What Elon Musk Can Teach Us About Donor-Advised Fund Fees

Adam Nash

· 3 min read

Most people have never even heard of a donor-advised fund, often called a “DAF”. But a few weeks ago, millions of people found out about them when Bloomberg reported that Elon Musk has donated $5.7B in Tesla stock ($TSLA) to charity, most likely to a donor-advised fund.

Unfortunately, there is a fundamental problem with most donor-advised funds that even Elon Musk hasn’t solved. In general, donor-advised funds charge fees to their customers based on a percentage of assets.

The lowest price for a donor-advised fund, even at the billion-dollar level, is about 0.08%. (For reference, Vanguard charges 0.60% for accounts up to $500,000). That may not sound like a lot, but it turns out that at 0.08%, Elon may be paying his provider more than $45 million in fees over the next 10 years.

Elon, of course, can afford it. But Elon isn’t alone. Most people who have donor-advised funds don’t even realize how much they are paying for their accounts. The problem, of course, is that money that goes to fees doesn’t end up going to the charities that need it.

At Daffy, we believe that everyone should put money aside for those less fortunate than themselves, and donor-advised funds are a great way to do it. This is one of the reasons that we set up Daffy as a membership-based community, with a simple flat rate so that anyone can have their own donor-advised fund.

The Problem with Donor-Advised Fund Fees

There are two big problems with donor-advised funds that charge fees based on a percentage of the assets in the account:

  1. Less Money for Charity. Every dollar that goes to fees ends up not supporting operating charities that need it. As the DAF market has ballooned to over $159 billion dollars in 2020, this means that there are likely hundreds of millions of dollars going to sponsors, not to charities.
  2. Disincentive for Giving. Every time a DAF customer recommends a grant to a charity, the DAF provider ends up losing revenue. This unfortunately puts a pretty strong incentive for sponsors to just accumulate assets. This is just common sense - if you have a $100,000 account at Fidelity Charitable when you decide to give $10,000, Fidelity loses 10% of their revenue from the account.

We set pricing at Daffy specifically to avoid these conflicts.

  • Accounts under $100 are free.
  • For larger accounts, Daffy charges a flat monthly membership fee, just like many community centers and religious institutions. The fee is just $3 per month for most members. For members who want to make unlimited contributions of stock and crypto, we have a $20 per month membership.

For Elon Musk, the math should be simple. If he moves his account to Daffy, he could give $45 million more to charity over the next 10 years.

How Much Do You Pay?

If you own a donor-advised fund today, it’s most likely with a large provider like Fidelity, Schwab, or Vanguard. Do you know what they are charging you?

We’ve made it easy to see how much money you could save by moving your account to Daffy.

Our challenge to you is quite simple:

  1. Find out how much your donor-advised fund charges you. (You may need a stiff drink after looking at that number...and if you want a sneak peek of how we compare, read here.)
  2. Move a small portion over to Daffy, just to try the service. You’ll save money by doing it, and we’re convinced you’ll see that there is no reason to pay so much in fees.
Source: Providers' websites as of March 25, 2022.

Moving money from an existing donor-advised fund is simple: just open an account at Daffy, select “DAF Transfer”, and then make a “grant recommendation” to Daffy Charitable Fund from your existing fund. Three easy steps. That’s it.

At Daffy, we believe that everyone should put money aside for those less fortunate than themselves, and we think donor-advised funds are a great way to do it. If you don’t have a DAF already, be like Elon, and open one up today.

But if you have one already, you are probably paying too much for it. That goes for you too, Elon. They don’t deserve your fees. That $4.5M per year could go to benefit causes and organizations you believe in.

In fact, I’ll make this even easier. If you move even 0.1% of your donor-advised fund over to Daffy, we’ll give a free account to every SpaceX or Tesla employee who joins this year. 🙏