Since the beginning of the pandemic, financial markets have been riding a roller coaster. This volatility is a good reminder that if your nonprofit has an endowment, it could benefit from management by a professional investment advisor. Here’s how to find a qualified advisor.
Nonprofit experience required
Finding the right investment advisor 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 advisors 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 the fee structure for their services. Generally, investment advisors charge clients based on one (or a combination) of three structures:
- Fees or commissions on trades,
- A percentage of the asset values they’re managing, or
- An hourly rate.
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.
Grow without incurring excessive risk
Members of your board’s investment or finance committee should interview candidates. They should look for someone who closely follows market movements and trends 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 behind their investment decisions. Committee members might ask candidates, based on what they know of your organization, what changes to your endowment’s current investment strategy they might propose.
Good candidates should express empathy toward the kinds of problems your organization faces 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.
Finally, consider how much you trust the candidate. Don’t engage an investment advisor for your nonprofit unless you’d wholeheartedly trust the person to handle your own money.
Referral source
If you’re not sure where to look for a qualified investment advisor, contact us for referrals. Also contact us if you don’t yet have an endowment but would like to establish one.
DISCLAIMER:
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. The services of an appropriate professional should be sought regarding your individual situation.
