Grantmaking from donor-advised funds (DAFs) to qualified charities has nearly doubled in the past five years, with philanthropists recommending over 23 billion in grants to charities through their DAFs in 2018, according to the National Philanthropic Trust. As the prominence of DAFs continues to grow, how can they work with nonprofits to bolster their operations and fundraising? SSIR publisher Michael Voss explores the relationship between DAFs and nonprofits in a conversation with Richard C. Shadyac, Jr., president and CEO of the American Lebanese Syrian Associated Charities (ALSAC), the fundraising and awareness organization for St. Jude Children’s Research Hospital, and Fred Kaynor, vice president of business development and marketing at Schwab Charitable. The full transcript of the episode can be read below.
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MICHAEL GORDON VOSS: Welcome to Season 2 of Giving with Impact, an original podcast series from Stanford Social Innovation Review developed with the support of Schwab Charitable. I’m your host, Michael Gordon Voss, publisher of SSIR. In this series, we hope to create a collaborative space for leading voices from across the philanthropic ecosystem to engage in both aspirational and practical conversations around relevant topics at the heart of achieving more effective philanthropy.
Over the past decade, the popularity and use of donor-advised funds, or DAFs as they are commonly known, has grown dramatically. According to the National Philanthropic Trust’s 2019 Annual Donor-Advised Fund Report, grant-making from donor-advised funds to qualified charities has nearly doubled in the past five years, with philanthropists recommending over 23 billion in grants to charities through their DAFs in 2018. How can nonprofits leverage donor-advised funds to support their operation and maximize their fundraising results? To begin to explore how nonprofits and DAFs successfully work together, we have two guests whose personal and professional experience represents both sides of the nonprofit and DAF relationship.
Rick Shadyac is the president and CEO at the American Lebanese Syrian Associated Charities, or ALSAC, at St. Jude Children’s Research Hospital. ALSAC was founded by Danny Thomas in 1957 to be the fundraising and awareness organization for St. Jude, and its sole mission is to raise the funds and awareness necessary to operate and maintain the hospital. Prior to becoming CEO, Shadyac served as the chairman and president of the ALSAC Board of Directors. A practicing attorney for 27 years, Shadyac worked as a partner in the DC area law firm, Feldesman Tucker Leifer Fidell, and has been a member of the Arlington and Fairfax County Bar Associations, the District of Columbia Bar, the American Bar Association, the Virginia State Bar and the Virginia Trial Lawyers Association. He earned a BA in political science from Marquette University and a law degree from Loyola University in Chicago. Our other guest today is Fred Kaynor, vice president of business development and marketing at Schwab Charitable. A past guest on the series, Fred brings over 20 years of financial services experience to today’s discussion. In addition to his current role at Schwab Charitable, he has formerly held senior level positions with MasterCard Worldwide and Visa.
Rick, Fred, thank you both for joining me today as we discuss the relationship between nonprofits and donor-advised funds. Let’s get started.
Rick, I would think most people are familiar with St. Jude and its work helping to treat and defeat childhood cancer. But I suspect this may be the first time many have heard of ALSAC. Would you explain a bit more about ALSAC’s role at St. Jude and how that structure works for your organization?
RICK SHADYAC: Sure, Michael. First of all, thank you for having me on your podcast. This is such a privilege. So we have a very unique governance structure here at ALSAC St. Jude Children’s Research Hospital. Our founder, Danny Thomas, who was a Hollywood celebrity, decided that he wanted to create two separate organizations. So he created American Lebanese Syrian Associated Charities first. He was Lebanese and he reached out to members of the Lebanese community in the United States to help him start this charity, which was going to be solely dedicated to raising the money to build, and now to operate, St. Jude Children’s Research Hospital.
But Danny was brilliant. He said, ‘We’re going to have two separate organizations’ because he said, ‘I want people to focus on raising the money that’s going to be necessary to build and operate St. Jude Children’s Research Hospital. And then I want a separate organization, St. Jude Children’s Research Hospital, to run the hospital, to treat the kids, and to do the research.’ So we were set up to provide the resources to operate St. Jude so doctors and scientists could have a laser focus on taking care of kids and finding cures.
