The PMC Podcast

What the heck is a DAF?

April 10, 2020 Kristin Sundin Brandt and Bill Alfano Season 1 Episode 3
The PMC Podcast
What the heck is a DAF?
Chapters
The PMC Podcast
What the heck is a DAF?
Apr 10, 2020 Season 1 Episode 3
Kristin Sundin Brandt and Bill Alfano

To alleviate some of the financial pressure that many people are experiencing due to COVID-19, the Pan-Mass Challenge announced that it would not be enforce the fundraising minimums for the first time in the ride's history. PMC Chief Financial Officer, Michele Sommer, joins Kristin and Bill to discuss the impact of COVID-19 on charitable organizations, and how people are using the money that's already in Donor Advised Funds (DAFs) to support their favorite charities.

Links mentioned:

* Important Policy Change for 2020 https://www.pmc.org/blog/important-policy-change-for-2020

* What is a Donor-Advised Fund? Source: Fidelity Charitable
https://www.fidelitycharitable.org/guidance/philanthropy/what-is-a-donor-advised-fund.html

• Pan-Mass Challenge Case Study (pdf) Source: DAF Direct

http://www.dafdirect.org/DAFDirect/popups/A-Widget-Case-Study-Pan-Mass-Challenge.pdf

• PMC - Ways to Give

https://www.pmc.org/ways-to-give

Support the show (https://donate.pmc.org/)

Show Notes Transcript

To alleviate some of the financial pressure that many people are experiencing due to COVID-19, the Pan-Mass Challenge announced that it would not be enforce the fundraising minimums for the first time in the ride's history. PMC Chief Financial Officer, Michele Sommer, joins Kristin and Bill to discuss the impact of COVID-19 on charitable organizations, and how people are using the money that's already in Donor Advised Funds (DAFs) to support their favorite charities.

Links mentioned:

* Important Policy Change for 2020 https://www.pmc.org/blog/important-policy-change-for-2020

* What is a Donor-Advised Fund? Source: Fidelity Charitable
https://www.fidelitycharitable.org/guidance/philanthropy/what-is-a-donor-advised-fund.html

• Pan-Mass Challenge Case Study (pdf) Source: DAF Direct

http://www.dafdirect.org/DAFDirect/popups/A-Widget-Case-Study-Pan-Mass-Challenge.pdf

• PMC - Ways to Give

https://www.pmc.org/ways-to-give

Support the show (https://donate.pmc.org/)

Announcer:   0:01
 This is the PMC podcast with Kristen Brandt at Bill Alfano. Now, here's Kristen Brandt and Bill Alfano.  

Kristin:   0:17
You're listening to the PMC podcast. This is Kristen. Brandt and I am here safely, physically distant from my co host Bill Alfano. Hello, Bill.  

Bill:   0:28
Hello Kristin. I don't have to do that, I guess. Hi, Kristin.  Hope you and your family are safe and well

Kristin:   0:00
We are we're hanging in there as best as we can, how about you?    

Bill:   0:00
Yeah same thing here, thank you  

Kristin:   0:00
So what are we talking about and who are we talking to today?  ?nd what are we talking about"

Bill:   0:32
DAFs of course, Kristen. And you may ask, what is a DAF? Well, let's save that for the podcast. Our guest is the PMC's CFO, wow acronym after acronym, the PMC CFO Michele Sommer. She's going to be joining us and let us know about this fundraising opportunity using donor advised funds . 

Kristin:   0:00
 That's great. We did record this through ZOOM, you know, like everybody else on the planet. So there you will be able to note that in the audio a bit, but let's take a break and we will come back with our interview with Michele. 

Kristin:   1:20
We're here with Michele Sommer, the chief financial officer for the PMC. Thank you for joining us today, Michele.

Michele Sommer:   1:27
It's really a pleasure to be here,

Kristin:   1:29
so let's to get us started. Maybe you could just tell us a little bit about your role at the PMC and a little bit about your background.

