunate to have one of those good years, you know, looking to a donor advised fund to put aside money not just for one year or two years, but five years, even 10 years, it's very common. Silicon Valley, you know, these, these liquidity events, you know, an acquisition, an ipo. But it's not just that, you know, at dafi, we, we have our members who are real estate agents, right? They're airline pilots. There's a lot of, of, of careers now that just have variable income. Yeah. And that's great in some ways, but when it comes to giving, right, no one wants to say to an organization they support every year, yeah, I can't do it this year, tough year, maybe next year. It doesn't feel good to us. It certainly doesn't feel good to the organization. And so the power of the donor advised fund to kind of put that money aside, to plan it like a financial goal so that when you want to give, you have the money. I mean, we saw a lot of this at DAFI last year in 2023. That was not a great year for a lot of people, both in the markets and in work. Some were fortunate, but most people, it was a tougher year. But what we saw at DAFI is that the donation rate didn't change very much because people had put Money aside, and they had that money to give. And so that's just phenomenal. And then of course we can get into the tax details around things like you mentioned, like liquidity events and donating stock, etc. And there are a lot of advantages to advisors and clients when they have this extra tool in their tool belt. Because one of the number one reasons that people don't make smart financial decisions is we're not always very rational about taxes. People will do unnatural things to avoid taxes. And the wonderful thing about having a donor advised fund and about giving in general is it's another way to kind of soften that blow and get yourself emotionally over the hump that the right thing to do is to sell some stock, right? To, to sell that fund you've held for a while to, to take the win on an investment and know that by putting some of that money aside for charity, your tax bill won't be so egregious, it won't be so imposing.
- [17:30]
Podcast Host
Well, when you look at the numbers in like a state like California, it's pretty hard to end up choosing not to, right? Like I have some business owners that are going to sell for 20, 50, $100 million, right? And if you think, think, okay, you have a $1 million basis and 100 million dollar company, let's say you donate $10 million, right? So you avoided on average, what is that, like almost $9.7 million of capital gains, right? Capital gains. You're going to see almost 37% and then you're going to get a deduction against your income for that $10 million donation at 50.3%. So for a 10 million dollar donation, it might cost you $2 million in the state of California. When people look at that, they're like, okay, I might be in $2 million worth of a spot. I'm going to have tons of money. I want to benefit charities. Most times what I find from successful business owners is post that liquidity event, charity now becomes their new thing. That is the what keeps them going, right? Because if you retire from a business, most times you need to find something else that's going to grab your attention, that's going to keep you going, charities, that one thing. And this becomes like such a good avenue to get started.
- [18:40]
Adam Nash
Oh, for sure. And just a small correction, you know that those taxes apply to like a $10 million liquidity event, right? And look, the good news is when you have a liquidity event, let's be clear, that's good news, right? Anyone who's coming into $10 million is hopefully having a good day. They should, you know, taxes or not. And those taxes do fund a lot of services that are really valuable.
- [19:04]
Podcast Host
Right.
- [19:04]
Adam Nash
They're public goods. But the reason the whole charitable giving system exists in the United States is because there are other public goods that are provided by organizations. And sometimes people want to have that intentionality, that impact where they can deliver a more specific public good. Right. This is why people give to their children's schools or to their, you know, to other local causes, even a local food bank.
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Podcast Host
Right.
- [19:27]
Adam Nash
You know, there are national programs to help with hunger, but sometimes you want to make sure that people in your community are getting the support they want. And so the ability, you know, stepping back on those liquidity events, et cetera, and that big tax bill, you can pay that tax bill, right? You have the liquidity event. But for a lot of people, they want some of that money kind of at their discretion to go towards public goods that they care about. And that's, that's the amazing thing about the donor advised fund is you can put that money aside, you save on your taxes, but now you have more money to give.
- [20:01]
Podcast Host
Right.
- [20:01]
Adam Nash
And so that's phenomenal for the organizations that depend on those donations. And also it can be incredibly rewarding for your clients, for individuals to have that kind of impact and have that ability to think about, you know, all that success that they've had, all that work that they did. For a lot of people, I hear the same thing from members, that they don't want it all to be for them, that they want to give back. That was part of what they did. That's part of what living a good life is about. And that can be at an individual level. I've also seen it at the business level.
