Transcription – WCI – 345
INTRODUCTION
This is the White Coat Investor podcast where we help those who wear the white coat get a fair shake on Wall Street. We've been helping doctors and other high-income professionals stop doing dumb things with their money since 2011.

Dr. Jim Dahle:
This is White Coat Investor podcast number 345 – Charitable Giving and Donor-Advised Funds.

Today's episode is brought to us by SoFi, the folks who help you get your money right. They've got exclusive rates and offers to help medical professionals like you when it comes to refinancing your student loans, and that could end up saving you thousands of dollars.

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All right, welcome back to the podcast. We are recording this just two weeks before it runs. It's just after Thanksgiving right now, and it's great to be back with you at this holiday kind of year. One of the things that my mind turns to every holiday season is charitable giving. Not only because it's around the holidays and you're thinking of others, and there's tradition of giving gifts at Christmas time, but also just because it's the end of the year and it's time to sum up a little bit how you've done this year, and maybe ways in which you've been blessed or ways in which you've been lucky and be able to take that and pay it forward to other people.

So, we're going to be talking in this episode all about charitable giving, which is something that's really important to me, something we do each year as a family. And it's one of those things I just feel like those who have been given a lot have a responsibility to pay it forward. That we're really stewards of these resources that we have for the limited time that we have on this sphere. It's not really ours. We're just caretaking it for the next few decades. Whether you think you're caretaking it for God or caretaking it for your family, or caretaking it for the planet, if you view yourself as a steward, you'll feel a little bit more purpose in your life, as you think about your finances.

QUOTE OF THE DAY

We have a great interview today. Before we get him on, I wanted to share with you a couple of things. The first is our quote of the day. This one comes from Maya Angelou who said, “I have found that among us other benefits giving liberates the soul of the giver.” I think that's very appropriate for today.

Okay. I also need to tell you that you need to use your CME money before the end of the year comes and it goes away. The idea here is that we have a lot of great uses for your CME money. It might be coming to the WCICON conference. You can still get a virtual ticket. In fact, you can still come in person if you like. I don't know that you're going to get a swag bag at this point, we'll do the best we can, but no guarantees on getting any sort of swag bag. We can usually get you something, but you're not going to get the full swag bag, but it's still well worth coming.

This is a destination vacation at an Orlando resort paid for with your CME money or in which you can write it off if you're self-employed and you're getting to come and have an awesome wellness experience and get some awesome financial and wellness content. I'd love to see you there personally. I really enjoy this conference each year. You can check that out at wcievents.com.

In addition to the conference, we have courses that are also eligible for CME. Probably the main one is called Financial Wellness and Burnout Prevention for Medical Professionals. You get Fire Your Financial Advisor, which helps you write your own financial plan. And you also get about eight hours of burnout prevention content. Like all of our online courses, there is no risk to you to buy this. There is a one week no questions asked money back guarantee that absolutely does work. And the truth is only about 1%, 2% of people take us up on it because people enjoy these courses. They're really helpful. They're a great value.

We also have our CFE 2023 online course. There's 57 hours of material in it. It's a fantastic value. 22 hours of CME credit. That's awesome. You can use your CME money for that as well, and take that at your own leisure and do it at your own home. If you have an Apple device, you can even listen to them like podcasts on your commute. It's just a great use for your CME dollars. So, check that out.

INTERVIEW WITH ADAM NASH OF DAFFY

Okay, our guest, today's Adam Nash. And if you don't know who he is, you're about to find out. Right now his position is CEO of Daffy, a donor-advised fund, but he is done a lot of pretty other cool stuff in his career. Let's get him on the line here.
Dr. Jim Dahle:
Our guest today on the White Coat Investor is Adam Nash. Adam, welcome to the podcast.

Adam Nash:
I’m glad to be here. Thanks for having me.

Dr. Jim Dahle:
For those who aren't aware, Adam is the CEO of Daffy which is a donor-advised fund company. He's been the CEO of Wealthfront. He's been on the board for Acorns. Lots of experience in this space. But before we get into your career, tell us a little bit about you growing up and what it taught you about money.

Adam Nash:
Sure. I didn't grow up knowing a lot about money. My parents are both doctors in different fields. I probably got my first exposure to money in college. It's funny, I had worked a couple jobs. My first job was minimum wage. I think minimum wage in California at that time was $4.25 an hour. I remember feeling like I worked the morning and then I bought lunch and then felt like I had to work again.

But in college, when I started majoring in computer science, I got my first software internship at Hewlett Packard, and it actually paid more than any internship I'd had before. I remember getting the offer and they offered me like $2,200, and I was like, “Wow, that's a little less than I made last summer, but that's a great offer.” But then they said a month. And I was just like… My head exploded.

I worked all summer, made more than $6,000, and I got back to school. And of course, being the computer nerd, I immediately spent my money on a fancy new computer. I think it was a Quadra 800, which by the way was an amazing computer at the time. But by Thanksgiving, I checked my bank account and most of the money was gone. I was just horrified that I'd gone through what seemed to me like so much money in such a short amount of time.

And so, I started really trying to learn about personal finance, etc. And fortunately, my grandmother, who had been a teacher through her career, had recently retired and she was really into it. I had this woman teaching me about certificates of deposit and mutual funds and all these basic things.

But fortunately, I was still in school so I could take coursework. I ended up going to grad school, even business school. I really give that credit for my passion for personal finance. My senior project in college, I tried to do a better Quicken just to show the era, etc.

But I had other influences. My grandfather was probably the first successful person in business in my family, and I learned some from him, even though he lived on the east coast. I had a few of these influences. You can always connect the dots of your life, but let's just say I've been in personal finance for a very long time, and that probably has a reason why when FinTech became big in the industry, I was excited to jump in and see if we could build better products and services for people with better technology.

Dr. Jim Dahle:
Before we talk about that, I want to hear a little bit about your parents. This is a podcast for doctors. Both of your parents were doctors. Were they good with money or not particularly good? Were they the classic doctor stereotype of being bad with money? What kind of influence did they have on you as far as your thoughts about money?

Adam Nash:
I just want to be super clear. I live about a mile from my parents still. And my father's retired. He was an OB-GYN. My mother is still practicing, she's a psychologist. But I can't give away too much around the money thing because I'll hear about it within seconds. So I have to be careful there.

But no, actually I think I was fortunate, my parents, when it comes to money, never felt like we had so much money that things were frivolous. I remember a lot of debates and discussions, what we could get at the grocery store, what we couldn't get at the grocery store, what was expensive, not expensive. A lot of that ambient education as a child growing up. I'm actually a big believer as a parent, I have four children myself, of actually being very transparent about money and financial decisions even with children at a relatively young age.

I think parents make this inadvertent mistake of hiding money from their children when the world makes it obvious that money's important. They see it out there. And so, when children know that something is important, but you don't talk about it with them, it creates a very strange dynamic. And it can send the wrong messages, unintended messages about money, which frankly is an important part of living a kind of a healthy financial life.

But no, I was fortunate. I didn't want for anything. We had food on the table. I went to good schools. A lot of what I learned from my parents about money was because my father was of a generation where you had a lot of doctors still doing private practice. I think his undergrad was in the 60s. He was a very successful career as an OB-GYN in the Bay Area, and did a lot of good work there. I remember as a child running into, we would go to events and it would always turn out that someone was a patient and happy and had invited him to restaurant openings and that sort of thing.

I remember feeling that that was a big deal, but I think it comes down to the fact that it was still an era where doctors had a deep personal relationship with a lot of their patients, had them for a long time.

My mother, of course, is still practicing, and she's clinical faculty at Stanford. So very accomplished in practice and in research. Mainly what I learned from her was less about money and more just about work and the value that people see in it. And growing up in Silicon Valley with parents who are doctors, it might sound strange, but I didn't have a lot of exposure to the technology industry. I didn't have a lot of exposure to tech until I went to college.

But of course, being a psychologist, you get this exposure to people, some very, very successful. And yet they have their demons. It turns out no one has it easy. Everyone has issues and family members and relationships, et cetera. And so, probably what I learned most from my mother is that there are things beyond money that actually matter. You can have very wealthy people who look successful to everyone else who are not happy. And that probably has affected my balance in my life and my career.

Dr. Jim Dahle:
Which has been a pretty impressive career. You alluded a little bit to your education in going to good schools. Undergrad at Stanford, MBA at Harvard. You've been a CEO of at least a couple of companies, on boards, important administrative positions in other companies. What's been your favorite part of your career so far?

Adam Nash:
Actually, what I'm doing right now is really what I love. It always takes time to figure out what you love. I'm a big believer in careers and finding this combination of at least three things. What you love to do, what you're good at, and then of course, what the world values. And the magic is trying to find that intersection of all three of those things.

I think I was fortunate. When I came out of high school, I was going to college, I thought I was going to do molecular biology. And it was at Stanford that I discovered engineering. I had not really considered that. I discovered computer science. And more importantly, discover this field where actually software in my view is not only an interesting technology by itself, but it's a fundamental piece of infrastructure. It’s a platform. It's a capability to actually make products and services across the spectrum better.

And so, it took me some time. I started as an engineer. I love solving problems. How can we make this run faster, cheaper, etc. But then quickly discovered design and said, “Well, what's the point of making these things run in 30 milliseconds if it takes the user 30 minutes to figure out how to use it?” And so, my first master's degree was in human computer interaction, really focusing on how humans use technology.