Michele Sommer:   1:37
Sure, thanks so much. I joined the PMC first as a rider back in the nineties and my husband I both road for many years. And then in 2012 I answered, an email that Billy (Starr) sent out looking for somebody in fundraising administration. So I came into that role, and then it really just grew to the chief financial officer role where I got to use my background. I was formally a partner at a one of the big accounting firms and had started my own business. So it was a terrific chance to bring my professional background to the PMC, which is a totally under entrepreneurial  mission driven organization. So that's how I arrived.  

Kristin:   2:26
How

Kristin:   2:26
long have you been with the PMC?

Michele Sommer:   2:27
So on full time staff? Now it's eight years.

Kristin:   2:33
Wow! And how long have you said you've  ridden and your husband rode?

Michele Sommer:   2:38
Right? So I aren't writing. I think my first year was 99 he wrote a few years before that he has written in 23 years without stopping. I rode six years and then had a pile of kids in quick succession. Um, so it took a little break in, came back onto into the PMC in the staff role. And last year I was able to ride, uh, the Saturday part of a two day ride, which was a big treat.

Kristin:   3:04
That's awesome. Welcome back. And yeah, I know how those kids can put the biking totally off track, right? Mine Mine threw me off the bike for a couple of years myself, it's hard to get back. Do that? Um so recently, you know, let's address what's been going on. As a result of Coronavirus. PMC made pretty epic decision pretty historic decision, which was not to enforce the fundraising minimum for those people who may not be familiar. Maybe you could talk about the philosophy that PMC has had about their fundraising minimums and why not enforcing it is such a major step for the organization?

Michele Sommer:   3:47
Absolutely. The PMC is all about commitment. It's central to our culture. It's central to our mission. Uh, Billy likes to say commit. You'll figure it out and we take that really seriously. We make riders sign several times during the registration processing, saying they totally understand that if they don't raise the money, they're on the hook for it and we will charge their credit cards and they give us permission to do so. So that's been the history now for 40 years. This year, as everybody understands, is a very challenging and unique situation. So for the first time, we made an unprecedented change in policy, and we have said we're actually not charging anybody's cards were not holding people to the minimum. We're asking them to do their best and to fundraise and to stay focused on mission. However, we know that individuals circumstances are just, you know, really challenging. And depending on what sector you work in and your personal situation, this just might be a year. We're fundraising for any causes is well beyond what should be expected.  

Bill:   4:56
And

Bill:   4:56
Kristin, let me ask you as a rider, when you received that message, how did how did you have that land with you and your family?

Kristin:   5:03
So uh, I will admit I probably wasn't there in my thought process yet, Like, I hadn't thought about the impact. But then the email came in, and I immediately felt this sense of just lift a lift off my shoulders that I don't even think I knew was there. And so I know you know my commitment. And I know I talked to my teammates were all committed to doing our best to to meet or exceed our goals. I'm still gonna be I'm still going to be going for Heavy Hitter. That's still in my head as my goal. Um, but to know that that my credit card is not gonna get hit because you're right, they ask us several times. It was a huge relief, and I thought it was I texted right away to say thank you, because I think it just took a weight off of my shoulders. That again, I didn't even realize, is there?

Michele Sommer:   5:55
Well, that's really nice to hear. And I think that, you know, the point was, it was obvious it was the right thing to do in this environment. And, you know, this is a time when we all need to help each other and and the way that help comes in all different ways. And for the PMC to be able to help relieve some of that stress from our ridership is really something we felt strongly about. We do, of course, at the same time, don't skip a beat and say We're still on mission and we do trust that each and every one of you did while you can. And we know that we do have a percentage of a ridership that can continue to to give very generously and to reach out to their network very thoroughly. And another great thing about PMCers is they're very goal driven. And even though there's no minimum, there are competitive group and they will want to reach those higher goals, that Heavy Hitter or the top 10%. And that's what's going to drive us to achieving Still, a really terrific an amazing amount of funds for Dana-Farber and cancer research,

Kristin:   7:06
right? So we, um as Bill and I have talked about where this podcast will go, the things that we're gonna cover helping with fundraising, helping give people ideas about fundraising was always top of the list. Um, and that's one of the reasons you're here today is to talk about, um, something called DAFs. 