- [20:34]
Podcast Host
Right.
- [20:34]
Adam Nash
And most people don't realize that donor advised funds are not just something you can open up as an individual that actually any entity with a Social Security number that pays taxes can actually put money aside. And a lot of small businesses, support organizations in the community. And the donor advised fund can help with all of that.
- [20:51]
Podcast Host
Yeah, totally. I mean, I think one of the points you made earlier that's, that always comes up when I have these conversations is, oh, but I give monthly, right? Like, I think that's the first hesitation to like, oh, if I'm gonna, if I'm gonna put stock into a donor advised fund, it turns into this thing that you can't give monthly. But with you guys, this is something that's easy, right? Like you can, can you set up automatic Payments or because I'm guessing, I don't think that's like something that's available at most custodians.
- [21:18]
Adam Nash
You know, it depends. There's about a thousand or so different providers of donor advised funds in the us Mostly very small and most very technically limited. And so a lot of them are even operating still off, you know, emails and spreadsheets and PDFs and that sort of thing. But yes, I mean, I think actually automating this is true with almost all financial goals. Automation is your friend, right? Be intentional, make a plan. Humans are actually good at that when they do it. We're just not good at sticking to plans. And so that's the place where you can actually let technology help you.
- [21:49]
Podcast Host
Right.
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Adam Nash
So setting up recurring contributions. We have members at DAFI who donate stock regularly. They donate cash. You can link your bank account and have money move over every month if you want. Every week, every month, every quarter, every year. So it's very easy to fund accounts that way. But you can also do it one off on the donation side. Of course, recurring donations matter. And like I said earlier, most organizations prefer that. And so we support adapt. You can set up a recurring donation that goes out every month, every quarter, every year. Some people like to donate on anniversaries, right? Maybe you had a family member who passed away and you want to donate in their honor. What a nice thing to do to donate on their birthday or on the day of their passing. Maybe it was a couple and the anniversary. I've seen people donate on the date of their retirement to an organization that they supported and worked for while they were working. So there are all these different ways and dates that are meaningful. Our perspective at DAFI is giving is meant to be meaningful. It's not just a financial task. And if there are dates and there's patterns that have meaning to you or work for you, great, we'll support it. Our mission is to help people be more generous more often. And that more often piece is really a big part of the automation that we support.
- [23:04]
Podcast Host
Yeah, I know we talked about this a little beforehand. And one thing that just came to mind again is, you know, I had somebody reach out to me recently that's trying to build the company to help financial advisors help their clients allocate money in charity side of things. And how do you see people doing this? Because I do find that that's some. That's an issue for a lot of people is I want to give. I don't know where. And so maybe I don't know if you have any practical points or things for advisors, like how can we better have these type of conversations and help people find those spaces? Because I think there is cause, but then there's also like the underlying charity. Right. Just because you're a cause you believe in doesn't mean that's a good charity or a good allocator of money. And obviously all of us, if we're giving money, we want this to be something that truly is going to benefit that organization, those people, et cetera.
- [23:51]
Adam Nash
Yeah. So there's three ways to come out that we spend a lot of time on this at dafi because it's very important to people. And that's a very common question. In fact, I would argue that giving always involves two questions. How much money can I afford to give? And then who do I give it to? And one of the reasons we love the donor advised fund is actually separates those two questions. Trying to solve both those problems at once is very, very difficult. But when you're talking about where to give, we see people getting inspiration from three different places. One is actually local.
- [24:23]
Podcast Host
Right.