And it’s a brilliant business model when you think about it because it allows all of us the focus on what our areas of expertise are and let other folks handle some things that aren’t necessarily in our wheelhouse. St. Jude leads the way the world understands, treats, and defeats childhood cancer, and ALSAC is the largest healthcare charity in the world.
MICHAEL: So Rick, thank you for sharing that history of ALSAC and the relationship between ALSAC and St. Jude, which, you’re right, is fairly unique. Let me focus in a little bit on the fundraising aspect. As a result of the current pandemic, we’ve become acutely aware that many nonprofits are struggling financially as a result of the unsettled market and the canceling of many traditional fundraising activities. What’s the current focus of fundraising efforts at St. Jude?
RICK: We’ve been around for a while and we’ve been in a digital transformation, thankfully, for about five or six years pre-COVID. So while none of us could be completely prepared for a global pandemic, we were fairly well positioned to be able to transition pieces of our business. About 90% of our workforce is working from home, while we would traditionally be doing in person events right now, including events of great magnitude... we just had the World Golf Championships here in Memphis that we’re the beneficiary of. No fans. That hurt us tremendously. You know, we had our St. Jude Memphis Marathon and a marathon in Nashville. All these kinds of events are being postponed or tremendously delayed. We had to shift to virtual events and live streams and things like that. Ordinarily, because we rely on public support, we would be having people coming onto our campus to tour. All of our tours now are virtual.
We became very intentional and amplified our digital presence. We over-communicated, I would say, with our donors and our supporters and the world. We got lots of new creative, out there that would be very timely, and wanted to make sure people knew that while we were in a global pandemic, kids still get cancer. Over 400,000 kids around the globe are going to get cancer, and we can’t forget them. And kids that get cancer, remember, are kids that are immunocompromised. They’re even more susceptible to COVID-19 and other infectious diseases. So we needed to ramp up our presence that way.
One of the other things that we did, which was really intentional, was to reach out to a lot of folks that we thought either had engaged with us for donor-advised funds, or, actually, we thought might have a donor-advised fund. And we had an intentional strategy around donor-advised funds, and it’s worked. And we can talk a little bit more about the kind of strategies that we’ve employed.
MICHAEL: And Rick, I think the point you made about pivoting to digital is something that a lot of nonprofits have had to be very thoughtful about right now. And then I certainly do want to get back to hearing a little more about the DAF effort that St. Jude’s has undertaken.
But that gives us a perfect opportunity to bring Fred into the conversation. Fred, I’ve often heard you say that knowing what to give is as important as knowing where to give. Can you explain a bit more about how that relates to DAFs and the associated benefits for nonprofits?
FRED KAYNOR: Sure. So thank you, Michael, for having me, and it’s such a pleasure to be here with you and Rick to talk about really what donor-advised funds and endowment giving vehicles, in general, can do to be additive and supportive of nonprofits today. It, particularly, in light of what’s going on right now with the pandemic and the significant impact that’s having, to Rick’s point, on, fundraising opportunities in general.
We accept a variety of different kinds of appreciated non-cash assets. The donor contributes those assets, we liquidate the assets, we deposit the proceeds of the liquidation event into the account, those assets are invested for growth over time, and, ultimately, they’re granted out at the direction of the donor to their charity and causes of choice. The beauty is not only in the efficiency of that process, but in the tax benefit for doing so. When the donor donates those assets, they donate it immediately to a nonprofit organization. They receive an immediate tax deduction for that donation, and they potentially avoid the capital gains that they would otherwise incur if they were to liquidate those assets themselves and then donate the proceeds of the sale to charity directly which, ultimately, means as much as 20% more that’s available to go to the charities that they choose to support.
What we do in that process is we relieve some of the administrative and then, potentially, costly burden that the nonprofit itself would otherwise bear in accepting those assets and liquidating them. And so, if you will, there’s a significant potential financial impact and a logistical impact that really, you know, frees up the resources and assets at the nonprofit to focus on their mission, as opposed to focusing on how to handle the fiduciary elements of accepting a complicated gift.
