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What the Fundraising
278: How Donor-Advised Funds Can Supercharge Your Fundraising with Mitch Stein
00:28:37
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- [00:00]
A
My number one piece of advice for nonprofit fundraisers is to get your own DAF account, because then you'll get to feel this firsthand. You don't just need to take it from me. And that will have such a big impact on your donor conversations. Because if this is an intimidating topic for you, the number one way to make it not intimidating is to do it yourself. Like, that takes all of the scariness out of it, and it really puts you on a level playing field with your donor because the dynamics that we're going to talk about are the same.
- [00:32]
B
Hey, my name is Mallory, and I'm obsessed with helping leaders in the nonprofit space raise money and run their organizations differently. What? The fundraising is a space for real and raw conversations to both challenge and inspire you. Not too long ago, I was in your shoes, uncomfortable with fundraising and unsure of my place in this sector. It wasn't until I started to listen to other experts outside of the fundraising space that I was able to shift my mindset and ultimately shift the way I show up as a leader. This podcast is my way of blending funding, professional and personal development so we, as a collective inside the nonprofit sector, can feel good about the work we are doing. Join me every week as I interview some of the brightest minds in the personal and professional development space to help you fundamentally change the way you lead and fundraise. I hope you enjoy this episode, so let's dive in. Welcome, everyone. I am so excited to be here today with my friend Mitch Stein. Mitch, welcome to what? The fundraising.
- [01:34]
A
Thank you for having me. It's such an honor.
- [01:37]
B
I'm so excited to have you here, and I'm so excited to dig into a topic that I haven't talked a lot about on the podcast, which is daft and daft givings and daft giving. And everybody's gonna have to bear with me a little bit. I'm losing my voice, so it just cuts out mid words sometimes. But before we dig into that topic, why don't we start with you just giving a little introduction to who you are, what brings you to our conversation, and then we'll. And then we'll jump in.
- [02:02]
A
Yeah, for sure. Well, hi, everybody. My name is Mitch Stein. I'm currently the head of strategy for Chariot. We're probably best known as the makers of Daft Pay, which is a payment option where you can give with your donor advice fund wherever you're inspired to give online, right at checkout. But before I came into this role in this company, about two and a half years ago, I had A prior journey in the nonprofit tech space, which is where I originally met Mallory as well, and had a startup called Pond that I founded in 2020. Fun fact, my prior job, I ended on March 6th to go launch my new startup March 6th, 2020. So for anyone counting days, very quickly changed everything. But we had a great experience. We built a marketplace to connect nonprofits with all types of tools and vendors and service providers for about three years. Ended up shutting things down. But I think it has given me a very broad perspective on nonprofit tech and fundraising. And now I brought that into a more specific but very relevant topic across all parts of fundraising. So it's been really fun to dig into and share more in conversations like this.
- [03:10]
B
Amazing. So, wow, that timestamp was rough to think about. But I'm curious, like, given kind of your inside look at the nonprofit ecosystem and the challenges that nonprofits face and fundraisers face and the different types of solutions, what has you particularly energized around being at a company focused on daft giving?
- [03:41]
A
Yeah, I just have met with thousands of fundraisers at this point who look, there's all kinds of challenges in the nonprofit space. I think one of the biggest bright spots in terms of revenue is the growth in donor advised fund giving. But that has also come with a lot of frustrations and challenges for nonprofit fundraisers. And so I am obsessed with the fact that we are the only company that spends all day, every day thinking about how to make nonprofit fundraisers lives better with everything related to DAPs, how to make them more successful, how to make the process simpler, how to educate and inform them and arm them for those donor conversations, thinking about their broader strategy. And so it's just a fun spot to be in. There's so much happening in our sector, as I'm sure you've covered in many, many episodes recently. And so talking about something that is simultaneously a bright spot and a big opportunity, as well as a really resonant source of certain pain points, is an exciting place to be as someone that's working on solving them.