Bill:   7:29
Michele's favorite topic, her favorite topic

Kristin:   7:31
DAFs and how they can actually help with fundraising. So maybe I thought we were gonna be talking about how you can host a fundraiser at the local pub, but instead we're going to talk about DAFs. So let's start with what is a DAF. And why do bankers like acronyms so much?

Michele Sommer:   7:50
First of all, I do not know. I, um bankers love acronyms, but I think everybody does every spore, every everything. And I think it keeps you. You know, whether you're an insider and outsider or whether in the know so makes people feel cool. I guess that's my theory.  

Kristin:   8:07
I like a good theory.  

Michele Sommer:   8:08
What a DAF actually is. It stands for Donor Advised Fund. It's also known as a charitable giving account, and it's an amazing vehicle because what happens is you take some money that you would like to donate to charity, but you're not quite sure which charity, and you can put it into one of these accounts, and at that point you get the tax deduction. 

Kristin:   8:33
these accounts are like with your employer or working with your employer or you set it up and then

Kristin:   8:39
great question. What it is is actually not with your employer is with a financial institution, so I'll do a plug for Fidelity Charitable is a separate arm of Fidelity that specifically is a place where these accounts exist and where you can open an account. And all of the big financial service firms Have these accounts there also some community foundations that have these accounts, but they're not for your employer. Typically, they are okay, there's something that's out there out there in the marketplace. Um, but they're terrific, because if in a particular year let's say I mean everybody's personal life, you have years where you have Feast and years when you have famine. So if you think about it. You have probably some some charities that you like to support over a long period of time and whether it's your your church or your your alma mater or, you know, some cause you care about, and in this way you can take some money. Let's say one year I get a really big bonus or or something or I can put this money in. I get my tax deduction in that year. I really kind of need it, since I've made a little bit more money that year. But then I have this kind of slush fund that I can use to dole out to charities over time. Um, and the idea is to move it out over time. But it just gives you the ability instead of in late December, rushing around and writing all these checks to get your tax deduction where you want it to be. You can take a lump sum what in this not worry about the tax deduction and then, more thoughtfully, think about where you want to give this money and grant it out over over time.

Bill:   10:18
And just to be clear, Michele, you're saying that so if you put money into your DAF in 2019 it doesn't need to be given out to charities in 2019. The deduction happens from 2019 but you can use that money to support charities in 2019, 2020, 2021. It doesn't really matter, and maybe it does matter. Maybe there's a time limit, but it doesn't have to be on the same year.

Michele Sommer:   10:42
You're right. Bill doesn't have to be in the same year. The only restriction, really is that there's only one way to get it out, and that's to give it to a charity. You can't change your mind and say, You know what? I actually need this to pay for my kid's college or, you know, I want to buy a second home or I just need it for household expenses. You really can only do one thing with it. So the idea is it sitting there and it allows you to give it it out. There's not a rule that you have to give it out at a certain pace, but the general way people approach this is they use it to give out people. People aren't sitting there and looking at this as a long term investment account, it's a vehicle for giving and people use it as that 

Kristin:   11:23
the idea for the PMC rider? For someone like me who is raising money for Dana -Farber is that when I'm asking people for money, they may have these charitable accounts that that they really have to, There's only one way to use the money, which is to donate it. And that could be one way for me to meet my goal.