An interesting anecdotal piece of information is that between mid-February and the end of June of this year, which has by everybody’s definition been a very unique and uncertain time, almost two-thirds of the contributions we’ve seen have been in the form of appreciated non-cash assets. So, clearly, donors recognize the benefit from an efficiency and a tax perspective for processing their contributions of non-cash assets through donor-advised funds like Schwab Charitable.
MICHAEL: I think that there’s a bunch of important points, but I love that point you made, Fred, about being able to focus on mission more.
MICHAEL: Rick, several past guests have referred to donor-advised funds as a rainy day resource, a place where organizations can tap into funds when they’re most needed, which can be particularly valuable during a time like the COVID pandemic. I think you referenced this briefly before, that St. Jude launched a DAF campaign several months into the pandemic. Would you tell us about the impetus of that campaign and share with the nonprofits who may be listening what were some of the outcomes and best practices that you’ve learned as a result of the effort?
RICK: Yeah. So, Michael, I agree with the idea that DAFs can be looked at as a rainy day fund. You know, during a period of time like this, where you’ve got a pandemic and then that’s led to, a horrible recession and people out of work, money can be tight for people. But these are assets that have already been transferred to Schwab, and right now people can access those without having to put additional cash in. And the really incredible thing is that donor-advised funds holders are stepping up. And they’re actually supporting charities at a time when we need that support desperately.
We saw an opportunity to reach out to donor-advised fund holders. We had an intentional campaign, Michael and Fred, and we wanted to reach out to people that we knew had donor-advised funds, and also some that we suspected may have a donor-advised fund. And we had a marketing campaign around it with very, very specific language.
And then we also wanted to make it easy for our donors to actually give through their donor-advised funds. And we would put a little icon on various giving paths that allowed people to go right to their donor-advised fund., It could say credit card, and then the very next thing would be DAF. And you hit DAF and it takes you right to Schwab Charitable. And then Schwab Charitable would allow you then to transfer money to St. Jude Children’s Research Hospital.
And we saw tremendous response. And when we didn’t get a direct donation, we saw interest. And a lot of this is about creating awareness that ultimately leads to a very material gift down the road.
MICHAEL: I like the details that you shared about the efforts you made recently. What additional best practices for leveraging donor-advised funds have you employed at St. Jude’s Children’s Research Hospital and ALSAC, Rick?
RICK: You know, Michael, what I would tell people is this. I think it’s important to meet your donors where they are. We don’t have conversations with our donors and say, ‘How can you best engage with our mission?’ Often we find people will volunteer. They’ll say, ‘Hey, you know what? I’ve got this fund at Schwab Charitable, and I’m not really sure what to do with it.’ So the very fact that they identified it. We want to speak to our donors in a fashion that allows them to give to a not-for-profit in the way that’s most comfortable for them, in a way that’s most tax-efficient, like Fred had talked about earlier. We also speak very regularly, Michael and Fred, with our donors about what the advantages are of donor-advised funds.
So you think about taking very, very creative approaches and then making sure that you establish, giving platforms, giving vehicles that allow people to give in a variety of ways. So it’s not just looked at as a major gift campaign. So I always challenge all of my fundraisers to be super innovative, super creative. Let’s think about ways that make it easy for people to engage with our mission, and donor-advised funds can do that.
MICHAEL: One of the things you said at the top of your remarks about meeting your donors where they are and understanding what their priorities are, too, is something that, you know, all nonprofits benefit from keeping in mind, whether they’re working with a donor-advised fund or just in their general fundraising efforts.
Fred, in addition to donors and advisors, nonprofits are obviously an important constituency for Schwab Charitable, not to mention likely a significant portion of the people listening to the podcast right now. Would you share some advice that you as a national DAF have for nonprofits with regards to working with donor-advised funds?
FRED: First and foremost, consider a donor-advised fund as a way to cultivate and steward the relationship. There are donors who use donor-advised funds for the reasons we discussed earlier, efficiency, the ability to avoid capital gains when contributing non-cash assets, and, ultimately, enabling and empowering donors to give more as a result. It’s a great opportunity. And it’s one that I would encourage nonprofit organizations to embrace proactively from a development and fundraising perspective.