- [04:46]
B
Okay, I love that you kind of focused on what is the opportunity here and not just what is another pain point that folks are dealing with. And okay, so I want to talk a little bit about those trends because I think there's a lot of myths around DAFs. I think there's a lot of historical frustration around them because of the like, privacy, which is obviously like great for donors to have ways of giving that allow them to maintain their privacy when they want to, but it's also this super complicated vehicle because there's so much opportunity there. But then nonprofits often feel like they can't take care of those donors in the same way and sort of ensure that they're thanked. And I think some of that fear actually has them deprioritizing, thinking about raising money that way, because it just kind of doesn't fit into their normal relationship model. So talk to me a little bit about that and how you think about that.
- [05:50]
A
Yeah, the anonymous piece is so important. I was just thinking, as you were describing that, and I'm looking at the title of your book behind you, and I'm like, maybe title of app is what the daf. Given the confusion or frustration around it for so many fundraisers. The anonymous thing is interesting because every piece of research that's been done on daft giving has shown that the percentage of gifts that are made fully anonymously is like 3 to 4%. And I think a lot of fundraisers would be very shocked by that because that doesn't feel true to their experience. And the delta between their experience and what the staff providers are reporting on is because there's this middle ground of limited information that's shared. So you might only get the fund name like you're supposed to. You get to name your fund when you set it up. The kind donor who probably knows how nonprofits work. I name mine Mitch Stein's Fund, but many will name them, like the Clark Street Fund, like something totally disconnected. So if you only get that name, that can be really challenging. The other thing is that even if you do opt to share contact information, it's almost always just an address. And so even if you do get that info, it's like, not a super actionable way to steward them. So I would say it's a spectrum of like, even if there's only a handful that are truly anonymous, there's a bigger swath that are limited information and then another big swath that are, like, not the most actionable. And to your point of, like, your flows for fundraising are through your form or through these predictable channels. And. And so I think that tends to be a source of frustration. I wouldn't even call it like, the anonymity. Overwhelming. Anonymity is a myth. But I think that's just the language a lot of fundraisers use to describe the gaps or the, like, the not super useful data that they get around these gifts.
- [07:46]
B
Yeah, totally. I mean, I definitely have gotten like, that's so I am personally shocked by that percentage. But I think part of it, you're right. Is so many funds that have an ambiguous name and then an address that doesn't seem linked to a home. And then, you know, it just feels like the access. And honestly, I mean, yeah, part of it is the flow and part of it is I think fear of like not really getting to thank somebody who maybe did something really meaningful. So I'm curious, I'm curious like, because I feel like you are having conversations on both sides, right. Both in terms of like the nonprofit experience, but also I feel like you have a lot of information about like why donors like to give through dafs. And I'm wondering if some of that information can help soften the guilt almost around like when people are giving through that vehicle, how it is so meaningful to them and why they're choosing to do that. Can you talk a little bit about that?
- [08:48]
A
Yeah. I think it is really important to be aware and mindful of why donors are choosing to do this at such a fast increasing rate. Right. So I think that from a donor's perspective there can be different reasons that they set up a daf. A big change that has happened, I think probably a myth maybe we are going to get to but is relevant here is it's not just the uber wealthy that are using DAF accounts. And I think that's the perspective people have had for a really long time. But in the research that the Chariot team has done with our partners at K2D Strategies, where we analyzed 32 organizations, five year of historical giving data to compare DAF and non DAF giving and we had over 400,000 unique DAF gifts to analyze in that Data set. And 69% of them were below $1,000. So it's a broad spectrum of people that are using DAFs. And because of that there's different reasons. I think for people at the lower end, the reason that I most often hear from someone who's newly adopted a daft is oh, this really streamlines my giving. From their perspective, they have one account that they make all of their gifts out of. So they have one receipt. They've got one place that they can see each individual gift they made last year, what they want to do this year. They all have a memory of like rifling through their inbox or credit card statement or mail or whatever. And so that's really resonates with them. It's streamlining my giving. And then I also think it's making them more accountable to their giving. Like when you have to look at the list of organizations you supported last year in One place, it's really easy to say, oh, yeah, I want to support them again this year. You also often are funding it, right? You're determining how much money you want to go into the account, and that forces you to take a proactive stance on what your giving is going to be. You're not just setting a goal to hit with future donations. You actually are committing to that in an irreversible way. Because when you put money into a daf, you cannot take it back out for any reason