But then of course, I got out into the world and I joined Apple Computer and then left there to do my first startup. It went public in 1999. But then as you're in business, you quickly learn what is the point of building these perfect products if you don't build a sustainable business around them? You get to build the 1.0, you never get to build the 2.0 or the 3.0. And by the way, the 1.0s are never great. They call them minimally viable products for a reason.

Actually, I feel fortunate I ended up in my career. But yeah, my career is not so unusual for Silicon Valley, especially given the era that I was going through. I really was fortunate to work with some amazing people. Now you look with 2020 hindsight, when I joined Apple, everyone thought that company was going to go bankrupt. My roommate literally bet me $5,000 that in five years Apple would be bankrupt. It turned out that didn't pan out, for him at least.

Dr. Jim Dahle:
Too bad he didn't bet you $5,000 in Apple stock at the time, huh?

Adam Nash:
Yeah, no kidding. Right. I've actually looked at that original option grant. I think it was a few hundred shares, and how much that'd be worth now after it split something like 56 to one or whatever it is. But no, fundamentally, I got to go through these different eras. I've done startups, I've been in venture capital. It was wonderful in Web 1.0 to be at eBay and help build products and services for the web for the first time. Obviously I thought we could do it better with Web 2.0, and that was a lot of my passion at LinkedIn. And I got to run the core product through the IPO in 2011.

And then FinTech started happening. Actually, it wasn't even a word at the time, but there were more and more founders trying to build great financial services and products and software. And so, I ended up joining a company where I had been an early client, but they ended up hiring me as CEO. I was at Wealthfront for four years, and now I'm doing Daffy.

But for me, what I really love is really using the latest and greatest in technology, all these new capabilities. Technology exists to take things that were expensive and hard to do, and make them inexpensive and just broadly available. And so, now at Daffy, I'm doing that with charitable giving, which is fantastic. But yeah, this is what I love. It's building new products.

Dr. Jim Dahle:
That's a great segue. Today’s topic is charity in general, but more specifically, donor-advised funds or DAFs, and even more specifically, Daffy. We're going to have some questions toward the end, specifically about your company and its product. But before we get there, let's talk about charity in general, and why do you think it's important to give to charity?

Adam Nash:
Well, it's interesting. One of the parts of the process that I love about designing and building new products is you have to talk to people. I have my own opinions and you have to go out. Before wrote a line of code for Daffy, I went out and talked to dozens of people across the country, different walks of life about how they think about giving, how they think about charity.

And one thing that struck me there was just how many people have someone in their life, a parent, a teacher, a relative, a priest, a rabbi, someone who taught them that part of living a good life is going beyond yourself. It's not all for you. It's not all selfish. There are people less fortunate than yourself, and part of being a good person is helping others when they need it, especially if you have the means.

And so, it was very interesting how consistent that was, even though it comes from different traditions and different backgrounds. Not everyone is religious, but it was amazingly consistent. For me personally, it is part of my upbringing. I was brought up that way. I was brought up believing that actually giving is part of leading a healthy life.

But as you get deeper into an industry and into a sector and you understand why people do it, I've come to appreciate how important a role charity plays in our system. We buy goods and services for ourselves. Of course, we pay taxes and we vote for leaders and policies that help people or try to help people in some cases.

But there are just so many gaps, so many holes, so many problems that might be too small for the government to lean into, or so much disagreement that you're not going to get a formal policy in place.

And this ecosystem, in the US there's over 1.7, 1.8 million registered charities in the US alone. Most of these organizations have spotted a need in communities or around causes where they think they can make a difference. And it's a combination of people who have the resources to support that mission, and people willing to spend their days, their hours, their time, actually helping in some way or some form.

And so, to me, it's not just about charity in general. It's that entire ecosystem, that idea of people giving up money or time that could be used selfishly and applying it to something that they believe in. I think it turns out to be a very important part of the system, not just financially for people, not just in how they live their life, but really about how we work together as a society. So, yeah, probably pretty obvious, but I think charity is very, very important.

Dr. Jim Dahle:
Yeah. I was looking at a charity this last week. It focuses on making mosquito and distributing mosquito bed nets to prevent malaria. And the estimate was that it took about $1,200 to save a life using these bed nets. And I think about my work in the emergency department, I can't save anybody's life for less than $1,200. This is incredibly cost effective for saving lives. And so, I just look at a lot of charities and just see my money can go so much further in actually doing good in the world than anything else I'm doing. And that certainly motivates me to give.

Let's talk a little bit about the giver. I think there's some significant benefits for the giver when they give to other people, whether those are registered charities or not. What benefits do you see givers get from giving?

Adam Nash:
I think there's a wide range. And it depends who you are as a giver. I'm a parent. And so when my wife and I decide to support an organization, support a charity, whether that's through volunteer work or I'm on the board, or by donating money, I'd like to think it sends a signal to our children about what we value. Actions speak louder than words. And so, as a parent, I often think about that and not just about myself, but the family I'm raising and building together with my wife.

But I think personally, there's a reason why a lot of ethical and religious traditions build charity and giving into their fundamental structure. I do think it's very hard. The world is a tough place. Getting out of your own problems, your own issues, your own fears, your own ambitions is a hard thing. And I think charity has this wonderful way of pulling you out of that. Sometimes just for a moment, sometimes broader.

But as I've become involved with more organizations, there's also personal benefits. You connect with the people who support that organization, not just donors. When you volunteer, when you work, the people who work there, the people you work with, the people who just care about things that you care about. And so, there's just so many benefits. Whether they're social, whether they're personal, etc. But that's how I think of, and this is some of the benefits that I've personally received from giving over the years.

Dr. Jim Dahle:
Yeah. One of the things I love the most about giving is the message it sends to your psyche. When you give money away, it sends a message to your psyche that you have enough. Because we've constantly got this message coming from the world that you need more, something terrible can happen, inflation can go crazy and you have got to have more.

But giving money away is basically telling your id, “No, you've got enough. You don't need more.” And I think there's some value to that as well as far as boosting your own happiness.

As I've talked to people, I find that very few have any sort of giving goals. They've got these savings goals. They've got investing goals and all these things, but they just kind of give willy-nilly. Why do you think that is? Why aren't people more consistent when it comes to giving?

Adam Nash:
Oh, I love this question. I love this issue. I'm not sure if you know this, but when Daffy was born, when it was new, I wrote this post about the generosity gap, because I come from the personal finance world to some extent. Obviously, my background at Wealthfront and Acorns. I teach a class at Stanford, personal finance for engineers the seventh year.

And so, I tend to think of giving and came at it from a behavioral finance standpoint. And so, the research is very clear, by the way. If you set a goal for something, you automate something financially, you're more likely to hit it. And it turns out there's even research that suggests this is true for giving. There's a research paper from 2006 that suggests if people set a goal for their giving, they end up giving 32% more.

And so, the question I ask is, “What would that mean in the US?” Individuals giving in the US is almost half a trillion a year, and over 300 billion of that is from individuals. But can you imagine if we all gave 32% more because we set a goal? That'd be an extra hundred billion a year. That's more than a trillion dollars over a decade.

And so, that's actually what we designed into the product at Daffy. It was one of the first questions we ask you is, how much do you want to give to charity? Every year, how do you set a goal? We know that people would not be successful or as successful saving for retirement if they didn't set some sort of goal. Any financial goal, college saving, etc, I think it's a groundbreaking and fundamental shift for more people to embrace the fact that giving is also a financial goal.

If you think about it, giving is two hard problems. On the one hand, you have to figure out how much can you afford to give, and then the second problem is, who do you give it to? And so, when we started Daffy, we saw a lot of people focused on that second problem, but very few focused on that first. And this is a place where I thought the product could help, you could build a better product.

I know this is not what donor-advised funds do, or they don't normally do as a product. Most firms treat that as just an account, a tax advantage account. And that's great. But we said, no, we can help people be more generous. In fact, that's our mission, to help people be more generous, more often.

We think that setting a goal is fantastic. It's fantastic for you personally. I've now talked to dozens and dozens of people about this. When you set a goal and you put money aside for giving proactively, then when a charity comes along, a cause, something you believe in, you're not solving that first problem. The money is already there. You've already said, “This is for giving, this is for charity.” And you can really focus on that second problem, which is who do you want to give that money to?

And we hear this from our members at Daffy. It's phenomenal to be able to pull out this app on your phone, open it up when you're inspired to give, and the money's already there. And the question is just giving, just do it. And we try to make that as easy as possible.

But yes, I think everyone should have a given goal of some sort. It can be simple. People have different frameworks for it. In our product, we've built a number of different calculators. Some people want to do it as a percentage of income. Some people like it as absolute amounts. Some people just like beating their goal from last year. It's just like, “What did I give last year? Maybe I can give a little bit more this year.” Whatever your system is, we think it's amazingly important for everyone to think about how much they want to give.

Dr. Jim Dahle:
I'm curious. I imagine you've jumped into this data pretty deeply. What does the data show? When are people more likely to give more or less, or not at all? Is it connected to times of year or economic situation? What influences people to give more or less?

