Nonprofit organizations often find themselves in a position where they need to hire an investment manager. This need arises for several reasons such as replacing an underperforming current manager, transitioning from internal management to professional management, or having excess funds that warrant the establishment of a dedicated investment program. In each case, the organization recognizes the importance of entrusting their financial assets to an experienced investment manager to optimize returns and ensure prudent stewardship.

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Here are 5 key steps to hiring and maximizing the value of an investment professional for your nonprofit organization.

Step #1: Identify the Goals and Expectations for the New Investment Manager

When the board acknowledges the need for a change in investment management, it is often driven by poor investment results, unsatisfactory communication or service from the current advisor, or a general lack of confidence in the organization’s investment program. Select a senior staff or investment committee member to take the lead in conducting the initial search for qualified investment advisors.

Since nonprofit organizations face unique challenges when managing their financial assets. Consider how your investment advisor will add value to your organization.

Step #2: Select Potential Investment Advisors

Consider several factors when identifying 1-3 potential investment advisors including nonprofit investment experience, a sensible investment approach aligned with the organization’s goals, a proactive service model that ensures regular communication and engagement, and competitive fees.

Some organizations formalize the process by inviting potential investment partners to complete a Request for Proposal (RFP).  Learn more about the RFP process and download a starter template.

The RFP process can be a big undertaking, so consider whether it can be bypassed by a systematic review of a few candidates identified.

Step #3: Evaluate Advisor Candidate Strengths and Weaknesses

Objectively review each finalist to select the advisor that is best matched for your organization and offers a model of partnership to your staff, investment oversight group and board members. This may involve scheduling presentations where the potential advisors can showcase their expertise, investment strategies, and service offerings. The committee evaluates the presentations and selects the most suitable investment advisor.

Using a scoring matrix like the one included in, “How to Evaluate an Investment Advisor’s RFP” makes it easier to compare each advisor’s offering.

Step #4: Secure Board Approval and Hire the Investment Advisor

After the Committee’s review and recommendation, the board votes to hire the investment advisor. Once the decision is made, the investment advisor is notified, and the necessary agreements are executed to formalize the partnership.

Learn more about the fiduciary responsibilities of board members by downloading, "A Board Member’s Guide to Investment Oversight."

Step #5: Implement Your Investment Program with the Investment Advisor

Upon hiring the new investment advisor, the onboarding process begins. This process typically involves a comprehensive orientation to establish clear communication channels, review investment objectives, and develop an in-depth understanding of the organization’s financial landscape. It also includes transferring existing assets from the previous advisor to the new one, approving an Investment Policy Statement,  implementing agreed-upon investment strategies, and establishing performance benchmarks.

Download a diagram that overviews the process of opening an investment account. 

Conclusion

Selecting and hiring a new investment advisor for nonprofit organizations is a process that requires careful consideration and evaluation. By recognizing the need for change, identifying potential advisors with relevant experience and a suitable investment approach, involving the committee in the selection process, obtaining board approval, and executing a thorough onboarding process, nonprofits can position themselves for improved investment results, enhanced communication, and greater confidence in their investment program. Effective partnership with a capable investment advisor is essential for nonprofit organizations to maximize their financial potential and fulfill their mission successfully.