- [24:24]
Adam Nash
Actually, you know, one of the first features we added to DAFI was the ability, mobile app, etc. Is to actually just explore the nonprofits in your area. Most people don't even know which food bank is near them. And so using dafi, we actually provide a geographic map. We actually did integration online so we can show you where all those nonprofits in our database are color coded by cause. And then you can click and explore and then learn more about them. All that publicly available information, you know, how much money they've raised, how they donate, what efficiencies, third party ratings, all of that information is there for you. The second way that people learn about what to give to, of course, is actually social. We learn from each other. And actually this is one of the big problems we see is that without a tool that helps you do this, we don't even know what our friends and family give to, let alone our neighbors or co workers, etc. And so one of the features we built into DAFI is that if you want, you can actually connect with other people and follow other people that you know and use them for inspiration, find out that they give to certain charities and ask them questions about the organizations they support. I mean, a lot of us have experts in our networks. We know there are people who are passionate about different causes and finding a platform, finding a way to connect with them and see what they give to and why they give to it. This is one of the reasons when people give on dafi, we ask them optionally, do you want to leave a public note about why you give to this organization? I mean, we have reviews for almost everything else online. It's kind of amazing that we don't actually have it for charitable organizations, but we built that into the DAFI experience. I think the third way that people find inspiration, what to give to, it's another version of social, but it's more specific. But we've seen it be amazingly popular at dafi, which is around campaigns. So we've added another way to give at dafi. So most donor advised funds, there's only one way to give. You put a recommendation in, the donor advised fund approves it, and money goes out to that charity. It's kind of like bill pay, right? Like you pit in the information and it goes out. But at Daft we said, listen, in the nonprofit world, actually what's very popular are matching campaigns, right? You have an organization or set of organizations you believe in, you want to support them instead of just giving them money, you say, hey, I'll match all the donations that are given. And what a perfect feature for a donor advised fund because you've already put money aside. And so actually what we've seen is by putting Internet campaigns together with the donor advised fund, letting people offer matching campaigns, you can get a lot of inspiration from other people about what they're fundraising for. And so that we've also seen that happen. But let's be clear, in the beginning, it's a little bit of a daunting task. I usually recommend to most people not to pressure themselves too much to try and solve that problem immediately. I mean, famous billionaires who have all the resources they can imagine still spend years figuring out how to have the most impact in organizations. And so don't put so much pressure on yourself to try and solve that problem at once. Giving is rarely something you have to do in one week or one month or one year. It's usually actually a lifetime exercise for people. And this is probably the reason I love the donor advised fund most, and I call it a better system for giving, is that it frees you up to have that time, you know, to explore organizations, you can give a little bit, connect with that organization, integrate with them more, learn more about them, and then actually increase your giving. As your confidence in that organization grows, you have time to explore your causes, etc. Now we have a great search tool. You can search and find by all these different dimensions. Like I said, geography, cause, keyword, etcetera But I would discover most people that this isn't a one time task. It's not just a Google search and you're going to find the answer. This is something that's worth spending time on. Most people while they're working don't have as much time to do this, which is why the organizations they tend to support are the ones that are closest to them.
- [28:22]
Podcast Host
Right.
- [28:22]
Adam Nash
In their families and their communities. But we see a lot of people, especially as they're approaching retirement or after retirement, spending more and more time on philanthropy. And in fact they tend to want to involve their family members as well.
- [28:36]
Podcast Host
Yeah, I mean, I think there's a lot of great points there. I think the way that I think about this for a lot of people, especially higher income, higher net worth people, is they can separate the two. Right. The donor advised fund contribution comes in opportunistic times. Right. So that's liquidity events, you know, high appreciation and securities crypto, etc. It can be pairing with Roth conversions, it can be right after retirement, again pair with Roth conversions. Those all create these great opportunities to say this is a great tax tool. But we also know that we want to give and we're going to give down the line. But we can isolate that. Let's make this decision and then let's make that decision. And the other thing is I find most people that I work with are actually trying to really grow that after the donation, like their goal isn't 1, 2, 3, 4, 5 years, this is going to be zero. It's actually they're taking risk. You know, you guys do crypto, I'm sure you see plenty of people use crypto and then stay allocated to crypto to continue to grow that asset. But if you think about it like some of my clients might be 10/2 million net worth in their 30s. They have this ability to do something really cool now with a few hundred thousand dollars, that could be millions of dollars of donations down the line and that actually not be what they're giving from in this intermediate time.