Adam Nash:
Well, I wish the data was actually better in this regard. It's not studied as deeply as you think it should be, or I think it should be. But we have seen in the data some insights. First of all, there is definitely a time of year impact. We celebrate Giving Tuesday. You have kind of Black Friday, Cyber Monday, and then you have Giving Tuesday. But it does show, the research shows that between basically the end of November and then December 31st, about 30% of donations are made. It's amazingly large amount. So there clearly is a time of year that people lean into it.

Dr. Jim Dahle:
Yeah. No surprise to me. All my givings are in end of November, beginning of December.

Adam Nash:
It's a weird combination because you've got three things working for you. A lot of nonprofits like schools actually really get going in the fall. There's a certain time of year there. Of course, you have the holidays, which inspire people. And then it turns out in the US at least the tax system really is between January 1st and December 31st. And so, there's an added pressure there. And I think that's part of it.

But if you really want to get down to what inspires people to give, the most compelling data I've seen shows that over 85% of donations end up being made because someone else asked you or inspired you to give. We actually designed this into some of the Daffy products. That's why we describe it not just as an app, as a service, but also as a community.

One of the things I think we don't do enough with our friends and our colleagues and neighbors is actually talk about the causes and organizations that we support. So many people want to support things, believe in things, but they haven't spent the time where they don't trust their own judgment about, “Well, who should I give this to? How do I find them?” And we all know these experts in our networks who know a lot or care a lot about different causes, etc.

And so, one of the things we hope and we design at Daffy, we ask every donor at Daffy, “When you make a donation, we give you the option to leave a public note. Why do you support this organization?” And wow, let me tell you that content, it's some of the best that I've ever seen on the internet, and I've been doing this a long time. It's human. It’s heartfelt. People supporting an organization saying that they had a loved one who passed away from this disease, and that's why they support this organization. They're fighting for a cure. Or there's a community center that's been a part of their family experience for generations and they support it every year.

The biggest takeaway I'd say is if you really want to get the heart of why a lot of people give, it is a social dynamic. When we see other people giving, it inspires us to give. When we see people so moved to help others, it reminds us that that's part of our lives too. And so, if you want big numbers on inspiring people to give, that's the biggest one I've seen. 85%.

Dr. Jim Dahle:
I think another factor that comes in toward year end giving is people know how they've done for the year and they can kind of get a sense of “I've had a good year. I can afford to give more.” It's easier to total that all up in December than it is in March, for instance.

Do you get a sense that when the economy is down, that people give less because they have less, or that they give more because they see more need around them?

Adam Nash:
I think both things happen. And it's very interesting. I will tell you, being a founder and designing new products is always humbling in a number of ways. And one of the ways it's humbling is you talk to all these people about how they think about the problem and you discover you don't have one clear answer.

And when I talked to dozens of people about giving in the very, very beginning, one of the disappointments was I found out that there is no one consistent model how people think of this. There are people who almost traditionally think of it as a percentage of income, whether it's high or low, a certain percentage should go to charity. There are others who see it as kind of an absolute amount. I should give at least this much to charity every year. I support these three organizations. These are the right amounts to give them. I give that amount every year.

But then there is another group that thinks like you do, or at least that you're implying a little bit of this. Well, there are good years and not so good years. And when you have good fortune, you should share that good fortune with others.

And so, I definitely think that when the economy is down, that impacts people in a number of different ways. This is a budget issue for a number of people. Some people do give more. This year we're running campaigns at Daffy around food insecurity and food banks across the country, because actually the food banks are seeing donations down this year even though the need is higher.

Honestly, this is one of the reasons I think the donor-advised fund is such an underappreciated product. The great benefit about putting money aside is that it's actually there for you when you need it to give. And we see this pattern in our members. When you've put money aside in an account, and even if you do that in the good years, that means you have the money to give in the not so good years.

And so, it's been very interesting on Daffy is we definitely see contributions to the funds vary with the stock market, with the economy, all these different things. But what's been wonderful to see is that for the members who have these funds, donations don't vary that way. And in fact, what you alluded to, they seem to give more when the need is higher because they have the money put aside. And that's something that we all know. This is why you put money aside for retirement or for your kids' college savings or for other goals that are important to you, saving up for a house or to start a business. I think giving is the same thing.

Dr. Jim Dahle:
Yeah. I've described this concept of putting money aside, which you use very positive terminology to describe it. I've called that move at times the jerk move because you're getting your tax break for putting it in the donor-advised fund but no charity is actually getting any money to help the charitable cause. Do you see a negative with people just putting money in donor-advised funds and not distributing it?

Adam Nash:
Well, I can understand the concern. I don't think the data actually supports that people do this, to be clear, at least they don't do it on average. Most of our members at Daffy, for example, have relatively small accounts. They support three to five charities a year. They put aside hundreds of dollars to support them, and they mostly put the money in every year that they give.

But I think it's a valid concern. It's one of the reasons we spend a lot of time encouraging people to give. It's actually one of the reasons we have the business model that we do, not charging a percentage of assets.

Listen, I don't want to get into an argument or push back and forth, that sort of thing, but I will tell you, the research is very, very clear. I think the bigger danger than people putting money aside and then not giving it is just the basic fact that if you don't put money aside, the research shows you're going to give less. It's just like any other financial goal.

Our goal at Daffy, our mission is to help people be more generous more often. We're always thinking how we can help people be more generous. The research is really incontrovertible. Getting people to make that first decision, I'm putting this money aside, and now it cannot be used for any other reason than go to charity. It doesn't matter. Your favorite team gets in the Super Bowl, can't use it for that. New restaurant opens up, can't use it for that. By putting money aside for charity, I think that step is underappreciated for how much it guarantees that that money will flow to those organizations.

And by the way, most organizations you talk to, and I've been on the board of a couple, will tell you that they're not looking for a one-time donation. What they're looking for, they have an operating budget. They need to run that organization. That cause isn't going away. They need help every year.

And so, when I see people put money aside, like you said, in a good year, you have a good year. Maybe you give a few hundred dollars, a few thousand dollars to charity every year. Fantastic. If a donor-advised fund lets you put aside 2, 3, 4, 5 years’ worth of money upfront, have it invested tax free. And so, now you set up a recurring donation and you're supporting that organization every year. I will tell you, getting those recurring donations is one of the top priorities for most nonprofits that I talk to. And I don't see how you do that reliably if you don't put money aside for it.

How many people would save for retirement effectively if that 401(k) deposit didn't automatically come out of their paycheck? I think in this case, the benefits outweigh the cost. But I understand the concern, and I think it's good that people ask these questions. It forces a lot of institutions, which frankly from their business model have a lot on the table for basically warehousing assets. I think it's good to keep the pressure on them and remind them that their goal is to get that money to operating charities and not just to collect a percentage of assets under management every year for doing nothing.

Dr. Jim Dahle:
I meet with my kids, my wife and I, we meet with our kids together every first part of December and select the charities we're going to give to for the year. And we spend a lot of time teaching about the importance of giving and that sort of a thing at that meeting. Both the spiritual roots and the personal benefits of it, as well as the good that these charities do. I'm curious how you teach your kids to be givers.

Adam Nash:
Well, fortunately, my wife and I care about this. We've chosen to send our children to some wonderful schools that actually build giving and charity into part of their curriculum. I talked about this when I started Daffy. One of the inspirations was my children, one of the traditions at my kids' school was that all the kids on Fridays would bring in spare change. They'd grab it out of change buckets and dishes, put in a little piggy bank every Friday, and then once a quarter, the whole class would vote on which local organization to give that money to. It's such a simple thing.

And the “aha” moments, like why do we teach our kids to put money aside for charity, but we don't do it as adults? As a parent, you always are worried looking for hypocrisy. Am I teaching one thing but doing another?

It's very important to my wife and I, but this was part of the inspiration of why we built Daffy for families. I realize that no other donor-advised fund does this. This isn't something you find at Fidelity or Schwab or Vanguard, but every service in technology has a family plan now. Netflix has one, Apple has one.

I have teenagers now. The number of requests I get from Amazon are not small from my teenagers. And so, we designed it in. All four of my children are actually on my plan at Daffy. Every time we make a donation, they get an alert on their devices about who we gave to. And it starts those dinnertime conversations.

And by the way, if they have an organization they want to propose giving to, they can make a request. And then my wife and I get that request and we can talk about it. We can accept the request and they can see the impact of their actions.

By the way, their siblings can see it too, the whole family. We actually designed the family plan to not just support nuclear families. You can add up to 24 people. We see people adding grandparents, parents, siblings, nieces, nephews, cousins. And that's because like I said in the beginning, I think that giving is more important than just the financial task. It's a chance to teach a way of living, a way of thinking. That is really powerful. At least that's the approach that my wife and I take. And of course, now that Daffy has a family plan, we use that pretty actively.

Dr. Jim Dahle:
What are your thoughts about non-charitable giving? Friends, family, random individuals that aren't registered charities.

Adam Nash:
Listen, I think it comes from the same place, or at least one of the core places, which is getting outside your own selfish needs and helping others. And I see that all the time. I grew up in Silicon Valley. A lot of immigrants are in Silicon Valley. A lot of people who are the ones in their family who made it big. They came to the US joined a great company. Maybe it's a Google, maybe it's an Apple, whatever. They send money home. Is that charity? It's not a 501(c)(3) but that's obviously a powerful thing to do.

