The donor-advised fund universe continues to grow, in both the size and number of accounts. Many clients establish these accounts for charitable giving after their financial, legal and tax advisors explain the benefits—both for the clients and the causes they want to support.

Many financial advisors have realized over the past decade that they can attract new clients by offering donor-advised funds, as well as retain existing clients and increase assets under management. The percentage of assets in these accounts may or may not be large, but by discussing charitable planning and getting the accounts open, advisors often find themselves managing these monies as well.

There are several scenarios in which an advisor might find the opportunity to introduce these products to clients and prospects (and thus raise his or her profile).

1. In one scenario, an advisor can encourage a client to donate assets the advisor wasn’t handling to a donor-advised fund account. Some fund sponsors allow advisors to manage the assets in the accounts and determine how the assets are invested once liquidated. Most advisors charge on these assets, and clients are pleased someone they trust is handling the assets.

2. Clients can also donate greatly appreciated assets they’ve held over a long time to a donor-advised fund sponsor and receive the fair market value for the donation. This eliminates the need to determine the exact cost basis of these assets, which would be difficult if not impossible to determine if the assets were sold.

3. Older clients can fund and establish donor-advised funds for their entire families or create separate donor-advised funds for their children, which allows their advisor to meet and work with the children before their parents pass on.

4. Some advisors work with younger clients whose aging parents are wealthy and philanthropic. In these cases, an advisor can open a donor-advised fund for the parents, and thus find an entry to managing some of the parents’ assets even if the parents are otherwise working with some other advisor who had never brought up the product in conversation.

5. If a client is about to sell their business (or some other illiquid asset), an advisor can encourage them to donate some of the privately held stock before the sale to reduce the capital gains taxes they would have to pay. The advisors can then invest and manage the assets once they’re liquidated.

6. Sometimes clients establish donor-advised fund accounts on their own, but the sponsors they’ve chosen offer only limited investment choices. An advisor can help clients transfer out of those accounts into new ones that allow the advisors to manage the assets. The advisors are then able to invest and grow the assets so the clients can donate more in the future.

7. When you share your knowledge about donor-advised funds and open accounts for philanthropic friends, family members and colleagues, you end up with referrals. (And if you don’t discuss these things, other advisors will.)

8. Because so many estate planning attorneys and accountants now recommend donor-advised funds instead of private foundations at nearly all levels, many financial advisors have informed their clients’ other advisors that they can open and manage the assets in the clients’ donor-advised fund accounts. This prevents the other advisors from suggesting another donor-advised fund sponsor that the financial advisor is unable to work with.

9. Advisors who create donor-advised fund accounts for clients can make their own operations much more efficient, especially during the peak of the charitable giving season. They can do this by having clients donate stock to one fund sponsor instead of numerous charities. That reduces the workload of the advisory firm’s associates, and the clients themselves have to keep track of only one tax receipt. The accountants, meanwhile, will not have to hound their clients for an accurate accounting of all of their donations.

10. Advisors can also offer to submit the grant recommendations to the donor-advised fund sponsor to help out those clients who aren’t technology savvy and also help them overcome their reluctance to open and fund the accounts.

Donor-advised funds have allowed many advisors to get to know the spouses and children of their clients, since these family members are sometimes even more philanthropy-minded than the clients themselves, and will likely become the successors on the fund accounts. This even holds true for clients who aren’t married, since they have relatives or friends who will become the account successors after the clients pass on. In any case, the financial advisors are keeping their roles on the accounts for more years.

Not all fund sponsors allow advisors to manage the assets in their clients’ donor-advised fund accounts, so it is important to find the right sponsor. While advisors want to and should be able to manage the investments in the donor-advised fund accounts, they also understand that by discussing charitable planning with clients, the clients and their favorite charities will also benefit.         

Ken Nopar is the vice president and senior philanthropic advisor for the American Endowment Foundation, the country’s sixth-largest and leading independent donor-advised fund. The foundation works with donors and their financial, legal and tax advisors in all 50 states.