Frequently asked questions
UBS donor-advised fund
- A donor-advised fund is an easy way for an advisor to offer a more comprehensive wealth management service to their clients without having to become an expert on charitable giving.
- Often referred to as a DAF, it is an investment account for charity. Donors receive an immediate tax deduction while supporting multiple charities over time. Contributions can be made at any time and range from gifts such as cash, publicly traded securities as well as a wide variety of complex assets (e.g., private business interest, hedge fund or private equity carry, real estate, personal property, etc.).
- Assets are invested in a wide variety of investment options through a segregated investment account.
- Grants to qualified public charities can be requested at any time to maximize impact while keeping donor and advisor effort to a minimum, making crisis-based giving, planned annual giving, and one-off gifts all easy with donor-advised funds.
- Direct giving requires donors to do more administrative work with each gift while keeping track of each gift receipt letter for annual tax filing. With a donor-advised fund, your administrator manages the entire granting process for you.
- Donor-advised funds are often the fastest way to deploy funds when a need arises, putting the money to work when a charity needs it the most (e.g., Maui fires, Israel/Gaza conflict, etc.)
- With the option of anonymity, donor-advised funds are the best way to fully protect an individual donor’s privacy. Contrary to the name, a private foundation is public – including a publicly accessible Form 990-PF tax filing.
- Donor-advised funds provide the look and feel of a private foundation without the administrative burden, tax reporting, and regulatory requirements to stay in compliance with IRS regulations.
- Donor-advised funds are flexible, simple, customizable, private, and often a more cost-effective way to create meaningful charitable impact.
- Donor-advised funds provide a simple way to create a philanthropic legacy and involve heirs in the charitable process. This can create opportunities for advisors to build new relationships as next generations get involved.
- Increased investment flexibility since RCF has a longer hold period for various asset types than many competitors; RCF is able to hold contributed assets for more than one year in some cases.
- Sophisticated processes and dedicated teams to manage complex asset contributions. Turn an illiquid asset into an investment for charitable gifts (further optimizing tax benefit vis-à-vis capital gains savings and increasing giving impact!).
- A great experience for financial advisors and their clients with industry-leading service quality, tailored to both UBS financial advisors and UBS clients – plus the ability to give feedback if the experience is not quite right.
- The people, systems, and processes underpinning RCF are operating at a scale and level of performance that makes it possible for you to receive all the above while your client incurs lower administration fees, sending more of their dollars to charity.
- Almost all advisors have multiple clients who would benefit from donor-advised funds, but we find advisors with the greatest number of applicable situations (50%+ of their client base) tend to meet at least two of the following criteria:
- Established practice, usually 35 or more clients
- Primarily high-net-worth and ultra-high-net-worth client base (>$250M AUM)
- Has at least 10 clients above 65 years of age and/or who have given to charity at some point in the past five years
- Has at least one client with a private foundation or an open conversation about starting one
- Private wealth management advisors should consider their entire portfolio ripe for donor-advised funds usage. Most find that about 80% or more of their client base is interested, it’s just a matter of timing. We hear that checking in with each client or family annually helps make sure their changing needs remain met.
- Clients are thinking about taxes during Q2 and given the tax-friendliness of donor-advised funds, it’s a great opportunity to talk about additional value that an advisor can bring to a client’s overall wealth strategy.
- Since one of the benefits of donor-advised funds is flexibility in timing – separating contributions and therefore tax deductions from granting timelines – most clients start getting serious about giving in late Q3 and into Q4 (Giving Season) as gains and losses materialize across their portfolio. Introducing the concept earlier in the year will allow for a more efficient decision-making process ahead of or during Giving Season.
- Clients ready to fund their donor-advised funds earlier in the year will beat the rush and experience faster processing times as a result. Those anticipating multiple contribution types may find it especially beneficial to spread out those contributions before the end of the year.
- Some clients may want to explore multiple types of charitable gift vehicles. While we recommend donor-advised funds as the entry point to charitable giving due to their ease, flexibility, and impact, RCF can support you and your clients in exploring a wide variety of charitable vehicles before decision time in Q4.
- We recommend first talking to your clients early in the year about donor-advised funds, but it’s never too late to broach the conversation.