You see people help others. Food, time, a blanket. They volunteer. It doesn't have to be for formal organizations. I think all of these come from the same place. I do think that there is value in organizations being formed and building something sustainable that can help people year after year.

The one off acts of kindness, I think are wonderful. I don't think there are a replacement for having a system in place to help people on an ongoing basis. But I think all of these methods of giving have a place. And one of the reasons in the Daffy product that we emphasize people over just dollars or donations is because we actually think that at its heart, that's what people really get motivated by. Is people. And that's not limited to any tax code regulation. That's not limited to any one specific type of charity. I think that's more of a general thing of people wanting to know what they can do to have impact on causes or issues that they care about.

Dr. Jim Dahle:
Would you feel comfortable sharing what some of your own personal favorite charities to donate to are?

Adam Nash:
Sure, although I don't think they'd be super surprising. There are organizations that I support every year and I have supported with my wife for decades. Obviously, kids schools and that sort of thing. Supporting education is a big thing for me. I was on the board of the Palo Alto Jewish Community Center. I think building centers for the community to come together of the whole Palo Alto community it's a really valuable thing to do. And every time I visit and see just hundreds of people or thousands of people gathered there who otherwise wouldn't be connected. Senior citizens living in housing, kids going to preschool, busy adults working in a workout. I'm really inspired by community.

Right now I'm running a campaign around food insecurity. Supporting Feeding America. We actually have a campaign up on daffy.org. But like I said, this year, 2023 has been a rough year for a lot of people. It's been a good year for a lot of people. But we all know that there's a lot of variance there. And even in Silicon Valley, which is a very wealthy area in most regards, there's more people than ever who don't know where their next healthy meal is coming from. And so, I'm actually running a matching campaign right now where I'm matching the first $10,000 donated to Feeding America through the platform. It's one of the ways I use my donor-advised fund to help inspire others to give.

Dr. Jim Dahle:
All right. I think we've inspired a lot of people that maybe weren't givers before to give and hopefully people who already give to maybe give a little bit more today. Let's get into some nuts and bolts here. First of all, we've been referring to these donor-advised funds without ever actually defining them. Almost all of my giving is now via donor-advised fund. But can you explain briefly to the audience what is a donor-advised fund?

Adam Nash:
Yeah. The easiest way to understand a donor-advised fund is just to think of it as being part of this family of tax advantaged accounts for different purposes. Most of us know what a 401(k) is, or an IRA is, an individual retirement account and it's a tax advantage account for retirement. A 529 plan is a tax advantage account for saving for college.

A donor-advised fund, these accounts have been around for decades, more than 70 years in the United States and are available in most countries. But the basic idea is it's a tax advantage account for charity. You can take money or you can even donate stock or other assets. You put it in this account, you get that immediate tax benefit, you get that charitable deduction and then that money is invested tax free. And then anytime you actually want to give that money to an operating charity, the donor-advised fund sends the money over.

And it's useful in for a whole wide range of features and capabilities. But for most people, I think it's just easiest saying like, “Hey, if giving to charity is something you do regularly, it's good to put money aside in an account for that.” And in the US, a donor-advised fund has a lot of tax advantages. It's the right type of account to use for that purpose.

Dr. Jim Dahle:
Yeah, I think one of the best tax plays out there for those who give is to simply take your appreciated shares, your stocks, your mutual funds, these shares with the lowest basis, and use those for your charitable giving instead of cash. You can transfer them into the donor-advised fund and it instantly liquidates it and invest that however you'd determine and then distribute it to charities. But neither the donor-advised fund, nor you, nor the charity pays any capital gains on it. So, it's a huge tax benefit there. You also, if you're itemizing, get a charitable deduction for it. So, a big benefit there. Actually up to $500 now I think you can get even without itemizing.

Adam Nash:
Yeah, that's correct. And I'm glad you brought that up because most people don't realize that. The truth is I've been very aggressive about this and I just read a great piece from Felix Salmon on the same topic about how if you're writing checks to charity, if you're giving money to charities in cash, you really are missing out on a phenomenal tax benefit because most of us, whether you invest in individual stocks, index funds, ETFs, even crypto, if you have held an investment for more than a year and you have a gain there, you actually also have a liability. Whenever you sell that, you will end up paying taxes on that gain. And donating those shares instead is a phenomenal benefit because not only do you get that charitable deduction for the market value of the investment, but you never pay the capital gains.

And the beauty of it is, even if you want to keep that investment, let's say you have Apple stock and you're very bullish on where Apple's going to go in the future. I don't know where Apple is going to go, but let's say you are, some people don't want to donate that stock because they say, “Well, I think it's going to go higher still.” But the truth is, if you were going to give cash to the charity anyway, you can donate the Apple stock and then just use the cash to buy back the Apple stock and reset your cost basis higher.

Dr. Jim Dahle:
Yeah. There's not even a 30 day wait period.

Adam Nash:
There's no wash sale.

Dr. Jim Dahle:
Yeah. It's not even like tax loss harvesting where you have to wait 30 days. You can do it right away.

Adam Nash:
Exactly. Literally, I spend so much of my time at Wealthfront on teaching people about what tax loss harvesting was and then direct indexing, etc. But you don't have to worry about that here. And the problem is it's very hard to donate stock or other investments to most charities without a donor-advised fund. And that's because out of the 1.8 million or however many charities there are in the US, only a few thousand are set up to take it.

And by the way, you may not want to give all that stock to one charity. The donor-advised fund actually just solves that problem. You contribute the stock to the donor-advised fund. They can handle it, of course. You give to Daffy, we handle it just fine. It's invested. And then we get cash to the nonprofits for them.

And so, it's easier for the nonprofit, it's easier for you, and best of all, you can do it anytime you want. If it's December and you're worried about your tax bill for the year, and by the way, I know you said you have a lot of doctors in the audience. If you are a part of a small business, there's always that motion of making sure you don't have excess profits in the business. But you probably support nonprofits. You can open up a donor-advised fund, put that money aside, get that tax benefit, and then have the money to give to all the organizations to support possibly for years. It’s really an amazing benefit.

Dr. Jim Dahle:
Two of my favorite benefits of a donor-advised fund. One is that now you only have one receipt for the year, just the one from the donor-advised fund. You don't have to keep track of all these receipts of all the charities you give to.

The other one is that it has eliminated charity porn from my mailbox. And what I mean by charity porn are these glossy brochures that Doctors Without Borders sends to you once you donate to them. It looks like it costs $10 to produce this thing. I don't want them, I don't want them. I want my money going toward what the charity's doing. I don't want them to spend my money marketing to me to get more dollars. And I love that I can give anonymously. They don't know who I am. And so, they don't send me charity porn and it's dramatically reduced how much of that shows up in my mailbox.

Adam Nash:
I should have talked to you before we built the initial version of Daffy because it's been one of my big surprises. I told you being a founder is humbling in some ways. The two features you just mentioned, I hear about from everyone about why they love Daffy.

One is they don't have to do whatever search it is. Some people print out charity receipts and they have a folder on their desk. Other people do these Gmail searches at the end of the year panicked to try and find the receipts. Taking that off the table and just knowing that anytime you want, you can open up the app, get a PDF, or even we give a spreadsheet if you want of all your charitable contributions for the year. People love this. That problem just goes away.

And then of course, the second one you mentioned, which is control over communications. Is it anonymous or do you want to make the donation but not give them your email address or not give them your physical? These are the things that people want control over. I feel for the nonprofits. Nonprofits really do have a hard problem. They do have to reach out to people to raise the money they raise. I'm hoping that with platforms like Daffy that problem will go away over time.

But you're right, those two features are really crowd pleasers. When people get a donor-advised fund for the first time, they go, “Wow, this is so much better to actually have a system for my giving.” It's one of the reasons we're convinced at Daffy that once people try it, they'll stick with it. Most people who open donor-advised funds, they don't just keep them for years. They keep them for decades.

Dr. Jim Dahle:
All right. Well, let's move into the rapid fire portion since time's getting short. But I've got a number of specific topics that I've gathered from the audience, specifically about Daffy. So let's go through a few of these and see if we can get answers to people's questions.

Adam Nash:
All right. I mostly through my coffee. I can do it.

Dr. Jim Dahle:
Yeah, yeah, exactly. One of the things people really like about Daffy is the app, but the app is only for Apple products. When will there be an app for Android users?

Adam Nash:
Oh, as soon as we can do it. Honestly, there's no part of our philosophy. I think like a lot of startups, a lot of small organizations, you just can't do everything, so you have to start somewhere. And it does turn out. We thought one of the big differentiators for Daffy was having a native app, which is when we launched, we were the first fully functional donor-advised fund in the app store.

By the way, that tells you something about technology in this industry that in 2021 we're the first app you can do this. And then quickly we realized that actually a lot of people seem to want to do their giving from the web, either mobile or desktop. Actually a surprising amount of desktop activity. A lot of people doing it in the evenings, on the weekends, etc. And so we put a lot into our web product.

And so, I'm a little embarrassed and upset that we don't have a native Android app yet. I promise you we will eventually. But I also tell you that as a new product and service, we keep learning. We've rolled out so many innovative features in the first two years. And there is a problem in software development that the more platforms you try to support, the harder it is to do any one new thing or change the product because you have to change it everywhere.

