The Alternative to an RFP: A Simplified Approach to Selecting Your Investment Advisor

The Alternative to an RFP: A Simplified Approach to Selecting Your Investment Advisor

While some organizations issue an RFP for investment services, that process can be time-consuming and complex. This guide lays out a more efficient alternative that involves interviewing a select group of advisor firms to make your decision.

Hiring an investment advisor for a nonprofit organization is a critical decision that involves specific considerations due to the organization’s unique financial goals and responsibilities.

While some organizations issue an RFP for investment services, that process can be time-consuming and complex. An efficient alternative is to schedule interviews with a select group of two or three qualified advisory firms. Opting for this method streamlines the selection process, reduces the time investment significantly, and provides a dynamic process for interactive questioning, thereby facilitating the evaluation of each firm’s compatibility as a collaborative partner. It’s a good idea to include your organization’s key stakeholders in the interviews to ensure a comprehensive perspective in the decision-making process.

Some of the key items you will want to consider when meeting with potential advisory firms include:

  • Experience With Nonprofits: Seek investment advisors with experience working with nonprofit organizations. They should understand the regulatory and governance requirements, as well as the unique financial challenges nonprofits face.
  • Fiduciary Duty: Ensure that the advisor agrees to adhere to the fiduciary standard to act in the best interests of your nonprofit. This is crucial for maintaining transparency and avoiding conflicts of interest.
  • Investment Approach and Philosophy: Discuss the advisor’s investment philosophy, risk management strategies, and how they tailor their approach to nonprofit organizations. Ensure their strategies align with your organization’s investment objectives and mission.
  • Experience With Similar Organizations: Consider advisors who have experience working with nonprofits similar to yours in terms of size, mission, and financial structure. They are more likely to understand your specific needs and be a sounding board when financial questions arise in the future.
  • Communication and Reporting: Evaluate the advisor’s communication style and reporting frequency. Ensure they can provide clear and regular updates to all your stakeholders on the performance of your nonprofit’s investments.
  • Help With Drafting Governance Documents: Your advisor should be able to help you draft or update your governance documents to ensure your program is compliant. These documents include, Investment Policy Statement, Committee Charter, and Spending Policy
  • Fee Structure: Evaluate the advisor’s fee structure and ensure it aligns with your organization.  Request information on: 1) the advisor’s fee 2) underlying fund expenses, and 3) custodial expenses.
  • Credentials and Qualifications: Look for advisors with relevant certifications, such as Chartered Financial Analyst (CFA), Certificate in Investment Performance Measurement (CIPM), or Certified Financial Planner (CFP). These qualifications indicate expertise in the field.

Hiring Your Next Investment Advisor Doesn’t Need to be Complicated 

In summary, opting for targeted interviews with pre-selected advisory firms may offer a streamlined and effective alternative to the RFP process.  Engage your key stakeholders and focus on crucial criteria including nonprofit experience, fiduciary integrity, and strategic alignment. The ideal advisor will instill confidence that they understand how to partner with your staff, committee members, and board to provide strong financial stewardship.

We’ve Helped Many Nonprofits Establish Investment Programs

eCIO’s sole focus is helping nonprofits establish enduring investment programs. Click here to schedule a 15-minute complimentary consultation with one of our investment advisor experts to learn more.

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