Strategic giving in down markets: What financial advisors need to know
As a Charitable Strategist at Ren, I work alongside financial advisors every day to help their clients give smarter, especially when the markets are unpredictable.
One question keeps coming up: How do donor-advised funds (DAFs) hold up in a volatile market? Here’s what we’re sharing with advisors like you, and why DAFs remain one of the most effective tools for HNW clients navigating uncertainty.
1. DAFs are market-sensitive but built for the long haul
DAFs are invested accounts, which means their value fluctuates with the market. A 20% downturn doesn’t just impact portfolios, it also reduces the amount available for grants. But that’s not a reason to pause giving. In fact, it’s a reason to revisit strategy.
2. Clients typically respond in one of two ways
During market downturns, we’ve observed two main behaviors:
- Some donors become more cautious, preserving DAF balances until recovery.
- Others give more, recognizing that nonprofits are often in greater need during a downturn.
Importantly, many ultra-high-net-worth donors feel a deep responsibility to support communities in times of crisis. They understand that during recessions or economic hardship, the most vulnerable are hit hardest and they want to show up.
Your role is to support either instinct with a plan.
3. Make liquidity part of the plan
Clients with a well-structured DAF (diversified, with a cash allocation) can continue making grants even when investments dip. This allows them to stay aligned with their values while giving nonprofits consistency.
Tip: Recommend recurring grants. Charities rely on predictable funding, especially in uncertain times.
4. Reframe contributions, not just grantmaking
Even when markets are down:
- Clients can contribute cash or other non-correlated assets (art, collectibles, even business interests).
- Some use DAFs to offset the tax impact of Roth conversions or other planning moves.
- Appreciated assets may be “on sale”, a long-term opportunity.
5. DAFs thrive in both crisis and caution
- 2020 (COVID-19): DAFs enabled fast, flexible grantmaking to frontline organizations.
- 2022 (slower downturn): Contributions slowed compared to 2021, but grantmaking hit record highs. Proof that many donors stayed active despite market pressure.
DAFs showed up when it mattered most.
6. Long-term planning = long-term impact
Remind clients: DAFs aren’t about market timing. They’re long-term giving vehicles designed to support consistent, strategic philanthropy through all cycles.
7. Your action plan for guiding clients now
- Reassess DAF investment strategy: Is it diversified and aligned with long-term goals?
- Encourage recurring grants: Especially to core nonprofits your clients care about.
- Plan to replenish: When the market recovers, make a plan to restore DAF balances.
- Talk tax: Don’t forget the potential benefits of contributing appreciated assets when values bounce back.
Bottom line: DAFs are one of the most flexible, powerful tools available, especially in volatile markets. When used intentionally, they allow your clients to keep giving, stay tax-efficient, and make a real difference when the need is highest.
If you’d like to discuss DAF strategies tailored to your clients’ goals, we’re here to help.
Let’s talk strategic philanthropy:
[email protected]