Donor-advised funds, in general, are additive to the opportunity for nonprofits to elevate the value and the message around how to encourage people to give and give more. It’s just a matter of establishing that awareness, engaging with their donors, both, existing and prospects, to let them know that they gladly accept gifts coming from donor-advised funds and make it easy for donors who use those types of giving vehicles to really embrace them and give in an effective and efficient manner using them. Just like Rick said, for example, you could conceivably put something on your website. You could feature what we call the DAF direct widget, which is what Rick referenced, which is a mechanism that you load onto the website which enables donors to click on the link that would take them directly to their donor-advised fund account so that they could login and process an immediate grant recommendation directly to the likes of St. Jude’s.
The more that a nonprofit can do to make the process for donors who use donor-advised funds as either their primary or a secondary giving vehicle, the easier that they can make it, the more efficient that process will be, and the more additive it will be to their development efforts.
FRED: You know, let’s take this year as an example., There was an enormous global pandemic. There still is. There’s a significant need to support relief and recovery efforts in our communities, viral treatment research, vaccine acceleration efforts, and our donors have been extraordinarily generous in supporting each and every one of those efforts. It really has been quite inspirational.
That said, there’s also a need for that ongoing sustained support of the charities and causes that they support on an ongoing basis that are struggling as a result of the pandemic. They may not necessarily deliver a service or provide something that directly correlates with relief and recovery around the pandemic, but they have an extremely valuable mission and role to play, and they are the ones responsible for, continuing to fulfill that mission that is such a priority of the donors. The donor-advised fund, as an example, is a way to accommodate both of those needs. They can provide that episodic support for things that occur—disasters, natural disasters or pandemic—but it also has the capacity as a result of its structure to enable them to continue that ongoing sustained support of the nonprofits that are part of their overall philanthropic plan.
MICHAEL: I think that sustained support is a really vital point that keeps coming up this entire season in all of our episodes that we’ve been taping since the COVID-19 pandemic started.
I’m going to turn back to Rick for a second. And, Rick, you talked about the digital transformation that ALSAC was already undertaking even before the COVID pandemic struck. And, to me, that really talks about the culture of innovation within the organization, not just, the culture of innovation within St. Jude’s with regards to the research conducted or the services provided, but the culture of innovation with ALSAC’s approach to fundraising. Can you speak to that culture and the role that leadership plays in it?
RICK: I’m a firm believer that you innovate from every seat, and what I wanted to do is incorporate that kind of mentality in our organization. So every employee at ALSAC is expected to innovate. It’s a part of the way they are evaluated on an annual basis. And now we do it two times a year. One of our culture pillars is to innovate and other one is to be strategic. So they need to tell me and their managers how they’ve been innovative over the course of the six months that they’re being evaluated, and give real examples of their innovation efforts.
We also want to make sure that we create a culture where we encourage ideas. What we always tell people is to make sure that they learn, they learn from their innovation efforts. So if things don’t go well, we accept that. Okay. As long as we can learn from it. Like Google will tell you, you fail, but you fail quickly, and you learn from those failures. But it’s critically important.
I’ll just give you one example. As we were working through all this, but also even before, we knew that there were opportunities to reach out to donors even more. So we created our own media publishing company here at ALSAC St. Jude, so that we literally create our own content. We have a studio in-house here. We create our own commercials, our advertising. We do a lot of our messaging and incredible creative work. We have a podcast series, as well. We’re trying to be as creative, as innovative as we possibly can to find ways to engage with our donors, and, again, to really meet them where they are. So innovation is a part of our DNA. It’s been a part of the DNA at ALSAC and St. Jude for the 60 years that our organizations have been in existence.
MICHAEL: Fred, to that point, you know, many nonprofits might not have the resources that ALSAC St. Jude’s has, but still need to connect with donors and very often donor-advised fund account holders. So what resources does Schwab Charitable provide for nonprofits who are trying to do that?
