You’ve got personality! Why do “investor” types love donor-advised funds?

Personality type matters, even when it comes to supporting community causes. “Social impact personality type” is especially important to identify whether a donor-advised fund--called “DAF” for short--is a good fit for a family or an individual to organize gifts to charities.

Why does it matter? It matters because donor-advised funds are the fastest growing philanthropic planning vehicle in today's wealth management marketplace. Donor-advised funds are popular because they allow an individual or family to make a tax-deductible transfer that qualifies as a charitable contribution, and then later recommend gifts to favorite charities from the fund when the time is right. A donor-advised fund operates a lot like a checking account just for charity, except it’s established according to the IRS guidelines that create the tax advantages.

Not everyone is a fit for a DAF. Research strongly suggests that each of us has a social impact personality type--investor, connector, activator, or a combination--that influences the way we prefer to make a difference in the lives of others through philanthropy and community engagement. Research further suggests that the social impact personality type referred to as “investor” is typically a good match for setting up a donor-advised fund. Activators, who like to focus on a particular cause, are also well-suited for a DAF, but they usually take longer to make the move. Connectors enjoy the social aspects of giving and might not immediately see the benefits of organizing their giving through a DAF.

If you’re the investor type, you probably enjoy acting independently as much or more than you enjoy "doing good" with a group. You look at the bottom line when you invest in the community, both from the perspective of your own financial objectives as well as those of the nonprofit organization you support. In other words, you’re looking at charitable giving and social impact as an investment to improve the lives of others, and you want to maximize results not only for the people you intend to help, but also for your own tax and estate planning portfolio. Investors love the elegance of the donor-advised fund to achieve many goals through one vehicle.

Investor, activator, connector. Everybody’s got a good side. What’s yours?