other than donating to an organization. So instead of thinking like, oh, I Hope I make $5,000 worth of gifts this year, $50,000 worth of gifts this year, if you in January say, oh, I'm putting $50,000 into this account, and now it totally changes your psychology, and you're way more likely to hit those goals. So I think it's that accountability and, like, that increased giving just from, like, a psychological perspective that people feel. And then on the higher end, you have people who are donating appreciated assets, like, being really strategic about their contributions. And so for them, they use adapt because they're able to give way more, because they're capturing all these layers of tax benefit and avoiding capital gains. And so I think keeping that in mind from the donor's perspective, like, why they're doing this. But there are really big experience pain points that I hear from donors and from DAF providers. And the number one thing I hear is, well, I never even heard from the organization again after I made my gift. And I know it's a combination of things. There are nonprofits who think that they are not supposed to reach out to donors that give from a daf. I hear that all the time. Or they think it's just a gift from the community foundation. They don't realize that it's an individual's account. There's, I think, also they didn't get that much information. They don't put the effort in to try to reach out and thank them. So it's like operational challenges, awareness and information challenges. And I think that is what leads to the donor frustration. But it doesn't make them stop giving with their daft. It just makes them give somewhere else. So that's why I am so passionate about nonprofits, both being aware and having the best practices and having better systems for how they handle this channel of giving.
- [12:32]
B
Okay, all right. That. Wow. There's so much in there that I want to dig into a little bit deeper. I'm curious how you think about that flow of, like, the donor's emotional experience and the role that a daft plays. Like, I want to dig into that a little bit more because I think that's sort of interesting, what you were saying around, like, the money is there, they can't take it back. They made a decision at a certain point. Maybe sometimes it was strategic and how much they're putting into the the daf. But then there's also this emotional experience that happens, psychological experience that happens at the moment they decide to give their DAF money to a particular nonprofit. And I know you've written a lot about this, like, the decision making kind of equation that happens in those moments when you're working from a daft versus working from your personal, like, cash account. Talk to me a little bit about the biggest behavior changes you see whether that's in, like, amount frequency because of some of that difference.
- [13:36]
A
Yeah, I knew we would get to nerd out on this because you're such a, like, psychology person. So I was excited for this conversation. And even before I dig into this, my number one piece of advice for nonprofit fundraisers is to get your own DAF account because then you'll get to feel this firsthand. You don't just need to take it from me. And that will have such a big impact on your donor conversation. Because if this is an intimidating topic for you, the number one way to make it not intimidating is to do it yourself. Like, that takes all of the scariness out of it and it really puts you on a level playing field with your donor. Because the dynamics that we're going to talk about are the same if you're giving a few hundred dollars a year or a few million dollars a year, which is really the beauty of the vehicle. But taking a step back, I think when in any type of donation setting, we are always making two simultaneous decisions. You are deciding how much money do I want to part with and do I want to support this cause or organization right now. And I would say one of those decisions is kind of a net negative. Right? You never want to part with money if you don't have to. The other is definitely a net positive. It's like the joy of giving. You're having an impact, like all the good feels. But when you stack those two and we don't recognize that they're two decisions in the moment, but they're sort of weighing against each other. And also, even just having multiple decisions is a friction point that slows us down as people. Now, when you have a donor advised fund, you are making that allocation decision upfront. Before you get to specific donation decisions after that. So you're making that budgeting decision, you're saying I want to contribute this much into my DAF account. Then you get the email from Mallory that you're raising money for your kids school. And now I'm like, oh, I already have this set aside for this exact purpose. Right. It's like this exciting moment. Like that's exactly what I set it up for. Oh wow. It's been invested in the market, it's growing. Like if your typical donation to a friend's thing was $20, it becomes 50 really easily. Think about it like you've got a gift card and you walk into a store and what goes through your mind? For me, the very first question, I want to know how much is on that gift card. And I go look for something that is worth that amount. And that's a totally different shopping experience than just going in with your credit card. And so I think that's a really helpful comparison to put yourself in the shoes of a daft owner that it genuinely feels like your charitable fun money. Like the stakes are so low, you it's already set aside for this specific purpose. Spend it. You're looking for opportunities to spend it. And I am so much faster to action on those like emails from friends. A crisis is happening. I quickly go to my daft and do something about it. And that is just such a powerful shift versus regular way donations.
