5 Steps to Hiring a Nonprofit Investment Advisor

Nonprofits often need to hire an investment manager, whether to replace an underperforming manager, transition from internal to professional management, or establish a program for excess funds. Selecting the right partner ensures alignment with your mission and creates a foundation for a resilient investment program that adapts to organizational and market changes.

Here are five 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

Begin by clearly identifying what you hope to achieve with a new investment advisor. This involves reflecting on your organization’s current investment challenges and articulating your financial and service objectives. Involve key stakeholders - board members, senior staff, and finance/investment committee members - to collectively determine the priorities and expectations. Goals may include improving risk-adjusted returns, aligning investments with the organization’s financial needs and mission, or enhancing transparency and communication. Document your findings in a goals assessment.

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

Once you’ve clarified your goals, the next step is to identify investment advisors who align with your nonprofit’s values and financial objectives. Start by focusing on advisors with experience serving nonprofits, a well-articulated investment philosophy, and a track record of transparent communication and proactive service.

Consider narrowing your search to 2 to 4 candidates by leveraging referrals from peer organizations, conducting online research, or consulting your network of financial professionals. Evaluate their nonprofit-specific expertise, alignment with your organization’s mission, and ability to provide tailored solutions.

Many nonprofits formalize the selection process through a Request for Proposal (RFP), which allows you to gather structured information about each advisor’s services, fees, and investment philosophy. A systematic review of a few well-qualified candidates can yield excellent results if the RFP process is too extensive. Learn more about the RFP process and download an RFP starter template.

Step #3: Evaluate Advisor Candidate Strengths and Weaknesses

After identifying potential advisors, the next step is to assess their strengths and weaknesses to find the best match for your organization. Prioritize candidates who act as fiduciaries, ensuring they prioritize your interests, provide transparent advice, and align with your mission. Schedule presentations or interviews where advisors can demonstrate their expertise, investment philosophy, and approach to client service. These meetings are an opportunity to understand how they would address your nonprofit’s unique challenges and adapt to evolving needs. Encourage open discussions among your staff or committee to evaluate how well each advisor’s approach aligns with your organization’s values and goals.

A scoring matrix like the one in “How to Evaluate an Investment Advisor’s RFP” makes it easier to objectively compare candidates on factors such as communication style, investment strategy, responsiveness, and cost transparency.

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

Once the evaluation process is complete, present the committee’s recommendation to the board for approval. Clearly outline why the recommended advisor is the best fit by summarizing their qualifications, proposed strategy, and alignment with your organization’s goals.

After the board approves the partnership, promptly notify the selected advisor and execute the necessary agreements to formalize the relationship. This step is critical to establishing a strong partnership based on mutual trust and clear expectations.

To ensure your board members understand their ongoing role, provide them with resources like “A Board Member’s Guide to Investment Oversight.” This will help them effectively oversee the new investment advisor and fulfill their fiduciary responsibilities.

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

The onboarding process begins upon hiring the new investment advisor. 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 to the new advisor and custodian, creating or updating and approving an Investment Policy Statement, implementing agreed-upon investment strategies, and establishing performance benchmarks. Regular performance reviews and periodic educational sessions with the advisor ensure the partnership remains productive.

By thoughtfully implementing your investment program, you establish a smooth transition and set the foundation for a collaborative and productive relationship with your new advisor. Download a diagram that overviews the process of opening an investment account.

Download a Checklist to Hiring an Investment Advisor

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.

Download the resource below to access the Checklist for Hiring a Nonprofit Investment Advisor – a practical guide to help you confidently navigate the selection process and choose the right partner for your organization’s needs.

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Do you have an investment or endowment question?

We help nonprofits across the country establish enduring investment programs. We’d love the opportunity to answer questions and help you understand your investment options. Schedule a short meeting with a nonprofit investment advisor to get started