FRED: It’s a great question. We provide a variety of different kinds of resources, most of which are accessible through our website, SchwabCharitable.org. Among them, we provide, information and granting guidelines, which provides the framework and the structure for, how they can theoretically promote among donors who have a donor-advised fund. We also offer access to the vehicle I mentioned earlier called DAF Direct, which is a widget that they could easily import onto the website, on the fundraising page, which donors can use. They can simply click on that widget, login to their account and ultimately process an immediate grant to the nonprofit. And then we also provide a host of information with respect to the types of contributions, non-cash assets, that we accept on behalf of donors and the nonprofits they support, so that they can understand and, ultimately, communicate with their donors that it’s an easy mechanism to give a variety of different kinds of assets, cash or non-cash, and to do so in the most effective tax-efficient way possible, and, ultimately, potentially, resulting in even having more to give to the charity than they otherwise would.
Really, St. Jude’s, has taken a tremendous leadership role in finding ways to engage more deeply and thoroughly with their donor base. I really want to applaud everything that Rick, you and your team have done in such an effective way. It’s inspirational to all of us.
RICK: Thank you, Fred. That’s very kind of you.
MICHAEL: Well, I think we’re all impressed with the work that you, ALSAC, and St. Jude’s, do.
Rick, any additional thoughts that you’d like to share before we get to the end of our time together today?
RICK: Michael, we’re at such a really interesting time in the world right now, and I’ve been so inspired by the generosity of the public. In 1962, when we opened our doors, we opened our doors to all children regardless of race, creed, ethnicity, religion, and our founders took economics completely out of the equation. So what did that mean? That meant that no family would ever receive a bill from St. Jude Children’s Research Hospital, not for the cost of treatment, travel, housing or food because all we wanted mom and dad to worry about was helping their child survive.
And now the big audacious goal is to take what we’ve learned and translate it to the world, where survival rates around the globe can be as little as 20% in low and middle income countries. So we want to raise those survival rates. What we want to say is where you live should not be the determinant of your child’s healthcare outcome. We want to reverse that. And that’s why partnerships like with Schwab Charitable and folks that have these donor-advised funds, they can provide the resources that allow us to treat these kids without regard to economic circumstance, and to try to change healthcare outcomes for kids everywhere. And donor-advised funds are just one of those vehicles that allows us to dream big.
FRED: I want to echo what Rick has said, I mean, really, the ability to collaborate with you and with your organization on the extraordinary work that you do. How you came about, how you have been successful thus far to date, and what you have stated as your audacious goal for a future is entirely inspirational to me and to all of us.
As difficult as this time is and has been for many months, we have seen an enormous spike in generosity of our donors in supporting causes like yours, and in supporting other causes that are cropping up on an episodic basis for people that have been severely impacted by the pandemic. And we are just, again, equally proud and honored to be able to support these donors in their efforts to try and do whatever they can to helping organizations like yours achieve their mission and objectives.
MICHAEL: And I’d also like to say that I think one of the hallmarks of St. Jude’s that everyone respects is the fact that it does, provide services regardless of a family’s ability to pay. And the audacious goal of trying to then translate that to the global scale and address the survivability rate for childhood cancer, that’s really something amazing. And kudos to you and to St. Jude for that work.
RICK: Thank you, Michael.
FRED: Hear, hear.
MICHAEL:
Well, with that, Rick, Fred, I know there’s plenty more that we could be discussing with regards to DAFs, we could have easily kept going for another hour, but, unfortunately, we’re out of time. So I’d like to thank you both for your time today, and for sharing your thoughts on the relationships between DAFs and nonprofits, and working well together.
RICK:Thank you.
FRED: Thank you, Michael.
MICHAEL: Thank you for listening. We hope you’ve enjoyed this episode. Please consider leaving us a review on Apple Podcast or your favorite listening app, as it helps others discover the show. We encourage you to listen to other episodes in this series, as well as other podcasts from SSIR. This podcast series is made possible with the support of Schwab Charitable, who played an important role in the selection of topics and speakers. For important disclosures and a transcript of this episode, visit SchwabCharitable.org/ImpactPodcast.