Michele Sommer:   11:45
You got it so and that And that is the whole point is you never know who has one of these things, and they are becoming more and more common. The I know, for example, at Fidelity. You have to have $5000 to open an account initially, so it's not a small amount of money, but it's not a tremendous amount of money. It's not the same as opening a setting up a private family foundation. So it's not necessarily for the uber rich. But, you know, again, if you had a particularly good year or you inherited money or somehow you ended up just with extra cash, it's kind of a smart thing to do to put this money aside and then know that going forward you're always in that position where you can support these charities. So, yeah, it's a PMC rider, first of all, understanding what DAF is and then understanding that these things have become more and more popular, they're growing by leaps and bounds that that is just a resource for you and your fundraising that you should definitely tap into

Bill:   12:43
Michele I'm so happy you said what you said. I remember when you first explained DAFs to us, the staff, my initial thought was, Well, this is definitely the uber wealthy only Have these? I was thinking it was like $100,000 or something to open one. And that most likely, you know, just a very small percentage of the people that I ask to donate would even potentially have one. But the numbers and maybe you can share some are staggering of how much money, are in DAFs, Um, and how much money the PMC gets through DAFs in in a quote unquote normal year.

Michele Sommer:   13:19
Right? So there are literally thousands of DAFs, DAF accounts out there and literally billions with a B dollars of money sitting in these accounts with nothing else to do but given away, so you know, and again, we have a really nice partnership with Fidelity who happens to be the leader in DAFs, and they just put out their annual report. And they recorded that last year from Fidelity. Terrible doubts alone. This isn't all DAFs from all across the country, but just their DAFs. $7 billion was donated to charities last year. Wow, so and then that is a 39% increase from the prior year. So that just shows you the exponential growth of these these vehicles. The PMC has really been a beneficiary of this, partially because we were early adopter Fidelity approached us back in 2012 with several other charities and asked us to brainstorm with them about creating kind of a DAF widget that could plug in to charities websites so that people could kind of directly go from being on a charity's website, wanting to donate and then clicking through and completing a DAF donation on their Fidelity account. So So we jumped on that, and it turned out to really pay. Huge dividends were in the Boston market, which Fidelity is, you know, a leader in our market. So there are a lot of people that have Fidelity DAFs specifically and a lot of our riders have connections to these people. And again, we've seen tremendous growth. I think back in 2012 when we were starting this, we received about $800,000 in in DAF donations from Fidelity again. Not all DAF donations. And last year we had in excess of $4 million from DAFs. We are seeing,  this amazing growth here and again they're becoming more and more commonplace. Another interesting thing is just like we talked about. The size of the accounts is the size of the donations. The donations could be a small as $50. That's the least amount of money you con donate out of a Fidelity DAF  anyway, Um, and the probably true for most of them, some kind of limit like that, or minimums. But then they could be tremendously huge. We've had actually corporations that used DAFs because again they want a kind of decide when they're giving the money. And they might put some money into one of these DAFs then give it out. So that could be covering, you know, a multi. You know, tens of thousands of dollars of a sponsorship through a DAF payment. So they're really a great flexible vehicle that people use from. I can go on and on about

Kristin:   16:07
from a totally personal side, First of all, my first donation this year came from a DAF. I came from a Fidelity, you know, and and which was when Bill said, This is what we're gonna talk about. I was like, I've seen that so exciting And I have tried in the past a couple of years when I'm doing my fundraising to remind people I basically just pick up the copy out of the different emails in the website that you have to say There are lots of ways to donate. You can do this and you can do this and you can do that. I didn't necessarily entirely understand what I was pasting but sounded good

Sponsor:   16:44
The PMC podcast is supported by Sunday Sports Marketing. Putting your ideas into action at Sundin Sports  dotcom.

Kristin:   17:06
But from a personal standpoint, this sounds like a like a financial planning tool that I could be using cause I have hit that point where it's the end of the year and I want to make some charitable contributions. But I don't feel like I have time to wrap my brain around how to do it. So instead, if I had a DAF, I could just put that amount of money that I want to allocate into the account and kind of think about it later.  

Michele Sommer:   17:30
That's right. I mean

Michele Sommer:   17:31
that is the beauty of and again, you know, You know, I'm not gonna assume anybody's financial, you know, net worth here. But, you know, as long as you've got the $5000 to start your DAF, then once you do that, you can put in, you know, a little bit at a time.

Kristin:   17:48
Can you do payroll? Can you? Sorry. Can you do payroll deductions? Like, With my health savings account, I can have a little bit put into one account and then into my checking. And then I put a little of my savings. I put some of my health savings. I mean, hypothetically, if they're all the same.