- [29:46]
Adam Nash
Yeah, we see a lot of philosophies that vary at dafi. It's really amazing. People have different traditions, different mental frameworks about how they think about giving. But what you just described as one of the most popular, which is a lot of people putting money aside for charity and excited about the fact that it can grow tax free as they learn that they can grow their impact. It's one of the reasons on the investment side we offer such flexibility on the investment portfolios.
- [30:13]
Podcast Host
Right.
- [30:13]
Adam Nash
So when we launched, we had like most donor advised funds, over a dozen different pre built portfolios, everything from conservative portfolios and cash and bonds. We had low cost index funds from Vanguard ESG portfolios, and then uniquely we had crypto portfolios which most donor advised funds do not support but have been very popular for people who say, hey, I'm going to put this money aside, I believe in where crypto is going and just think what that wealth accumulation could do for all these causes and organizations that I care about. And so we see people do it on the contribution side. In fact, we had so much interest there, we actually a few months ago augmented our investment platform. And so now actually our members or their advisors, if they have advisors on the account, DAFI supports adding your advisory team to your account to help you make these decisions and execute these actions. We now support over 460 different low cost ETFs on the platform. And so with your advisor, you can actually build a custom portfolio of up to 10 ETFs that are all automatically rebalanced. It's all invested tax free. And there's something great about feeling like those gains go to charity, right? It's just a wonderful feeling. And so I like to joke about this, of course, I'm a math guy. So you know, it turns out that 460 choose 10 gives you about 100 quintillion options. That's a lot. You probably shouldn't try them all. But I mean, for an advisor who is working with their client, knows what they value, knows how they like to invest, knows how they're thinking about things. If you have a client who likes that idea of putting money aside regularly and seeing that money grow. I mean, we mentioned this earlier, right? Like even my first donor advised fund experience, it was explained to me that, oh, you had a big year, you can put this money aside for charity. It's smart to donate stock. And by the way, you can think about how much you're going to give over the next 10 years, right? How much you give in a year, multiply it by 10, and guess what? Invested tax free, you might get years 11 and 12, right? Just from the gains. And so all these things are great motivations that help get people into the habit of putting money aside for charity. And then my experience has been like a lot of other people is that once you start down this path, you start realizing, wow, this feels really good and it's very flexible and all of a sudden it's top of mind. And so we see advisors help people not just with Windfalls or not just with variable income, but even the basics of things like how to rebalance a portfolio or how to get out of a concentrated position. Once you have this magical account where you can donate stock, get this incredible tax advantage and then see the money grow. All of a sudden when you have a hammer like that, a lot of problems start looking like nails.
- [32:58]
Podcast Host
Yeah, great points. I think one thing I want to hit on here is just as I work with a lot of business owners and this is a tool that a lot of business owners consider. But a couple things that people need to think about. One of them is if you own a C corp that's QSPS eligible, this is not the tool. Right. Use something else for it because you're basically giving up that the big benefit. You're already going to have the capital gains tax free part. The second one is I've had some people who are like, oh, my business is valued a lot. I'm going to go donate this now. I don't know if I'm ever going to have a liquidity event. But there is a rule that if you don't have a liquidity event and it doesn't turn to cash within five years, you have a tax of 10% of the value of the donation. And this was something that I didn't actually know about because I've never seen somebody not do it like right before a liquidity event. But you know, you don't want to donate a few million dollars and all of a sudden have a $300,000 tax liability because you never had a liquidity event come down the line.
- [33:53]
Right.
- [33:53]
Adam Nash
I mean there are a lot of important. This is like everything with taxes. It's really not something for you to just in my opinion, diy, not think about it, do it yourself. But you want to have a high quality accountant. Ideally you want to have an advisor to run different scenarios because every situation is different. I'm not just talking about the state you live in and your tax situation. I'm talking about the fact that you have other financial goals, you have other things going on with your money. The great thing about giving to charity from a tax perspective, and this applies to the donor advised fund, is that actually it offers a solution for the hardest problem.
- [34:28]
Podcast Host
Right?
