GoFundMe's Secret Weapon to Revolutionize Giving

GoFundMe Aims to Revolutionize Everyday Giving with Refurbished Financial Tool

GoFundMe, the popular crowdfunding platform, is venturing into new territory with the launch of its revamped donor-advised fund (DAF) product, "Giving Funds." CEO Tim Cadogan aims to democratize charitable giving and move beyond the company's image as solely a crowdfunding site. The goal? To encourage more consistent and impactful philanthropy among everyday users.

Cadogan's own experience highlighted the need for a simpler solution. He faced delays and complications when friends tried to donate to his fundraiser for a Los Angeles wilderness rescue team using traditional DAFs. "It was just a bit of a thing," he said. "If they were using a Giving Fund, it would take ten seconds."

What are Donor-Advised Funds (DAFs)?

DAFs are essentially investment accounts earmarked for charitable giving. Donors can contribute cash, stocks, or other assets, receive an immediate tax deduction, and then recommend grants to qualified charities over time. The funds grow tax-free, allowing for potentially larger future donations.

GoFundMe's Approach: Making DAFs Accessible

GoFundMe's Giving Funds aims to overcome the traditional barriers to DAF adoption, such as high minimum balances and complex fees. Key features include:

• No minimum balances: Open an account with any amount.
• Zero management fees: Making it cost-effective for all users.
• Low donation threshold: Start giving with as little as $5.
• Easy funding options: Connect bank accounts or use direct deposit for free. Credit card payments are also accepted with a small transaction fee of 2.2% plus 30 cents.
• Investment options: Choose from a selection of exchange-traded funds (ETFs) from leading managers like Vanguard, Blackrock, and State Street Global Advisors.

Why is GoFundMe Doing This?

Cadogan envisions a future where GoFundMe users manage their entire "giving portfolio" through the platform. He believes DAFs have been perceived as "wealth management products," limiting their appeal. GoFundMe is positioning Giving Funds as a "giving product" for everyone, regardless of their wealth.

The DAF Landscape: A Crowded Market

GoFundMe enters a competitive DAF market with over a thousand providers. Traditional financial institutions like Fidelity Charitable have lowered minimums, while fintech startups like Daffy emphasize transparent, flat fees. This increased activity has also led to scrutiny from regulators and lawmakers, with proposals to impose penalties on DAF misuse and require disbursement deadlines.

Addressing Criticisms and Encouraging Giving

DAFs have faced criticism for allowing donors to receive tax benefits without a mandatory timeline for distributing the funds to charities. While the extent of potential abuse is debated, the lack of transparency regarding asset holdings within DAFs remains a concern. The National Philanthropic Trust estimated these assets at over $250 billion in 2023.

GoFundMe plans to actively encourage giving through:

• Targeted spotlights: Highlighting the 1.5 million charities already on the platform.
• Personalized recommendations: Connecting users with local nonprofits, crisis responders, and causes aligned with their interests.
• Simplified goal setting: Allowing users to set annual giving goals and track their progress in real-time.

Cadogan believes this "dynamic, alive community" will differentiate Giving Funds from the "fairly static, passive" nature of existing DAFs.

Expert Perspectives

Jeff Williams, a researcher at the DAF Research Collaborative, acknowledges the competitiveness of the market but notes that "givers are voting with their feet that DAFs are increasing with popularity." He adds, "Anything that makes sure we maintain or enhance the ease of giving, it makes me happier."

Amy Weaver, CEO of Direct Relief, sees GoFundMe's entry as a potential "game changer," unlocking additional funds for charitable causes. Direct Relief, which received over 18,000 DAF gifts totaling $116 million in the past five years, views DAFs as a "savings account" for "good works." She believes GoFundMe's brand recognition and appeal to smaller donors could bring DAFs to a wider audience.

Conclusion

GoFundMe's foray into donor-advised funds represents a significant step towards democratizing philanthropy. By removing traditional barriers and leveraging its existing platform, GoFundMe has the potential to empower everyday individuals to become more strategic and impactful givers. Whether Giving Funds will truly revolutionize charitable giving remains to be seen, but GoFundMe's commitment to innovation and accessibility suggests a promising future for the democratization of philanthropy.

Source: https://apnews.com/article/gofundme-dafs-fidelity-schwab-vanguard-dcfb4af8a32f412d5a9f1aebbe95a907