JAMES POLLARD
5 min read
NEW YORK (AP) — GoFundMe CEO Tim Cadogan had some complications while fundraising on his own website last fall.
Several friends wanted to help Cadogan reach his $28,000 goal as he crowdfunded for a Los Angeles area wilderness rescue team. However, they tried to donate through a lesser-known but growing wealth management tool called a donor-advised fund, or a DAF, a no-frills investing vehicle for money earmarked as eventual charitable gifts. After cutting checks and waiting three weeks, Cadogan said, the money finally arrived.
“It was just a bit of a thing,” he added. "If they were using a Giving Fund, it would take ten seconds.”
Giving Funds are GoFundMe's latest in a flurry of product rollouts with the purported goal of moving stagnant U.S. charitable contributions beyond the 2% GDP mark where totals have long hovered. But the for-profit company's DAF, announced Monday, enters a crowded market of more than a thousand providers — products often with older, wealthier clienteles that are often criticized for warehousing gifts.
To transform the way that everyday users plan their donations, Cadogan will have to widen the appeal of DAFs beyond the likes of the technology entrepreneur's circles. And he wants to change public perceptions of his company as just a crowdfunding site.
“We’re also hopeful that more people will start using GoFundMe for a broader set of things in their lives: not just that one fundraiser they’re supporting, not just that one nonprofit. But they’re coming in and they’re managing their giving portfolio with us and through us,” Cadogan said. “That connects directly to our mission, which is we want to help people help each other.”
A DAF boom — but for whom?
Donor-advised funds grew popular over the last decade among ultra-high net worth individuals as a tax-efficient instrument for grantmaking without the hassle of a more sophisticated charitable foundation. Donors can immediately write the contribution off on their taxes but face no deadline for giving the money to a nonprofit.
The idea: account holders invest money they wanted to ultimately donate, let the funds grow tax-free while they sit and give themselves time to identify the recipients best aligned with their giving goals.
There's since been a rush to court average givers. Legacy financial services firms such as Fidelity Charitable lowered the minimums to open accounts. Fintech startups such as Daffy contrast their flat fees with the hidden expenses they allege their competitors charge. With all that traction came IRS proposals last year to impose penalties on those who abuse DAFs and congressional legislation that would require some deadlines for disbursements.
