GoFundMe is refurbishing a little-known financial tool in a bid to supercharge everyday giving

NEW YORK — GoFundMe CEO Tim Cadogan had some complications while fundraising on his own website last fall.

Several friends wanted to help Cadogan reach his $28,000 goal as he crowdfunded for a Los Angeles area wilderness rescue team. But they tried to donate through a lesser-known wealth management tool called a donor-advised fund, or a DAF, a no-frills investing vehicle for money earmarked as eventual charitable gifts. After cutting checks and waiting three weeks, Cadogan said, the money finally arrived.

''It was just a bit of a thing,'' he added. "If they were using a Giving Fund, it would take ten seconds.''

Giving Funds are GoFundMe's latest in a flurry of product rollouts with the purported goal of moving stagnant U.S. charitable contributions beyond the 2% GDP mark where totals have long hovered. But the for-profit company's DAF, announced Monday, enters a crowded market of more than a thousand providers — products often with older, wealthier clienteles that are often criticized for warehousing gifts.

To transform the way that everyday users plan their donations, Cadogan will have to widen the appeal of DAFs beyond the likes of the technology entrepreneur's circles. And he wants to change public perceptions of his company as just a crowdfunding site.

''We're also hopeful that more people will start using GoFundMe for a broader set of things in their lives: not just that one fundraiser they're supporting, not just that one nonprofit. But they're coming in and they're managing their giving portfolio with us and through us,'' Cadogan said. ''That connects directly to our mission, which is we want to help people help each other.''

A DAF boom — but for whom?

Donor-advised funds grew popular over the last decade among ultra-high net worth individuals as a tax-efficient instrument for grantmaking without the hassle of a more sophisticated charitable foundation. Donors can immediately write the contribution off on their taxes but face no deadline for giving the money to a nonprofit.

The idea: account holders could invest money they wanted to ultimately donate, let the funds grow tax-free while they sit and give themselves time to identify the recipients best aligned with their giving goals.

There's since been a rush to court average givers. Legacy financial services firms such as Fidelity Charitable lowered the minimums to open accounts. Fintech startups such as Daffy contrast their flat fees with the hidden expenses they allege their competitors charge. All that traction brought IRS proposals last year to impose penalties on those who abuse DAFs and Congress has considered legislation that would require some deadlines for disbursements.

GoFundMe's Giving Funds will have no minimum balances, zero management fees and donations starting at $5. Users can load their DAF through their bank accounts or direct deposits for free. Credit card payments will be covered through the end of the year and then face the company's standard transaction fee of 2.2% plus 30 cents. Contributions can then be invested in a choice of exchange traded funds from managers including Vanguard, Blackrock and State Street Global Advisors.

Cadogan pitches Giving Funds as a way to be more intentional about giving — something he said user feedback suggests more people want. As he sees it, widespread adoption hasn't occurred because DAFs have been framed as ''wealth management products.''

''This is a giving product,'' Cadogan said. ''It's something for everybody. And you don't need to know the words ‘donor advised fund.' It doesn't show up.''

Moving the needle

DAFs remain scrutinized for allowing donors to reap tax benefits before they ever redistribute any money to charitable causes — even if the notion that the channel is being exploited is fiercely debated in the nonprofit sector. Opaque disclosure requirements make it difficult to put a number on the overall assets held within the funds. The National Philanthropic Trust placed the total at more than $250 billion in 2023.

Cadogan believes GoFundMe's culture is uniquely suited to nudge users with targeted spotlights of the 1.5 million charities already active on the platform. Giving Funds holders will be peppered with information about local nonprofits, crisis responders, their friends' charities of choice and potential beneficiaries that address their selected issue areas.

That ''dynamic, alive community'' is very different from the ''fairly static, passive'' financial vehicles in the current market, according to Cadogan.

''It's essentially inspiring the money to move,'' he said.

Other features seek to encourage contributions by simplifying things. Users can set annual giving goals by a percentage of their income or a fixed number. Their gifts will tally up in real-time records to track their progress and ease year-end tax planning.

Streamlining the process was one area for improvement identified in the DAF Research Collaborative's recent survey of more than 2,100 donors. But Jeff Williams, one of the researchers, said DAFs are currently hitting the ''sweet spot of convenience and connection to nonprofits.''

The challenge for any new player, he said, is that it's a competitive environment with many different options. Plus, he added, many DAFs already are ''available-to-everyone vehicles" considering that half run balances under $50,000.

''Givers are voting with their feet that DAFs are increasing with popularity. More options are generally better,'' Williams said. ''Anything that makes sure we maintain or enhance the ease of giving, it makes me happier.''

But Direct Relief CEO Amy Weaver, previously the CFO at Salesforce, described GoFundMe's entrance as ''a game changer'' that could unlock additional funds. Direct Relief, a nonprofit that supplies free medical resources worldwide, reported receiving more than 18,000 DAF gifts totaling $116 million over the past five years.

Weaver acknowledged DAFs have been traditionally used by those with more substantial wealth. But she encouraged people to view them as a ''savings account" for "good works."

''And GoFundMe, with its name familiarity and the fact that it really attracts people making smaller gifts, I think could be incredibly powerful if they can bring DAFs to that group of people,'' she said.

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