- [34:29]
Adam Nash
You know, it's, it's the places where you have a low cost basis where actually the tax impact would be significant if you sold that security. If you already have tax advantages elsewhere. You know, doubling down on tax advantages sounds like a good idea, but it actually doesn't work.
- [34:44]
Podcast Host
Right.
- [34:45]
Adam Nash
There's only so much to go around. So like you said, qsbs or you know, you know, money from Tax advantage accounts, rarely is the right answer. Sometimes, but rarely is the right answer. Usually the right answer is it's a complement to other strategies you have. So let me give you an example.
- [34:59]
Podcast Host
Right.
- [35:00]
Adam Nash
And I know you know this, but a lot of advisors will talk about this rebalancing, something people do every year or they should do every year. And rebalancing naturally involves selling something that's done better than expected and using those funds.
- [35:15]
Podcast Host
Right.
- [35:15]
Adam Nash
To shore up an asset that hasn't done as well. That's what rebalancing ends up looking like. The problem is that generates taxes.
- [35:23]
Podcast Host
Right.
- [35:23]
Adam Nash
But if you take those securities that have run up and donate them and then use the cash that you would have used to donate instead to shore up that portfolio, all of a sudden it's much more tax efficient. Same thing applies, by the way, with concentrated stock positions, etc.
- [35:41]
Podcast Host
Right.
- [35:41]
Adam Nash
It might feel very expensive. You bought Nvidia a few years ago. Good for you. Amazing. It's run up tremendously, but a lot of people are sitting on those positions even though it's much, much too high as a percentage of their overall assets. That's risk they shouldn't be taking for themselves and their family. I love Nvidia. I'm not saying anything bad about it. They're amazing chips and cards. But fundamentally, if you have to diversify that idea of, oh, if I sold a thousand shares, that would be a very expensive tax event. But maybe Instead I sell 900 shares and donate 100 and cut that tax bill in half. That can be a way both for an advisor to help their client think about their taxes, but also to help get that client to a better financial position overall. And so there's just countless scenarios like that tax loss harvesting. There's so many tax strategies out there, but they very often leave you with these long term investments that have low cost basis where they're kind of stuck. You don't want to take it. And having the donor advised fund really gives you a tool to say, no, I don't have to be stuck in this risky situation. I can actually do something about it and do something for the organizations and causes I care about. It's a really rare win. Win. Yeah.
- [36:53]
Podcast Host
All really good points, Adam. This has been an awesome episode. Anything you feel like that we haven't hit on before we wrap up?
- [37:01]
Adam Nash
No, I would just argue that, you know, it starts with the basics. Just get started you know, the donor advised fund flow that we have at dafi. We're very proud of it. Of course, new technology, you can go to the website, you can download it from the App Store. But there's a reason why one of the first questions we ask you is, how much do you give to charity every year? And we actually track it like a goal. It's a little bit like Apple Health, whatever your number is. I don't. It could be $500, could be $500,000. But we actually try to track that and manage that. We have a family plan so you can add children, grandchildren, siblings, parents, up to 24 people, add your advisors on it. But the biggest piece of advice I have for people is just to get started, right? Once. Once you do it, you realize that this isn't actually rocket science. This isn't so difficult to do. And then all of a sudden, once you have it in place, then all of a sudden the idea of, oh, wait, I can fund this account with stock ETFs. It becomes an annual thing you do, right? It'll be towards the end of the year, and you'll be sitting there going like, oh, what do I need to do with my portfolio? What am I thinking my taxes look like? And you have now agency. You have power to influence it. And the best part is all that agency, all those savings actually go towards money put aside for charity, which is phenomenal. Feels good for you, and it certainly feels good for the organizations that get your support. So, yeah, my big piece of advice is just to get started.
- [38:23]
Podcast Host
Yeah, really good points, Adam. We really appreciate the time, everybody. Thank you for listening. If you want to check out more about Adam, he's on social media, AdamMash on Twitter, Twitter, LinkedIn, and then also the company is Daffy.org but thanks for listening, everybody. Please don't forget to rate and subscribe, and we'll see you back for another episode here in a couple weeks.