Excess Benefit Transactions

If You Have an Endowment, You Need An Investment Advisor

Since the beginning of the pandemic, financial markets have been riding a roller coaster. This volatility is a good reminder that if your non-profit has an endowment, it could benefit from management by a professional investment advisor. Here is how to find a qualified advisor.

Non-Profit 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 non-profits. Also, members of your board may know investment advisors they can recommend. Qualified candidates should have experience working with non-profit endowments.

Request detailed proposals from candidates on how they would manage your investments and the fee structure for their services. Generally, investment advisors 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 are managing

3. An hourly rate

After reviewing the candidates’ proposals and checking their references, allow search committee members to talk to other non-profit 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 non-profit. They also should have the time to properly manage your investments. Ask how many hours per month they anticipate spending on your account and whether they would be able to attend off-hour meetings, if necessary.

Finally, consider how much you trust the candidate. Do not engage an investment advisor for your non-profit unless you would wholeheartedly trust the person to handle your own money.

Referral Source
If you are not sure where to look for a qualified investment advisor, contact us for assistance. Also contact us if you do not yet have an endowment but would like to establish one.

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