And so, I will apologize to everyone. We do try to make our mobile web experience excellent on Android and test it for that, but I realize that that's no excuse and that's not going to make Android users any happier. But we will do it, I promise.

Dr. Jim Dahle:
All right, next topic is the search function for the charities. When you actually look up charities on Daffy, people say it's not as slick as on Fidelity or Vanguard. Do you expect that to be improved anytime soon?

Adam Nash:
Yes. This one you have to understand, hits me right here. You have to understand, a lot of my original patent work, if you go look at eBay when I was more on the product side was in search. I was very proud of the search engine we built at LinkedIn. This idea of people search was not really a concept before LinkedIn. And I'm really proud of what we were able to do there over time.

And actually my co-founder was one of my favorite engineers on that team who I worked with. So, we actually care about search to a terrible degree. In some ways I feel like that's probably working against us. We've tried to do more clever things in the search engine. For example, you just type an EIN, a tax ID number comes up. We try to use location. We even have nearby a number of other things, but it turns out to be a tough problem to do the right way. But we are constantly improving and working on it and we want it to be great. I'm not sure I would describe the other search engines as even search engines or great, but that's no excuse. We spend a lot of time on this. We will keep spending a lot of time on this.

Dr. Jim Dahle:
All right, let's talk about fees. The pricing of Daffy is pretty darn cheap, particularly for those with a large donor-advised fund. At $100,000 in the account, Vanguard would charge $600 a year with their 0.6% AUM fee but Daffy would charge no more than $240 a year and possibly as little as $36 a year. How can you afford to stay in business that way? Are you making it up somewhere else with higher investment fees or lower interest paid on the cash in the account? And what is really the cash option at Daffy anyway?

Adam Nash:
Yeah. Well, there's a lot of questions in there and it's funny. Every technology company I've worked at, every startup, LinkedIn, I can't tell you how many people are like, “How are you ever going to make money?” LinkedIn made over $15 billion last year. I think they're doing fine. Wealthfront, the same thing. So, I appreciate the concern.

There's really two answers to it. One is, I'll actually tell you part of this is about the technology. The truth is it's not fundamentally that expensive to run a donor-advised fund anymore, especially if you're using technology intelligently. And so, we're actually very comfortable with our pricing and the value we provide. This is not some sort of loss leader. Like most businesses, it does require some amount of scale. We're building Daffy to be a place where not just thousands or tens of thousands of people can put money aside for charity, but hundreds of thousands or millions.

Acorns, which I was on the board of for over six years, they now have millions of people using that app and service to help them with their financial lives and people pay a regular membership fee, a regular subscription fee every month to fund that business. And so, that was some of the inspiration for Daffy.

But long term, we actually do see other revenue opportunities, other ways to make money for this business. And so, we're very proud of the fact that we tried to launch with clear, transparent pricing from day one. I cannot tell you how many people I've talked to. You just gave the Vanguard pricing. By the way, Vanguard has a $25,000 minimum on the account, which often doesn't also get mentioned.

But across the industry, most people don't know what they're paying for a donor-advised fund. I've talked to people who are paying thousands of dollars a year in fees for their donor-advised fund, and they'll say things, “Oh, I think it's free because I have my business with this banker, with this brokerage.” And I'm looking at them like, “It's not free. You just can't find it on the statement where you're paying those fees.”

Anyway, I think that we were very proud of our pricing and the transparency. It's very interesting. Pricing is never perfect and you always get people who are asking about different things. But our actual focus was to build a platform that was sustainable for everyone. Like I said, most of our members are the type of people who put aside thousands of dollars for charity, not tens of thousands, hundreds of thousands.

Our smallest accounts, our minimum contribution, I think is $10. And we have accounts under $100. We make Daffy free if it's under $100. But we also have accounts that are now in the millions and even some that are in the eight figures and everything in between. So, we try to support everyone's level of giving if we can.

Dr. Jim Dahle:
The last question there was the cash option. When you just choose the cash, what is that invested in?

Adam Nash:
Oh, that's a great question. Actually, that's about to be updated. I'm not sure where is this aired. It may be updated already by the time this goes live. Right now, our cash account is very interesting. When we launched Daffy, we launched for this set of portfolios range of low cost, globally diversified portfolios of Vanguard funds. We have ESG portfolios from BlackRock, and we even have crypto portfolios for people who believe in that technology.

But what we discovered is that there's actually quite a few people who don't want their money at risk. They're putting money aside for charity, they're going to give that money to charity this year. They don't want any volatility at all. And so, our cash option was originally really designed for them. The cash is just in a Wells Fargo account. It's not an interest bearing account, it's just held. And that's fine for some people.

We are going to be updating that and upgrading that with an option that has a money market fund that pays a more market rate of interest because we have gotten a lot of requests for that. And so, we'll be rolling that out. We also have conservative portfolios in inflation protected bonds, set up for people whose big concern is protecting from inflation. But we're always looking to add more investment options.

One of the great things we did at Daffy is we built this flexible backend. It's a brand new platform. And so, we have a lot of flexibility on what investment options we can offer to our members. We just base it on what requests we get from our members and we have to prioritize that versus other features that we're building.

Dr. Jim Dahle:
Yeah, this is a selfish question for me to ask because I'm one of those people that just leaves it in cash because I mostly clean out the DAF every year. But I put a lot of money in there and it sits in cash for months. And so, it's a big deal if I'm sitting in a Vanguard federal money market account making 5% versus Wells Fargo at 0%. I'm more than making up my fees just by having a better cash option. Do you know what money market fund you're planning to use?

Adam Nash:
I don't have that offhand with me. I didn't realize we were going to get this question, so I don't want to get the detail wrong.

Dr. Jim Dahle:
No worries.

Adam Nash:
But it's a money market fund that's yielding between, I think it's not quite 5%, but it's in the high fours. But yes, I think we get this request quite a bit. And so, we're going to be adding that option. We're also going to be adding some more conservative portfolios that have different types of bond portfolios, etc, to give people a range of flexibility.

Like I said, it's very interesting to me. Most of our members actually like the diversified investments in the portfolios. Our most popular portfolios tend to be the diversified global portfolios of Vanguard index funds. They're low cost, it’s properly diversified. I don't need to sell that basic idea.

And they like the idea of their money growing over time, especially people who put more than one year's worth of giving aside. They like that idea that their money is still growing because they see that money as eventually going to charity. But like you, we get a lot of members who they don't want to put that money at risk, but they also want some return on that money, or at least they want a fair market return. And so, I'm pretty sure by the time we air this, that actually those will be live, but if not before the end of the year, we'll have those new conservative portfolios available.

Dr. Jim Dahle:
Some people have griped about the fact that for the two mid-tier plans, one's limited to just $25,000 or $50,000 in transferred security value as a lifetime limit rather than an annual limit. Do you have any plans to change that?

Adam Nash:
The short answer is yes. And this is once again, as a founder humbling, pricing is a difficult subject for any business for any platform. And for us it was actually a pillar. We see one of the fundamental problems with the donor-advised fund industry is the fact that their business model is based on a percentage of assets. If you put $100,000 in a Fidelity charitable account and then you give $10,000 away, it's true. Fidelity's revenue just dropped 10%.

And you even asked earlier about warehousing assets, etc. I think all these organizations are filled with good people but these incentives matter, especially as organizations scale. I tell founders all the time that they need to think carefully about their business model because in the long term, that drives the prioritization of the business.

For us, having flat transparent pricing is very, very important. But it's never perfect. And by the way, we're really young. I think the reason some of those things are lifetime is, let's be honest, I'm wearing the birthday shirt. Daffy is just celebrated second birthday. And so, when you're only a year or two old, lifetime doesn't feel like that long. And so, I think we kind of took a shortcut there of trying to make it simple.

I will say that in general, for the different plans, you described them as mid-tier plans, but we really see the benefits of the service as not just being a low cost service. It was never our goal just to build the lowest cost donor-advised fund. We want to build a platform that's actually better for giving. One of those tiers you're talking about is the family plan. What's the value of the family plan? Well, it's perfect because not only you can add your spouse to it, you can add your children, like I said, siblings, other family members.. And then of course, at the highest tier, the ability to add your financial advisor if you have one. There's a number of features there.

But I hear the concern. We're actually thinking about pricing for 2024. And so, I will say from now that don't expect that the lifetime issue is one that'll be there for very long. We're just trying to figure out the right way to price the thing while still sending the right message around this idea that we have clear, transparent flat rate pricing without diving into where the industry kind of already is, which is pricing based on a percentage of assets.

Dr. Jim Dahle:
I love what you're doing with Daffy, but as you mentioned, it just celebrated its second birthday. It's not exactly the household name that Vanguard or Fidelity or Charles Schwab might be. What do you see as the risks of that to those using the donor-advised fund?

Adam Nash:
Well, hopefully the risks are minimal. Whenever you're making decisions with money, it's fundamentally a trust decision. And I take that very seriously, and I know that there's a lot of people who may look and say, “Hey, give them a few more years. We'll see how this plays out. They may have tried that service before that doesn't come out.”

But this is one of the reasons why we try to build trust by sharing with people who the people are involved in this business, how it runs, how it makes money. The truth is with a donor-advised fund we have it in our member agreement, but it's very, very easy to move your money to another donor-advised fund.

