Nonprofits: Selecting an Investment Advisor

A partner should be up to date on government rules, conversant on industry best practices, and have a depth of experience working with nonprofits.

Your nonprofit organization enjoys the enthusiastic support in your community with current and prospective donors, and you are fortunate to have grown a pool of funds to invest for the long-term support of your organization.

Now the real work begins.

How do you select an investment advisor who will carry out the fiduciary duty of administering the funds and developing an investment strategy that will further your group’s long-term goals? After all, you have a wide range of choices, including large national firms, community boutique banks, local brokers, and regional financial institutions. You want to find an investment advisor that’s the best fit for your organization. Here are some considerations to help guide your decision.

Ask Advisors Tough Questions

It’s essential to ask the right questions, advises Marcie Braswell, Philanthropic Solutions Executive.

  • Does the investment advisor have a depth of experience working with nonprofit organizations—or, better yet, specialize in nonprofits?
  • Is the investment advisor conversant in IRS rules governing nonprofits?
  • Is the investment advisor an expert in industry best practices?
  • Does the investment advisor have adequate staff resources to serve clients?

Such an advisor can (and should) help you develop key policy statements that govern investments, spending, gift acceptance, and conflicts of interest. These guidelines need to be developed as part of a comprehensive assessment of the organization’s objectives and resources, says Kevin V. Phillips, Philanthropic Solutions Area Manager in Birmingham.

These policy statements and assessments can guide the nonprofit in both the present and the future, as two or three board seats typically turn over each year, Phillips says. For instance, your investment strategy will depend in part on your nonprofit’s spending needs, which should be detailed in a spending policy. Your advisor should be comfortable discussing with the board how particular spending policies impact investment strategy.

Another consideration in choosing an advisor is whether the institution will partner with you to help you communicate with current and prospective donors. For instance, some financial institutions may conduct seminars or small meetings with donors to explore topics such as planned giving or complex gifts. “We collaborate with our nonprofit clients by meeting with prospective donors and discussing how those donors can accomplish their charitable goals consistent with their overall financial plan,” Braswell says.

Quarterly presentations are standard for touching base and ensuring an investment strategy is on track. You should make sure, though, that your prospective investment advisor is doing more than delivering a quarterly performance statement. Your advisor should be a partner in helping your organization achieve its mission.