Get the Most From Your Nonprofit Investment Advisor

Get the Most From Your Nonprofit Investment Advisor

One of the responsibilities of a nonprofit board is to manage the organization’s assets prudently. Unless you have someone on staff with significant investment expertise, partnering with an investment advisor is a prudent decision.

One of the responsibilities of a nonprofit board is to manage the organization’s assets prudently. Unless you have someone on staff with significant investment expertise, partnering with an investment advisor is a prudent decision.

Your advisor should provide trusted guidance and manage your organization's assets to meet your investment goals. Consider hiring an advisor that is dedicated to working with nonprofit organizations and offers a holistic approach that goes beyond investment management, providing specialized services to help you succeed.

Oversee Assets as a Fiduciary

Acting in a fiduciary capacity means putting the organization's interests ahead of your own which ensures the organization is well served.

Self-Managed Typical Financial Advisor eCIO Investment Advisor
Board and board members assume all fiduciary responsibilities and liabilities

It may be difficult to reach a consensus on key aspects of your investment program
Some financial advisors may act in a fiduciary capacity, others may not

A ‘suitability obligation’ does not meet the same requirements as a ‘fiduciary standard’
eCIO is a fiduciary advisor and always acts in a fiduciary capacity

eCIO recommends specific best practices to guide boards toward strong consensus decisions

Assess Organization’s Needs

Purpose, risk tolerance, and time horizon are key factors in determining asset allocation and investment policy.

Self-Managed Typical Financial Advisor eCIO Investment Advisor
Determined by the board
 
Influenced by composition and individual views of the membership
Often applies a personal wealth management focus to institutional clients
 
Utilizes standard risk/return profiles
Leads a rigorous group risk assessment for boards and committees through a formal survey

Quantifies organization-specific risk, time horizon, and spending parameters

Design Asset Allocation

Asset allocation is critical and typically drives the vast majority of your investment return.

Self-Managed Typical Financial Advisor eCIO Investment Advisor
May be influenced by members’ personal wealth portfolios and outlooks

Lack of data and tools to model asset allocation scenarios
Typically chooses from off-the-shelf models

Frequently has limited ability to customize the asset allocation
Builds a fully customized asset allocation based on risk assessment

Models client-specific asset allocation with both historical data and forward return projections

Establish Investment Policy

A formal Investment Policy Statement (IPS) is critical to a well-run investment program.

Self-Managed Typical Financial Advisor eCIO Investment Advisor
A formal Investment Policy Statement is often missing

It may not be up-to-date or reviewed on a consistent basis
Generally offers a canned Investment Policy Statement

Frequently lacks a review of the goals and performance of investments to ensure needs are met
Designs a customized Investment Policy Statement that outlines clear oversight and succession

Regularly reviews and updates the IPS to ensure relevance and that performance of investments and goals are in line

Select Portfolio Investments

Low-cost, diversified investment options drive a successful investment program.

Self-Managed Typical Financial Advisor eCIO Investment Advisor
Based upon individual board member experience and knowledge

Access to limited investment research tools and due diligence process
May lack access to institutional-quality investment options

Selection process may be biased toward firm-sponsored investments

While investments may be “suitable” they may not meet the fiduciary standard
Adheres to a research and selection process focused primarily on institutional investment options

Seeks the most cost-effective investment strategies

100% independent in selecting investment strategies

Report to the Board

Your board should be well-informed on investment program performance to ensure members are fulfilling their fiduciary duty.

Self-Managed Typical Financial Advisor eCIO Investment Advisor
Typically only custodial statements are sent to staff and select board members

May not have necessary resources to create investment performance reports
May lack performance reporting and appropriate benchmark comparisons

Often provides reports designed for wealth management portfolios and/or are difficult to understand
Provides quarterly video-based institutional account reporting via a user-friendly portal

Evaluates account performance with appropriate benchmarking

Offers dedicated nonprofit investment advisors for consultation to the board

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We're investment advisors for nonprofits. Questions about your investment program?

ASK US A QUESTION

Download a PDF version of this article.

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