- [16:34]
B
Yeah, that is interesting. It's like the like slush money kind of situation. I'm curious, I know we don't have a ton of time, but I'm curious if have ever, if you have any suggestions to a scenario that came up recently with me, but also with a, with me and a donor. But then also I've heard this from other folks inside my program too and I'm curious like how you would answer this. So I have a donor who came to me actually because they want me to inherit their death. So that was my first sort of introduction to dafs. And he showed me behind the scenes inside his account. How it works was like showing me all around the platform. He has a lot of money in that daft and he inherited the daft from his father. And there's maybe close to a half million dollars inside there. And he's gotten to the point where because that number is so big, he is being really picky about how he wants to to give because it feels so meaningful. Right. It's more than he could ever give in a cash donation. So he's maybe Even having a little bit of analysis paralysis around it. And I'm just curious, you know, so much around kind of the psychology of, of motivation, inspiration, given this type of giving. And I have a feeling that I've heard from other folks inside my programs, like they have encountered situations where somebody's trying to figure out what one big or two big really transformational gifts to give their daft to. How would you suggest folks approach those.
- [18:17]
A
Conversations, like from the fundraiser's perspective? Yeah, it's interesting. I was at the leading locally conference this summer, which was run by the Council on Foundations, and I went to a session on like giving psychology and someone was talking about how they, their staff often or local organizations will kind of gripe like, oh these people have so much money and like why aren't they just donating it all and get annoyed by that and that then they do this thing for their staff at the community foundation every year where one of the board members sets up a fund so that every staff person has, I forget what the exact amount was. $1,000 every December to determine where to give. And they start to have that same feeling like, oh wait, like where am I supposed to give this now? I have this extra money. And they now understand that it is actually harder than it sound to make these big decisions on where those gifts go. So just to give some perspective to people who might feel frustrated by that scenario and just be being like, what? It's not that hard. Make the gift. I think that lowering the stakes is always a good approach when someone is nervous or they're just kind of like emotional barometer is up and maybe finding a way for them to make a gift for them to start to use the account right to some like entry point, some toehold and that they don't need to determine where they're going to make a half a million dollar grants, but they could start by making a few smaller grants, thousand $5000 grants. Learn more about the organization. Right? Understand what it's like to be a supporter and then make the bigger decisions as you learn more. And I think that should resonate with folks that are using DAFs too because inherently part of the reason they were sold on it was the flexibility. You know, you want to be charitable, go ahead and set the funds aside and you don't have all the pressure of making all the decisions right this second. And so I think it always helps to just start doing something. A small aside. I have had these free weights in my apartment for like three years that I don't think I've ever picked up. And last night I just wanted to go to the gym. I walked to the front door, didn't have my headphones. It was just one of those long days. Finally walked in the door at 9pm and I looked at those freeways and I was like, I'm gonna do a 20 minute lift. Looked up a video and just did the class. And I'm like, whoa, now I've broken that barrier. Now I'm like, okay, I'm gonna do that. Find a longer class. I'm gonna do a different exercise. It took the scariness out of it to just take the leap. So I think that applies to so many parts of our lives. But if you can be a bit of a guide to a donor to lower the stakes of like an entry point for them to get involved, I think is a huge win for both of you.
- [21:10]
B
Okay, all right, last question. I love that. I love that answer. If you do get a DAF gift that has a level of information that allows you to interact with the donor, what does a donor giving through a daf? Should that change any future conversations between the fundraiser and the donor? Should they be talking about that vehicle more in their interactions? Like, what does that sort of open up in terms of how they should be approaching future conversations, knowing that that's the preferred vehicle?