Michele Sommer:   18:05
Yeah, I I I don't think so, But I guess I think that maybe you could just even out of your checking account doing on auto pay or something. Yes. I don't know. You know, you could do it through your employer, but

Kristin:   18:17
I'm all about set it and  forget it

Michele Sommer:   18:19
You know you can you know, you can do this. And it is going great for financial planning, you know, and it just helps to, um, give you that ability to always be supporting those charities that you care about.

Bill:   18:31
Michele, is there a secret handshake or something? How would I know who would my donor base as a DAF?

Michele Sommer:   18:38
Right. So you probably don't know. I guess I don't really think that necessarily matters,

Michele Sommer:   18:44
but I

Michele Sommer:   18:44
think he is, too. Put it out there to everybody. And, like Kristin said that the the templates that we use are email templates that all riders to have access and hope they're using have these links embedded in them, which are terrific because they link to the Fidelity DAF. But they also are tagged to your fundraising. So when it goes through the process and that those funds come back into the PMC, they're automatically posted to your account. Um, you know, we've talked a little bit about Fidelity and how that's all integrated, but it's important to remember that these DAFs exists all over the country in all different institutions. So I think it's also important to let your donors know that they can support your ride, my donation from their DAF, no matter where they hold it. And in that case, they're just going to go through their usual granting process, which is probably an online process. And all they really need to do is to make sure that when they make that grant allocation that they reference the PMC. Probably best use our tax I. D number, which is easy to find and then reference your rider name and number. So again, when the money comes in, those will come kind of snail mail as checks, but they should reference the rider name, so we know where to post them, too. But there they're terrific. And again, it's like you just you do never know you never and just like fundraising in general, you really never know who has the capacity give and who's motivated to give. I mean, I'm sure we've all had that experience where someone you know is pretty wealthy, but they don't really give, and you always wonder why. And then you have somebody that you've only had a cup of coffee with once, and they don't really live in the Taj Mahal. But next thing you know, they're sending you a huge check. You really can't good. Being a good fundraiser is never deciding who is going to give and who has the capacity to give its to put out the ask and to make sure the tools are very apparent.

Kristin:   20:41
I was going to say a lot of this comes back to now. My background is marketing and advertising and content. But a lot of this is tone and how you ask and what you say. And, you know, I think we can. I've been slowly starting to do some fundraising, and I've really tried to do it in a way that is cognizant of what is happening in the world and how this piece of for me for how fundraising for me, for the PMC in some way is helping feed my soul at a time when I feel so out of control. But that I also recognized that it's a big ask for some, and I hope that no one takes my requests. as anything other than help if you can give me a thumbs up If you can't, you know it's there's so many ways to help me as a rider, whether it's fundraising or cheering me on or spreading the word or so putting it out, my job is to cue it up so that people can take whatever opportunity they have, whether that's actually giving money or again sharing it or just giving me a high five. They all help.

Michele Sommer:   21:50
That's that's really beautiful. I mean, it really is. Is the point right? I think all of us should always ask that right way right. It's an invitation for someone to be part of something that you care deeply about and that, you know, if this is not a hard sell, it so it If it's if it's not the right time for them or they're committed to other things, it's all good. It's just that you're hoping that they support you emotionally and that you want them to know what you're up to. So and I think that that kind of method is always appropriate. But this year, all the more so when we're trying to be, you know, really sensitive to the challenges that people are facing at this time.

Bill:   22:31
So Michelle just following up and maybe these are obvious points. But I wanna make sure people understand this is a donation to an individual's fundraising. This isn't just a donation to the PMC. Riders use this, as Kristin said, to bring to, hit their fundraising goals and to increase their fundraising. So whether it comes through Fidelity or whether it comes as a check to the office, it will hit your personal fundraising, which is great. And the other part is, and I can only say this so many times, but it's just so important to me. if someone does have a DAF the money's ready in the DAF. So there is this without sounding tone deaf. But there is this sense of you're not asking for checkbook money right now. It is money that is waiting to be given to a charity, Um, and let your friends and potential donors know, that this is what your fundraising for and then use the tone that Kristin kind of mapped out to put the heart behind it.