Actually, we benefit from this quite a bit. If you have money at Fidelity, at Schwab, at Vanguard, we appear in their list of grants. And by the way, you don't have to move over the whole account. If you just want to try us out, you can move a few hundred dollars or a few thousand dollars or whatever you want to Daffy just to try it. And so, it's not an all or nothing decision for most people.

I think that in general, we've done everything we can to try and build that trust, our custodians. We're not holding the money. We have cash at Wells Fargo. We use firms like Apex Clearing for securities. We use Coinbase obviously for the crypto.

And so, we try to use trusted institutions where we can. Our financials are also publicly audited, third party audits and our taxes are filed publicly. We just completed our 990. I've never been a part of a startup that does a third party audit this young, or actually makes their taxes public.

We do everything we can to share with our members what we're doing with the money and how we're running the business. But I think it's good that people think about this, and take it seriously. And I know that my team takes it seriously.

Dr. Jim Dahle:
Yeah. Now at Daffy you have to select one of the 13 prebuilt portfolios. Are there any plans to change that to allow people to roll their own portfolio?

Adam Nash:
Well, the short answer is, there are regulations around donor-advised funds. You have to remember that fundamentally from a regulatory standpoint, when you contribute assets to a donor-advised fund, the reason you get that charitable deduction is you actually are donating those assets to the nonprofit. Daffy.org, Daffy Charitable Fund is a registered 501(c)(3). It's a nonprofit organization.

And so, in the end, the government basically asks that donor-advised funds take responsibility for all the assets being invested properly. We can't just let numbers pick and choose stocks or whatever they're going to invest in, et cetera. It has to be part of a cohesive investment strategy for the whole organization.

That being said, we're very excited about offering more investment options and giving people more flexibility. It'll just be within constraints, in terms of what types of portfolios you can build.

Actually, one of my surprises in building Daffy, you have to understand my background. I love the investment piece. There are so many things that we could do on the investment side. Surprisingly, it hasn't been one of the top requests from our members. We have a small number, we're excited to do it. We're excited to build more options for them.

But for most people, what they care about is can they find the charities that they're doing, they care about features like the family plan. We have our new campaign feature where people can run campaigns for organizations that they care about. We've invested in those based on what our members request.

But in the end, I'll say, no, we're never going to let people pick and choose stocks individually, but giving you more flexibility to define your portfolio, where you want your charitable money invested, or at least what you're recommending to us. Absolutely. We're going to do a lot more of that in the coming years.

Dr. Jim Dahle:
One of the more interesting things about Daffy is that it came of age in the crypto era. And I'm curious about the decision to put crypto on the platform and any risks you see to non-crypto investors as a result of that decision.

Adam Nash:
I don't see any significant risks to non-crypto investors once again. From our point of view, remember, our mission is to help people be more generous more often. And it turns out that there are a lot of people who actually believe in crypto and believe in the future of those investments, or they previously have invested and now want to donate that to charity. We have received millions of dollars in crypto contributions.

In fact, one of our very first donations on the platform was after we launched, a member in New York wanted to give a Bitcoin to their congregation. A religious congregation. And of course, the synagogue didn't take crypto, didn't know what to do with Bitcoin. And he read our impression, he said, “Oh, I get it. I give the Bitcoin to Daffy and then Daffy will get the money to the congregation.”

And so, we see a lot of that on both ends. We see a lot of people contributing crypto, but then investing it in traditional portfolios. We also do see some people who say, “Listen, I don't have a lot of money, but I'm going to invest this money in my charity account. I'm going to put it in crypto because I believe that's going to be high, and that'll give me more money to give.”

From our perspective, we really have a bias towards doing anything that helps people be more generous. And so, if by supporting crypto, we get more people putting money into donor-advised funds so that money goes to charity. If we get more people contributing crypto, we see that as a net win for charity overall and forgiving, which is why we do it. But remember, those portfolios are all separate. If you're invested in the Vanguard portfolio, you don't have an overlap in any way, or at least not directly with any of the crypto portfolios. So, we don't see any significant risks there.

Dr. Jim Dahle:
Like you, I like getting into the weeds on the investing portion as well, and I went through your portfolios kind of in detail. I thought it was interesting that in your conservative portfolios, the only bonds there are TIPS, and in the standard portfolios, the only bonds there are nominal bonds. I was curious what the thought process was behind that decision.

Adam Nash:
Yeah, as usual, it's two different decisions. And like I said, I'm hoping by the time this airs, we have more fixed income options for people. So, hopefully this is a short-term issue. But each one was responding to member requests. When we designed the original portfolios, we did use diversified bond portfolios, low cost index funds across. And in the standard portfolios, we used Vanguard funds for people who wanted to invest in ESG ETFs. We did that there, but we stuck to basically globally diversified portfolios of fixed income, just like we did for equities.

But what happened is as interest rates went up, and as then inflation became a bigger concern, we were getting more and more members saying, “Hey, I want a portfolio that's protected from inflation.” And so, we added the inflation protected bonds just as a quick way to make sure that people say, “Well, listen, if your big concern is protection from inflation, the government makes a security for that. They have inflation protected bonds, and that's why we added them.”

But I'll be the first to admit, there are more great fixed income options that we could add to the platform. And I'm hoping by the time people listen to this, we have them live for everyone. But that's the background on that decision.

Dr. Jim Dahle:
Well, you've been very generous with your time today, and I appreciate that, but I wanted to give you a chance. If there's anything we haven't talked about yet that you think our audience ought to know, I wanted to give you a chance to tell them.

Adam Nash:
Yeah. Well, I think the shortest I say, it's about Daffy, but it's around charity and giving in general. I think that giving is more than just one thing. I think thinking about a donor-advised fund purely as a financial account is not giving due credit to how important giving is. And charity is to most families, most people. And at the same time, just giving and reaching into your pocket whenever someone asks is not a structured or rewarding way to live a more generous life.

And so, what we're trying to do at Daffy is really solve both of those problems. We're trying to design a platform in giving. There's all these great products out there. On the health side, there's all these meters and measures to help you do the right thing every day. You can measure your sleep, you can measure what you're eating, you can measure your workouts. I love fitness, so I love these apps and services.

In FinTech, we have all these great apps and services to help people spend better, save better, invest better. Daffy is trying to help people give better. And so, if you haven't tried it, I would highly encourage you. If you are the type of person who gives to charity, you give to your kids' school, you support a religious institution, a church, a synagogue, if there's a national or global cause you support, I would encourage everyone, whatever platform you're using is to set a goal for your giving, put money aside for charity in a donor-advised fund and be more generous, be more consistent about your giving.

And of course, if you want to try Daffy, I think that's fantastic. We're a low cost service. We have options that no one else has, like the family plan. Even our new feature, campaigns. Any organization, your kid's school, your church, your synagogue, they're doing a fundraiser. You can do a matching campaign anytime for them over your donor-advised fund. And all the match comes from your donor-advised fund. Really groundbreaking.

And so, I just encourage anyone listening to give it a try, go to the App Store, download Daffy, or it's as simple as going to daffy.org. And if you get an invite for us, I'm happy to provide one to your listeners. We'll even give you $25 to give to the charity of your choice once you fund the account.

Dr. Jim Dahle:
Awesome. If you send that over, we'll certainly include that in the link in the show notes. Daffy.org is where you can learn more about Daffy. Adam, thank you so much for what you're doing with your life. Founding Daffy is awesome. You should be very proud of what you're doing.

Adam Nash:
Listen, it's early days, but it's been one of the most rewarding areas to work in my entire career. So, it's been a delight.

Dr. Jim Dahle:
Awesome. Well, thank you for coming on the White Coat Investor podcast and I hope you have a great day.

Adam Nash:
Thanks.

Dr. Jim Dahle:
All right. I hope you enjoyed that interview. Daffy is one of these companies. They're not a sponsor by the way. We get paid nothing by Daffy. Vanguard Charitable doesn't sponsor us. Fidelity’s DAF, whatever it is, doesn't sponsor us. Schwab's DAF doesn't sponsor us. We don't have a DAF sponsor. If someone wants to sponsor us, I guess you'll hear more about them.

But I don't think there's a lot of money in this space. It's a little bit like the HSA space. There's just not a lot of money there. And so, we don't see a lot of sponsoring going on. The only HSA sponsor we've ever had is Lively. He's a great choice. I wish I could talk Fidelity into sponsoring us with their HSA, but they don't.

So, anyway, no real conflicts of interest here with this episode. I know there was a lot about Daffy, and of course, he's the CEO of Daffy. It's his job to promote the company. And you heard a lot about Daffy. I think they're a pretty great donor-advised fund. Mine is at Vanguard Charitable right now. It does have some downsides. The minimum grant is $500 and there's a minimum amount you can put in there. At the beginning, you got to put $25,000 in it to start. So, that just doesn't work for a lot of the audience that they're marketing Daffy too. You can start Daffy for free if you put less than $100 in there, but I'm like, “Why am I going to bother opening a financial account for $100?”

But the cool thing about Daffy is no AUM fees. Even Vanguard charges an AUM fee in their Vanguard Charitable DAF. It's 0.6% is what it starts at. I don't know, I think that's like the first half million or something. 0.6%. A lot of us are do-it-yourself investors, and we wouldn't ever want to pay 0.6.

