One of the board's key responsibilities is ensuring funds are managed responsibly and prudently. This typically involves selecting an advisor who can guide the board and help them fulfill their fiduciary duty—ideally, a co-fiduciary.

1. Understand the Different Types of Investment Advisors

Before selecting a pool of advisors for consideration, it’s essential to identify the appropriate advisor for your organization. Hiring an experienced advisor specializing in working with nonprofits is ideal since they add more value to your organization.

Fiduciary VS. Non-Fiduciary Advisor

One of the first considerations is recognizing that advisors fall into two categories: fiduciaries and non-fiduciaries. A fiduciary advisor must always act in your organization’s best interest. Non-Fiduciary advisors may be incentivized to select one course of action over another rather than base decisions solely on what’s best for the organization.

Institutional VS. Private Wealth Advisor

The second key issue to consider is the practice focus of the advisor. Institutional advisors focus primarily on working with organizations and their oversight groups -  typically boards or committees. Private wealth advisors usually work with individuals who don’t have the experience or know-how to guide boards through meeting their fiduciary requirements.

2. Find Qualified Investment Advisors to Interview

Once your group knows the type of advisor they would like to consider, the second step is to identify a pool of qualified candidates. This typically involves issuing a request for proposal (RFP). The RFP gives your organization a systematic way to evaluate potential candidates. Generally, an RFP will include questions in the following areas:

• Organization Background and Ownership
• Employees and their Experience
• Investment Philosophy and Process
• Performance Reporting
• Assistance with Investment and Spending Policies
• Fees

3. Select Finalists Investment Advisors to Interview

When you have a pool of qualified candidates, evaluate their responses to the RFP and select two or three for your board or committee to interview. Use this opportunity to assess items that were not included in the RFP, such as:

• The advisor’s experience and commitment to working with nonprofit organizations
• Ability to clearly explain and educate the board or committee
• Access and availability to your organization’s needs
• Additional services and benefits that the advisor offers
• References and examples of other nonprofit organizations the advisor works with

4. Engage a Nonprofit Investment Advisor

After interviewing the top candidates, compile the insights and present them to the broader board for a decision-making vote on engaging an advisor.

The chosen investment advisor will be instrumental in drafting necessary policies and documents, devising a tailored asset allocation, and formulating a resilient investment strategy in various market conditions. This strategy aims to meet your investment objectives and timelines.

Let eCIO’s Nonprofit Investment Advisors Help!

At eCIO, our investment advisors, who act as fiduciaries, partner with nonprofit organizations nationwide. Our specialization in nonprofit sectors enables us to craft customized investment and endowment plans that cater to the distinct needs of your board.