Frequently Asked Questions
1. How can I choose the best NFP financial advisor for my needs?
Selecting the right financial advisor is an important governance decision for your organization. Look for an investment advisor that specializes in working with nonprofits, as they will understand the unique needs of endowments, reserves, donor restrictions, and board oversight.
Choose a firm that acts as a fiduciary—meaning they are legally required to put your organization’s interests first. A fiduciary partner goes beyond investment management to support governance, policy development, and communication with multiple stakeholders, including staff, the Finance or Investment Committee, and the Board.
An effective advisor will:
- Deliver institutional quality investment management tailored to nonprofit needs.
- Offer fiduciary services beyond investment management, including help with policies, spending frameworks, and audits.
- Provide clear, tailored communication for staff, committees, and the board.
- Offer fiduciary services beyond investment management, including help with policies, spending frameworks, and donor support.
- Maintain low, transparent costs that support long-term growth.
- Emphasize clarity, documentation, and accountability, ensuring that investment decisions are aligned with your mission and fiduciary responsibilities.
2. What should I consider when choosing an association advisor?
When selecting an advisor for your association, it’s important to find a partner who understands the governance structure, financial objectives, and fiduciary responsibilities unique to associations. Look for an investment advisor that specializes in serving nonprofits and associations, with experience supporting boards, finance committees, and staff leadership.
Key considerations include:
- Fiduciary commitment: Ensure the advisor acts as a fiduciary—legally obligated to put your association’s interests first and provide objective, conflict-free advice.
- Experience with associations: Choose an advisor familiar with dues-based organizations, reserves, and board oversight, who can tailor strategies to your financial goals and liquidity needs.
- Comprehensive service model: The advisor should effectively engage with multiple stakeholders, providing clear communication and education for staff, committees, and the board.
- Governance and policy support: Look for guidance beyond investment management—such as assistance with investment policy statements, spending policies, and reserve frameworks.
- Low-cost investment approach: Favor advisors who use low-cost investment management strategies that help preserve resources for your mission and member services.
3. What are the key factors to consider when choosing a foundation investment advisor?
When selecting an investment advisor for your foundation, look for a fiduciary partner who understands the unique responsibilities of stewarding charitable assets for long-term impact. The right advisor should align your investment program with your foundation’s mission, spending policy, and governance structure.
Key factors to consider include:
- Fiduciary duty: Choose an advisor who acts as a fiduciary—legally required to put your foundation’s interests first and provide objective, transparent advice.
- Experience with foundations: Seek advisors experienced in managing endowments, donor-restricted funds, and long-term investment pools, as well as working with boards and investment committees.
- Governance and policy support: The advisor should help establish and maintain key documents such as the Investment Policy Statement and Spending Policy, and ensure alignment with your foundation’s goals.
- Collaborative service model: Select a firm that engages effectively with staff, finance or investment committees, and the board, providing education, reporting, and clear communication tailored to each audience.
- Low-cost investment management strategies: Favor advisors who use cost-efficient investment approaches to maximize long-term growth while maintaining prudent risk management.
A strong foundation investment advisor combines fiduciary oversight, nonprofit expertise, disciplined investment management, and transparent communication—helping your foundation sustain its mission for generations to come.
4. What factors should I consider when planning an endowment fund?
When planning an endowment fund, your organization should focus on aligning the fund’s purpose, structure, and investment approach with your mission and long-term financial goals. A well-planned endowment provides sustainable support for future needs while maintaining flexibility for the organization today.
Key factors to consider include:
- Purpose and objectives: Define the role of the endowment—whether it supports operations, specific programs, or long-term reserves—and establish clear goals for growth, income, and preservation of capital.
- Governance and policies: Develop an Investment Policy Statement and Spending Policy that outline how assets will be invested, how much can be withdrawn, and who is authorized to make decisions.
- Fiduciary oversight: Ensure that board and committee members understand their fiduciary responsibilities and maintain appropriate documentation, transparency, and accountability.
- Investment approach: Work with an advisor who employs low-cost, disciplined investment management strategies aligned with your organization’s time horizon and risk tolerance.
- Liquidity and reserves: Determine the right balance between short-term reserves and long-term endowment assets to meet both current and future needs.
- Gift and donor considerations: Establish clear policies for how new gifts will be added, restricted, and recognized to maintain donor trust and compliance.
The right investment partner can guide your organization through each of these steps—helping develop policies, establish a prudent investment framework, educate board and committee members, and implement strategies that align your endowment with your mission and fiduciary responsibilities.
5. What legal considerations should churches keep in mind when managing an endowment?
When managing an endowment, churches should ensure that their practices align with both state regulations and fiduciary standards governing charitable and religious organizations. Proper legal and governance structures help protect the church’s assets, maintain donor trust, and support long-term ministry goals.
Key considerations include:
- Adherence to donor intent: Funds given for a specific purpose must be used in accordance with donor restrictions. Maintain written documentation for all restricted gifts and ensure they are tracked separately from unrestricted assets.
