Insight

Nonprofits: How to invest in an investment advisor

You may think that only large, well-endowed not-for-profits require the advice of an investment manager. But even smaller nonprofits with modest endowments — particularly smaller nonprofits that don’t have in-house financial expertise — can benefit from hiring an investment professional.
Finding qualified candidates
Finding the right investment consultant for your organization starts with identifying a pool of qualified candidates with proven track records. Ask for referrals from local private foundations (possibly ones that have funded you in the past) or other area nonprofits. Also, members of your board may know investment managers they can recommend. Qualified candidates should have experience working with nonprofit endowments.
Request detailed proposals from candidates on how they’d manage your investments — as well as how they wish to be compensated for their services. Generally, investment managers charge clients based on one (or a combination) of three structures: 1) fees or commissions on trades; 2) a percentage of the asset values they’re managing; or 3) an hourly rate. Many nonprofits prefer that their investment manager’s compensation be based on asset value or hours, rather than commissions.
After reviewing the candidates’ proposals and checking their references, allow search committee members to talk to other nonprofit leaders to gauge their satisfaction level with your short list. Then select two or three people to interview.
Conducting interviews
Members of your board’s investment or finance committee should interview the candidates carefully. They should look for someone who closely follows market movements and trends, has a thorough understanding of different types of investments, and is capable of creating and managing a balanced portfolio that can grow without incurring excessive risk. Understanding the candidates’ investment processes, along with their long-term results, is essential.
Other desirable qualities include experience assisting investment committees in drafting and changing investment policies and an ability to clearly explain the processes and considerations behind their investment decisions. To get at some of these issues, committee members might ask candidates their advice for an organization that’s more (or less) risk averse than a traditional nonprofit. Or based on what they know of your organization, what changes to the current investment strategy might they propose?
Good candidates should express empathy toward the kinds of problems facing your organization and suggest investment solutions specific to your nonprofit. And they should have the time to properly manage your investments. Ask how many hours per month they anticipate spending on your account and whether they’d be able to attend off-hour meetings, if necessary.
Trusting your choice
Finally, consider how much you trust the candidate. Don’t engage an investment manager for your nonprofit unless you’d wholeheartedly trust the person to handle your personal life savings. For advisor recommendations, contact us.
© 2019

Related Insights

Don’t Forget to Take State Estate Taxes into Account | estate planning cpa in baltimore county md | Weyrich, Cronin & Sorra

Estate & Wealth Transfer Planning

Don’t Forget to Take State Estate Taxes into Account

A generous gift and estate tax exemption means only a small percentage of families are currently subject to federal estate taxes. But it’s…
Nonprofit Restructuring has Become Easier, but Not Without Challenges | CPA in Baltimore County MD | Weyrich, Cronin & Sorra

Non-Profits

Nonprofit Restructuring has Become Easier, but Not Without Challenges

A few years ago, IRS Revenue Procedure 2018-15 changed the rules regarding not-for-profit restructuring. If you’ve participated in a restructuring…
The Tax Score of Winning | tax accountant in bel air md | Weyrich, Cronin & Sorra

Tax Prep, Planning & Strategy

The Tax Score of Winning

Studies have found that more people are engaging in online gambling and sports betting since the pandemic began. And there are still more traditional…

Connect with us

Use the form below to send us an email. WCS responds directly to all inquiries and general questions within 24 hours of posting.

This contact form is deactivated because you refused to accept Google reCaptcha service which is necessary to validate any messages sent by the form.