A Donor Advised Fund (DAF) is a specialized charitable giving account that can help you maximize the tax advantages you get for making charitable donations. A DAF can be useful for high-income professionals since you get the charitable deduction when you fund the DAF and you optimize the timing of when you make the donation and receive the tax benefits. You can also donate appreciated investments rather than cash.
While historically DAFs were solely the playground of the ultra-rich, recent advancements have allowed even moderately wealthy individuals to take advantage. There are several major DAF providers, but the “best” DAF brokerage depends on several factors, including how much you are giving, how often you give, where your taxable investments are held, and whether you plan to leave money invested in the DAF. Let’s take a look at some of the most popular brokerages offering Donor Advised Funds to see what might be the best one for your specific situation.
What Are the Best Brokerages for DAFs?
Some examples of good brokerages for DAFs include Vanguard, Fidelity, Schwab, and Daffy.
Vanguard Charitable
Vanguard is one of the biggest brokerages out there, and it has a charitable arm called Vanguard Charitable, which allows you to set up a DAF. WCI Founder Dr. Jim Dahle has used Vanguard Charitable to help facilitate his charitable giving.
Vanguard Charitable is especially convenient for customers who are already using Vanguard, since it can integrate directly with your other Vanguard accounts. There is a $25,000 minimum to open a new account, and a $5,000 minimum for additional contributions. Fees for Vanguard Charitable start at 0.60% for balances below $500,000 and decrease if your fund has a higher balance.
- Best For: Large donors/Vanguard customers
- Main Advantage: Integration with Vanguard
- Main Drawback: Higher minimums
Fidelity Charitable
Fidelity, through its Fidelity Charitable arm. is probably the easiest choice for many readers. Fidelity has no minimum to open an account and no minimum balance, and you can start supporting charities right away. Like with Vanguard Charitable, it can be convenient if you have your brokerage account with Fidelity, but it is important to understand that you don’t have to have your taxable brokerage account at Fidelity to use Fidelity Charitable.
One of the pros of using a DAF is that it can simplify the charitable-giving process, and Fidelity Charitable makes it easy to start one. If you don’t have a strong reason to choose another provider, Fidelity is probably a safe “best overall” pick.
- Best For: Most investors
- Main Advantage: Low minimums and flexibility
- Main Drawback: Administrative fee
Schwab Charitable
Schwab offers essentially the same basic DAF concept as Vanguard and Fidelity. And like we have mentioned before, one of the biggest reasons to use Schwab Charitable is if your other accounts are already at Schwab. Having your DAF and taxable accounts at the same institution can make donating appreciated ETFs particularly easy, which can be one reason to use a Donor Advised Fund.
Schwab also has no minimums to open an account, though there is a $100,000 minimum if you want to open a professionally managed DAF account. There is an administrative fee of 0.60% of total assets in the account for the first $500,000, and the fees get lower if you have a higher balance.
One thing to keep in mind is that there is little reason for a Schwab customer to switch to another DAF brokerage solely because it might be “better.” Generally speaking, the best DAF is often the one that makes donating appreciated assets easiest. Schwab may not win on every feature, but it is a very strong choice if you’re already a Schwab customer.
- Best For: Schwab customers
- Main Advantage: Convenience
- Main Drawback: Similar fee structure to Fidelity
What About Daffy and Other Alternatives?
While Fidelity, Vanguard, and Schwab are the “Big Three” of brokerages, there are also a few other companies that offer DAFs that are worth considering. We have talked before about Daffy, which has a different fee structure (no traditional AUM fees) and lower barriers to entry. Charityvest is another option we have discussed on the WCI podcast, with no minimum balance, no minimum contributions, and low-cost investment options.
While opening a DAF with one of the Big Three brokerages can make a lot of sense if you already have accounts with that brokerage, you might also consider some of the other non-brokerage DAF companies as an alternative.
- Best For: Cost-conscious/smaller donors
- Main Advantage: Different/lower-fee structure
- Main Drawback: Less established than the big three
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