- [21:44]
A
Yeah, that's a really awesome question. I don't think enough people are thinking about staff getting in that way. I see a lot of advice to folks to not treat it as a. It's just a way that person gave, like PayPal versus Apple Pay. But it's not. It is. It does tell you something about the donor. And I think it goes a long way for you to communicate that back to the donor so they feel that you are paying attention. And so that starts with, how in the world do you track your DAF data? Like, that is a huge can of worms. I find that most organizations, if you haven't already been having these conversations internally, I'll often ask someone like, oh, well, how much in daft giving did you raise last year? And they'll look at me like, I have five heads. And it's just like, I don't know. I don't know how I would find that out, I don't know where. Like, they're just not set up to track it in that way. And so I think the first step is a bit of an audit and a review of your data, if this is where you are. We have a ton of resources from leading the daft fundraising report and having to help guide organizations to QA their data and submit. So I can share that to Mallory. So you can provide some of those links and stuff. But that's where you have to start. Then assuming you have the information in a way that is accessible and the donor shared it. This has been something that's come up a lot for people that are using DAF pay for the first time, because for the first time ever, they know the second a DAF gift is made. They have the email and they have the donor's name and contact information so they can send them a thank you immediately. What do you say? They're crafting that for the first time. And I think a lot of organizations are not taking advantage of that to be candid, are not making a custom plan and thinking about it. So I would say, number one, thank them as soon as you can. It differentiates you. A ton of organizations send no thank you when someone submits a daft gift. So if you can do it as fast as possible, I think even if it is a smaller gift, it is the best indicator of wealth capacity that you can have. I know we talked about how people of all giving levels use DAFs. That is true. But the average DAF account is $147,000 in assets and the median at a place like Fidelity, which discloses that info, is 25k. So even if you get a $100 gift, my personal opinion, if you have the bandwidth, is to put them in a similar cycle as you would a major donor. And I think that involves like, is there someone on your team that's more senior that could be sending a personal email or at least appears more personalized? I think in future appeals, say, mention using a daf. Mention the actual name of their DAF provider. Right. It just shows that you're listening. It stands out more. And I think that this donor base has not had the best stewardship experiences. So you can really go above and beyond to a donor that is highly likely to increase their giving over time and likely has a lot more capacity.
- [24:42]
B
Okay. I love that. I love that you gave so many amazing takeaways. Tell people where they can go to connect with you, follow along, learn more from you, learn about Chariot. Thank you for all of this wisdom.
- [24:54]
A
Of course, the best place to find me is on LinkedIn. I spend way too much time there with my friend Mallory. So you will learn more than you ever thought you needed to know about dapps, if you follow me there. I try to keep it fun though. Don't worry. And then, yeah, our site for chariot is givecheriot.com Honestly, I think our goal is that people can use Daft Pay no matter what their existing technology is. So your first stop should be your existing fundraising platform. Like ask them if they have Daft Pay available, turn it on if they do, and if not, ask them to add that feature and otherwise GiveCherry.com as our site for more information.
- [25:32]
B
Amazing. Thank you Mitch. I'm so grateful for all the education and wisdom and everything that you're sharing to bust the myths out there that are holding us as fundraisers back and organizations back from being able to move more money into their organization. So really appreciate you.
- [25:48]
A
Of course. Thanks for having me. This was super fun.
- [25:56]
B
I hope today's episode inspired or challenged you to think differently. For additional takeaways, tips, show notes, and more about our amazing guest and sponsors, head on over to Mallorykson.com podcast and if you didn't know, Hosting this podcast podcast isn't the only thing I do every day. I coach, guide and help fundraisers and leaders just like you. Inside of my program, the Power Partners Formula Collective. Inside the program, I share my methods, tools and experiences that have helped me fundraise millions of dollars and feel good about myself in the process. To learn more about how I can help you, visit MalloryErickson.com PowerPartners Last but not least is if you enjoyed this episode, I'd love to encourage you to share it with a friend you know would benefit or leave a review. I'm so grateful for all of you and the good, hard work you're doing to make our world a better place. I can't wait to see you in the next episode.