- Compliance with UPMIFA: Most states follow the Uniform Prudent Management of Institutional Funds Act (UPMIFA), which outlines how nonprofit organizations—including churches—should invest, spend, and manage charitable funds prudently.
- Fiduciary responsibilities: Church boards, finance committees, or trustees overseeing the endowment have a legal duty to act in the church’s best interest, make prudent decisions, and document those decisions to demonstrate accountability.
- Governing policies: Establish an Investment Policy Statement and Spending Policy that clearly define how funds will be managed, invested, and distributed, ensuring consistency and transparency.
- Segregation of funds: Keep endowment assets separate from operating accounts to prevent inadvertent use of restricted funds.
- Audit and reporting: Maintain accurate records, perform regular reviews, and provide appropriate reporting to the congregation, donors, and governing bodies as required.
The right investment partner can help churches navigate these responsibilities—providing guidance on policy development, fiduciary compliance, and prudent investment strategies that align with both legal standards and the church’s mission.
6. Can you suggest some effective investment strategies for non-profit foundations?
Effective investment strategies for nonprofit foundations balance long-term growth, risk management, and mission alignment. A strong strategy supports predictable spending, preserves capital, and provides transparency for the board, investment committee, and donors.
Key strategies include:
- Establishing a diversified asset allocation: Build a balanced mix of equities, fixed income, and alternatives designed to meet the foundation’s risk tolerance, time horizon, and spending needs.
- Developing and following an Investment Policy Statement (IPS): The IPS serves as the foundation’s roadmap, outlining investment objectives, target allocations, spending policy, and risk parameters to guide consistent, disciplined decision-making over time.
- Maintaining a disciplined rebalancing approach: Periodically realign the portfolio to its target allocation to control risk and capture gains systematically, rather than reacting to short-term market movements.
- Managing costs carefully: Investment costs directly impact net returns—and therefore the dollars available to advance the foundation’s mission. Favor low-cost investment strategies that preserve more growth for long-term charitable impact.
- Implementing a spending policy: Set a sustainable spending rate that supports current programs while maintaining long-term purchasing power, typically informed by historical returns and inflation expectations.
- Incorporating liquidity planning: Structure assets so that operating and grant-making needs are met without disrupting long-term investments, often through a “bucket” approach.
- Monitoring performance and risk: Regularly review investment performance, risk exposures, and adherence to the foundation’s Investment Policy Statement.
7. What should a nonprofit consider when opening a brokerage account for investments?
When opening a brokerage account, a nonprofit should ensure that the account structure, authorization, and investment options align with its governance policies and fiduciary responsibilities. The goal is to create a transparent, well-documented framework that supports proper oversight and efficient investment management.
Key considerations include:
- Authorized signers and governance: Clearly define who has authority to open, fund, and make transactions in the account—typically following board approval or policies outlined in the organization’s Investment Policy Statement (IPS).
- Account type and ownership: Open the account in the nonprofit’s legal name with the correct tax identification number, ensuring it is distinct from operating accounts.
- Secure Custody: Choose a reputable custodian or brokerage firm that provides institutional-quality service, strong security, and transparent reporting for nonprofit organizations.
- Access and reporting: Set up appropriate access levels for staff, committee members, and advisors, and establish a regular reporting cadence for oversight and accountability.
An experienced investment partner can guide your organization in selecting the right brokerage firm—one that offers secure custody of assets, transparent reporting, low-cost investment options, and account structures suited to nonprofits. They can also coordinate the setup process, ensure proper authorization and documentation, and help align the account with your governance policies and long-term investment goals.
8. How do nonprofit financial advisors differ from regular financial advisors?
Nonprofit financial advisors bring specialized expertise tailored to the unique governance, oversight, and fiduciary needs of nonprofit organizations. Unlike advisors focused on individuals or families, nonprofit advisors serve as partners to boards, investment committees, and staff, helping ensure that every investment decision aligns with the organization’s mission, policies, and fiduciary responsibilities.
Key differences include:
- Alignment of stakeholders: Nonprofit advisors help bring alignment among staff, committees, and boards by facilitating discussions that clarify financial objectives, risk tolerance, and decision-making processes.
- Policy and governance support: They help craft essential documents such as the Investment Policy Statement (IPS) and spending policy, providing a structured framework for consistent and prudent oversight.
- Objective investment management: Nonprofit advisors take an independent, fiduciary approach—focusing on aligning investments with each investment pool’s specific objectives, such as liquidity for operating reserves, stability for short-term funds, and growth for long-term or endowed assets.
- Optimized asset allocation: They design diversified portfolios that balance long-term growth, risk management, and liquidity across multiple pools of assets, such as operating reserves, board-designated funds, and endowments.
- Education and continuity: Nonprofit advisors help onboard new committee or board members and build institutional knowledge, ensuring stability through leadership transitions.
- Cost-conscious implementation: They emphasize low-cost investment strategies and institutional pricing to enhance net returns, so more of the organization’s assets support its mission.
- Transparency and communication: Regular reporting, clear performance explanations, and ongoing education build confidence among leadership and donors in the organization’s investment program.
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