Michele Sommer:   23:34
It's a great point, Bill, and I think the way I looked at this before we were in the COVID environment was  DAFs are the ultimate rainy day charity fund, and that I always thought of it as on individual level. So again, you know, like I said at the beginning, we've all had you know, leaner years and better years. And having something like this makes you still be able to do what you want to do, even in the lean years. So, you know, if we think about it as a rainy day fund, you know, we're having the rainiest day ever. Yeah, right. We have never imagined ongoing rainy day like this, Um and so really, it takes that kind of idea on an individual level, and you think about it on a societal level, like we're having this super rainy day and we don't know when the rain's gonna stop. But there are rainy day funds out there specifically for charity. And there are billions of dollars in these rainy day funds and thousands upon thousands of people who have these rainy day funds. And everybody wants to help in this at this time, right? It's what we want to do. It makes us feel less helpless. And so, you know, knowing that I think is one more way that we can feel better about going and making the ask. Even in the environment that we're in today

Kristin:   24:55
I couldn't have said it better. I love it. I was writing down DAFs are  the ultimate rainy day fund. I Have my notes. Well, that's awesome.

Michele Sommer:   25:06
Yeah, and I just I can add something else. Which is, I think, for PMC riders  specifically. You know, that's what we already have. Like, such a track record with this that, you know, there are a lot of donors out there that donate to multiple PMC riders. So there could very well be a donor that you know where that you're asking. That's already used their DAF. Maybe not for you, but for somebody else. Um, or they have their DAF. And I think that that again makes it all the easier for PMC fundraiser to access this money because they're donors are used to using this money for the PMC. And, I'm just kind of brag about a few, you know, successes. The PMC has had, you know, a spoke of Fidelity being such a leader in this, and, you know, I think partially because we are a pretty nimble organization and we jump on opportunities, you know, we become a leader as far as recipients of DAF money. So in the again, the latest report out of Fidelity, um, the PMC is number 12 in the entire U. S of A as far as recipients, of DAFs from Fidelity and that's tremendous. And we are the Only regional charity that ranks in the top 20 in the country. And this. We have some pretty cool charities in the Boston area, and there are cool regional charities all around the world, and we are the only one that's not a big national charity that's in the top 20 and we are absolutely the number one in New England of this far as recipients. So again, um, everything's in place. These things people have been putting these money monies in these accounts for years. More and more people set up DAF accounts every year. You know, the PMC is well experienced with these are donors of, well, experience with these. So, you know, if there was ever a time to embrace the idea of DAFs as being a part of your fundraising and like like you were saying, it's it's really no different in your message, and your messaging is still that very compassionate, compelling message that you were that you're making. You really just want to make sure that you include the idea that DAFs work as a way to support you.

Kristin:   27:29
I have no other questions. I feel so much smarter. 

Bill:   27:34
Michele did we miss anything. Is there anything you want?

Michele Sommer:   27:37
No, I think this was fantastic. You know, I don't like talking about anything more. I love DAFs so much that people rightfully tease me about it. I just think they are tremendous vehicle and, you know, I had a crystal ball. I would have said, you know, this is gonna save us in 2020. But I really think DAFs are gonna make a tremendous difference to a lot of charities that a lot of worthwhile causes in 2020. Most importantly for for us, the PMC, but really for all charities that it's going to allow people to support things that they otherwise would not be able to. So So again, I couldn't be a bigger fan. I'm you know, I want to take the show on the road and, uh, go from there. So thanks so much

Kristin:   28:24
I love it when people are passionate about things that you go. I had no idea that was even a thing that is so great. Well, thank you so much, Michele, for coming on and explaining it to us. We will have links on the web site about what a DAF is and how it interacts with the PMC. But, um, there's my

Kristin:   28:45
dog. Perfect.  

Bill:   28:48
Yeah. Thank you, Michele.