Now, it's true that the tax savings there is probably offsets some of that fee. And if you don't leave the money in there very long, you're not paying 0.6 on it very long. I tend to liquidate my DAF pretty quickly after I put the money in there each year. So I don't pay that very much. But it's pretty cool. These guys just charge a flat fee. You could have $10 million in your donor-advised fund and still, what would you be paying? $240 at Daffy. Pretty awesome. And the expense ratios aren't bad either.

Now I pressed them a little bit on the cash question because right now their cash isn't paying anything. If I put $100,000 at Vanguard, it's in the Vanguard Federal Money Market Fund, it's paying the donor-advised fund $5,000 a year. And sure, there's a $600 fee each year for having that money in there, but come on, you're making more than that with the cash. I'm glad to see they're adding a money market fund in there for those of us who use these things like I do. That'll help make it continue to be what is probably the cheapest donor-advised fund out there.

So, pretty cool company. I'm pretty proud of him for what he's doing. It's really a great thing to be doing. I kind of grill people with some of the questions I give them, but this is really something to salute to have started a company like that. It's pretty awesome.

SPONSOR

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Thanks for those of you who've been leaving us five star reviews and telling your friends about the podcast. It really does help a lot. A recent one came in from somebody who titled it Titanic Rage, and said, “Wish I'd found this sooner. Cannot recommend highly enough. This podcast provides accurate, relevant information in an accessible way. It has saved me thousands already, and will save me so much more throughout my investing life.” Five stars.

It reminds me of an email I got last week from a two doc couple who said they estimated that the knowledge they learned from the White Coat Investor will be worth about $5 million to them over the course of their career. And I don't think that's an underestimate at all. And when I multiply that by the hundreds of thousands of people who have been by the White Coat Investor website over the last few years, it's pretty exciting to think about the amount of value we're adding to this community. That's so important to me.

Thanks so much for what you do. Keep your head up, your shoulders back. You've got this. We're here to help. There's a whole community here of doctors who have done this, and you can too. See you next time on the White Coat Investor podcast.

DISCLAIMER

The hosts of the White Coat Investor are not licensed accountants, attorneys, or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.

Transcription – MtoM – 148
INTRODUCTION
This is the White Coat Investor podcast Milestones to Millionaire – Celebrating stories of success along the journey to financial freedom.

Dr. Jim Dahle:
This is Milestones to Millionaire podcast number 148 – Nurse practitioner hits a quarter million dollars.

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All right, welcome back to The Milestones to Millionaire podcast. This is your podcast. We bring on you and your successes and use them to inspire others to do the same and to reach their goals.

This financial stuff is a single player game. It's you against your goals, but it's still nice to hear about how other people are doing what they're doing and to use their experiences to inspire you to keep it up because it takes time to reach most important financial goals and a little bit of inspiration along the way goes far.

If you'd like to come on the podcast and share your story, you can apply at whitecoatinvestor.com/milestones. We've got a guest today that's reached a net worth milestone. We'll bring them on the line shortly. But stick around afterward. We're going to talk a little bit about some of the pathways available through the military that may help you financially while you're serving your country.

INTERVIEW

Our guest today on the Milestones to Millionaire podcast is Aaron. Aaron, welcome to the podcast.

Aaron:
Thank you. I appreciate being here.

Dr. Jim Dahle:
Tell us what you do for a living, how far you are out of school, and what part of the country you're in.

Aaron:
I'm a family nurse practitioner. I specialize in infectious disease. And I also on the side work at a psychiatric facility doing the medical side of things. I am about to be four years out of school in December, and I live in Atlanta.

Dr. Jim Dahle:
Atlanta. Okay. Very cool. All right. Well, we got a unique milestone. We've done lots of net worth milestones in the past. I don't know that we've ever done this particular number. Tell people what you just reached.

Aaron:
My current net worth, and this is without real estate, but it's $250,000.

Dr. Jim Dahle:
Pretty awesome. Pretty awesome. And what do you mean without real estate? Do you have a house or you got some rental properties? What do you got?

Aaron:
I have a condo and then a single family house that currently is used for a short-term rental.

Dr. Jim Dahle:
Okay. A lot of value in neither of those besides the debt on them or no?

Aaron:
About $100,000 for the condo in equity right now. And the house is probably $60,000.

Dr. Jim Dahle:
Okay. You're pushing $400,000 plus in net worth just a few years out of school. That's pretty awesome.

Aaron:
Yes, I appreciate it. I try to keep the real estate out to give me that push. If I see the lower number, I have that push to save more.

Dr. Jim Dahle:
Yeah, for sure. It might not be as accurate though. You're probably got to count the real estate. Sometimes it's hard though. The difficulty with stuff like that is it's a liquid and it's hard to value, so I totally understand why you leave it out. It's like trying to value the white coat investor as a business. Well, today nobody is interested in buying it, so it's not worth anything.

Aaron:
Right.

Dr. Jim Dahle:
But tomorrow somebody gives me an offer for it, maybe it's worth something. So, that makes it hard as well. Not as difficult to do that with a typical property as it's with a business, but I totally understand your difficulty. Okay. Well, this is pretty awesome. How'd you do this? What kind of money are you making?

Aaron:
Between my two main jobs, probably $180,000 right now. When I first came out of school it was about $115,000 and that's gone up with my main job. So that's getting closer to $140,000. But then I picked up that side job doing admission physicals and medical visits at the psych facility to make up that difference.

Dr. Jim Dahle:
What was your net worth when you came out of school?

Aaron:
It was about $80,000 I want to say.

Dr. Jim Dahle:
Okay, $80,000. So you had something.

Aaron:
Correct. Yeah, about $80,000.

Dr. Jim Dahle:
Where did that come from?

Aaron:
Over time I was in the military for four years, so during that time I saved up a lot of money and invested when I was overseas for some time.

Dr. Jim Dahle:
Okay. What did you do in the military?

Aaron:
I was a healthcare specialist, so better known as a combat medic.

Dr. Jim Dahle:
Combat medic. Okay. Very cool. Well, thank you for your service.

Aaron:
I appreciate it.

Dr. Jim Dahle:
All right. But still even with that little jumpstart, I'm assuming coming out of the military you didn't have any debt either. You have G.I. Bill or something to pay for school.

Aaron:
Correct. When I got out of school, I went and got my bachelor's in nursing first and then my masters. I received my associates while I was in so all of my education was debt free. That of course helps with the net worth.

Dr. Jim Dahle:
Yeah, you didn't have to start in a negative hole like a lot of people. But still, even when I look at the numbers your net worth encompasses about half of what you've made the last few years.

Aaron:
Yeah.

Dr. Jim Dahle:
You're putting a lot of money toward building wealth.

Aaron:
Correct.

Dr. Jim Dahle:
What percentage of your income do you think is going toward wealth building?

Aaron:
This is bad to say but I don't know the exact percentage. What I can say is almost all of my second job income is going towards investments. I haven't figured out the percentage of it, but just trying to invest as much as possible.

Dr. Jim Dahle:
Is there anybody else in the picture? Is there a partner or spouse or kids or anything?

Aaron:
No, I'm single and no kids.

Dr. Jim Dahle:
Okay. All right. So, we got some explaining to do. How have you done this? Tell us what your tips are, what your secrets and strategies and techniques are to be building wealth so quickly?

Aaron:
I think what helps for sure is during COVID I saw everything I have in the stock market increase, which has helped. I would say one of the biggest things is probably that I have an older car. I drive an older Honda, 96 Honda Accord.

Dr. Jim Dahle:
Yeah, that's older.

Aaron:
Yes, correct.

Dr. Jim Dahle:
You're making my car look brand new.

Aaron:
Yes, yes. I got that while I was in school, planned to get a new car after and it just didn't happen. What I was seeing going into my investment accounts, I couldn't justify getting a car payment. I started out doing, I would say like $400 biweekly into my S&P 500 brokerage fund. And then that's increased now to about $600 every two weeks and whatever extra I'm making in the side job going towards that. I also mentioned for my second property. That's on Airbnb. Some of the income from that as well, I invest.

Dr. Jim Dahle:
Very cool. You're making real sacrifices to invest money. You're driving a 96 Honda. That is not a nice car.

Aaron:
Correct.

Dr. Jim Dahle:
How do you feel when this money that you have not spent on a new car and invested instead trying to do the right thing when that goes down in value, say in 2022? How do you feel?

Aaron:
It's very emotional looking at those numbers. I was looking a few times a week during that time seeing the numbers change, but I pushed myself to only look once a month now to make it not so emotional. Listening to a lot of podcasts and different things, I've just learned that this is part of the ebbs and flow of the market. I know that eventually will go up like I saw earlier this year.

Dr. Jim Dahle:
Yeah. What do you invest in?

Aaron:
I have VTSAX through a broker brokerage fund with Vanguard for my just brokerage fund. Then I have a Roth IRA with Vanguard as well. That's in a target date fund.

Dr. Jim Dahle:
Somewhere you got the motivation to work hard, earn well, save, invest, build wealth. Was that from your upbringing or did something happen to you or where did that motivation come from for you?

Aaron:
I would say as far as the hard work, my parents, both of my parents. My father worked two full-time jobs for most of my childhood and my mother worked hard as well, but they really didn't save anything. They very much lived paycheck to paycheck and I just remember being young thinking I didn't want to live that way. I had some friends that just seemed like they were better off or taking nicer vacations, had nicer houses and I kind of wanted that. I really don't know how it started, but when I was 16 and got my first job, I saved almost everything and at that time I actually started watching Suze Orman as a junior in high school and that kind of kick started things.

Dr. Jim Dahle:
Okay, can I afford this? Those are her famous segments, right?

Aaron:
Correct. That was my favorite part. Yeah.

Dr. Jim Dahle:
Yeah. Everybody loves that. Maybe we got to start doing that on the podcast. People will call in and ask about their latest Tesla purchase.

Aaron:
Right.

Dr. Jim Dahle:
Well, the problem is the big part of our audience is relatively high earners, lots of docs, et cetera, and a lot of times they can afford it. They just can't afford everything they're doing. If they just pick one of those things they can.

Aaron:
Correct.

Dr. Jim Dahle:
All right. Well, what advice do you have for someone that's just like you? Maybe they're not the orthopedic surgeon making $800,000 a year. Maybe they're a nurse practitioner, maybe they're a dentist, maybe they're a physical therapist married to an occupational therapist. What advice do you have for somebody like that moderate income earner that wants to be successful like you?

Aaron:
I would say it sounds really simple because I hear this a lot, but delayed gratification. That definitely is getting me where I need to be. Like I said, the biggest thing was the car, holding off and not getting a new car. But even with my condo, I was able to save. I didn't put quite down 20%, but about 15% down on my condo. I could have done that earlier, but I really wanted to save and have lower payments. But definitely delayed gratification.

Dr. Jim Dahle:
What advice do you have to somebody else that wants to get into the short-term rental business?

Aaron:
Oh, that's good. That was not easy and not something I thought actually I would do. I would say what helped me, which was pretty simple, was watching a lot of YouTube videos for people who have already done it. Through that I learned about a local Facebook group where people were getting rid of their Airbnb so they would give away a lot of furniture at a bulk price. So little things like that I learned along the way.

I would say with that too, it's a big investment in the beginning, but once you get stuff up and running and have a good set of cleaners, mine is a household, lawn care and things, once you have that in place, you really make your return. The beginning is a little rough.

Dr. Jim Dahle:
Very cool. Later this week, this week that we're recording, it's not the week that it runs, I'll be speaking at PIMDCON. My talk this year is on entrepreneurship. And there's really three categories I put people into. You can just go and work and work your shifts, save a good chunk of your money, invest it in some reasonable way, a bunch of index funds, whatever, and just slowly build your way to wealth. And then at the other end of the spectrum is this. Go out, be an entrepreneur, do something nobody's ever done before with this new idea you have and build a business, whatever. Who knows, it might be super successful, it might not.

But in the middle is this sort of thing like what you're doing. It is a business, yes, but it's a proven business. It's a business that's reproduced all over the country every day that other people are doing, that you can learn how to do, that if you just follow the formula, it's eventually going to work in some reasonable way. And some franchises are like that. Real estate investing tends to be like that. But it tends to generate a little bit more income and a little higher returns than just boring old totally passive investments.

What made you decide to take that kind of half step into entrepreneurship rather than trying to come up with something totally new and start a new business nobody's ever heard of?

Aaron:
Right. I'm actually someone I never was interested in entrepreneurship. I always wanted to be an employee. I just thought it was easier, show up and do my job. My favorite part of my job is patient care. I never wanted administration or anything outside of that. But getting the second job, at one point I did have three jobs, the main and two side hustles. And it was just taking up so much time and I was there nights, weekends. I knew I couldn't sustain that, but I still wanted that income coming in, so I just had to make that decision. As you said, this is something I already established, not something I came up with, but what are other people doing?

I actually listened to an episode you had about side hustles and some other stuff on YouTube and I just thought, “Okay, this is something I can do.” In full disclosure, I've used my VA home loan, so that allowed me actually to get that house with no money down. I was able to purchase that, have it for some time, and then be allowed to use it for a short term rental. It all fell into place.

Dr. Jim Dahle:
Was there a regulation on how long you had to live in it before you could turn it into a rental?

Aaron:
Yes, it's a year.

Dr. Jim Dahle:
A year. Okay. Very cool.

Aaron:
Yes.

Dr. Jim Dahle:
All right. Well, what's next for you? What's going to be your next milestone? When are we going to see you on this podcast again?

Aaron:
That's a good question. I think eventually my goal is more real estate. I'm from Connecticut originally and there's a lot of multifamily there. So I see maybe getting that in the future. Probably like a five year goal. My big overall goal is by 40, I'm 32 now. By 40, I would like to be able to retire. Not that I want to, I would go probably part-time, but just to have that option.

Dr. Jim Dahle:
Pretty awesome. Well, congratulations to you. You've done fantastic. You should be very proud of yourself and I want to thank you personally for coming on this podcast and inspiring others to do the same.

Aaron:
I appreciate it. Thank you very much. It was nice working with you.

Dr. Jim Dahle:
All right. I hope you enjoyed that podcast. There's another person coming from a situation where they weren't given a lot of money when they left home. They weren't necessarily given great examples or a whole bunch of financial literacy, so somebody that had to learn it on his own. It's amazing what you can learn with Google and YouTube. He has learned how to run an entire short-term rental business. He has learned to accumulate wealth. All this stuff he's learned on it.

You too can learn how to become financially literate. We've got lots of resources here at the White Coat Investor, but we're not the only place in the world that has resources to help you become financially literate. It pays huge dividends. It will allow you to have a lot less stress in your life. You'll become a better practitioner, partner, parent, et cetera by becoming financially literate and you'll be able to help a lot more people. It's just far easier to help people from a position of strength than a position of weakness.

FINANCE 101: PATHWAYS WITH THE MILITARY

Speaking of strength, there's a lot of strong people in our military and there's a lot of great options for your career that involve the military. The military is actually having a lot harder time now and especially in the next few years recruiting docs for instance.

They have made public service loan forgiveness so attractive and so easy to get the people that are looking at the health profession scholarship program or they're looking at the military medical school USUHS and going, “Well, that seems a lot harder than public service loan forgiveness.” So it's starting to affect recruiting. That might cause there to be bigger bonuses for those of you who are serving in the military, but it might cause some shortages as well and make you all work a little bit harder.

There's a lot of great pathways though. I have long thought a great route for a career is for someone to join the military at 18, have the military put them through school. This happened all the time when I was in. Techs would be going through nursing school while they're enlisted the first few years in the military, then they commission as an officer.

And by the time they hit their 20 year mark, they're 38 years old. They're probably a major, they've got a nursing degree and then they leave the military and go on and have a nursing career for another 20 years while collecting a military pension. Not only are they not going to debt, they didn't waste any time because they're getting paid the whole time for 20 years and saving money the whole time. And they come out with this valuable degree, a valuable career and a pension. They've got healthcare paid for the rest of their life. At 38 they're collecting retirement checks every month whether they work or not. And considering a lot of docs don't even get out of residency until they're mid-30s, I've always thought that was pretty awesome.

But another great route is what this gentleman has done. He went in, he served for a few years enough to qualify for the G.I. Bill. He let the G.I. Bill pay for his schooling. Instead of coming out owing $150,000, he came out with a net worth of $80,000 and hit the ground running, which I think is a great way to start a career.

There's other options as well. The Reserve has programs, the Guard has programs, both of which try to attract doctors. And even if you don't go through any of that, you can sign up for the military as a resident. I think it's the FAP program is what they call it.

Once you've already eliminated the risk of having to go through the military match and not getting what you want, you can sign up as an attending and they'll give you signing bonuses. If you're willing to serve, they would love to have you the vast majority of the time. If you qualify, you're below a certain age and they're pretty lenient for docs. But if you're below a certain age, you can still go in and oftentimes they'll bring you in as a major or even a lieutenant colonel if you've got a lot of experience.

So, you can do a lot of cool stuff with the military. Not to mention stuff that really is only done well is the military. Things like dive medicine that you can do in the Navy and some of the aerospace medicine you can do with the Air Force and the Navy and even the Army that's just not as easy to do outside of the military. Consider those pathways for your career. Consider them for your mentees, for children. Sometimes the military is the right route for somebody.

SPONSOR

This podcast was sponsored by Pattern. At Pattern we help thousands of doctors learn about the importance of disability insurance. We understand that this is something you need to check off your list. We're here to help you obtain the right policy at the right time. Thousands of doctors have trusted us with their financial future and we hope you will too.

Here's how our simplified process works.
1. Request your quotes
2. Compare your options in a short meeting with one of our expert sales advisors.
3. Buy risk-free.

So, request your quotes today at http://www.patternlife.com/wcipodcast

All right, we've come to the end of our podcast. I'm sure glad you're here. I hope this is meeting your needs. Send us suggestions if you don't like what we're doing. If you want to come on the podcast, whitecoatinvestor.com/milestones. We appreciate you telling others about this podcast and helping spread the word. Thank you so much. Keep your head up, shoulders back. You've got this.

DISCLAIMER
The hosts of the White Coat Investor podcast are not licensed accountants, attorneys, or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.