3 Key Takeaways
- Dedicated nonprofit investment advisors provide specialized expertise.
Nonprofits often lack in-house investment expertise, so partnering with advisors who specialize in nonprofit organizations can provide stronger guidance, governance support, and a more strategic investment approach.
- A fiduciary advisor helps strengthen oversight and decision-making.
Advisors who act as fiduciaries are required to put the nonprofit’s interests first. This helps boards make better investment decisions, reduce conflicts of interest, and fulfill their fiduciary responsibilities.
- Professional advisors provide continuity and institutional memory during leadership transitions.
As nonprofit staff and board members naturally turn over, a long-term investment advisor ensures that the organization’s financial history, investment philosophy, and Investment Policy Statement (IPS) remain consistent.
One of the responsibilities of a nonprofit’s board is to manage the organization’s assets prudently. Unless you have someone on staff with significant investment expertise, partnering with nonprofit investment advisors is a prudent decision.
Advisors should provide trusted guidance and manage your organization's assets to meet your investment goals. Consider hiring an advisor dedicated to working with nonprofit organizations and offering a holistic approach beyond investment management, providing specialized services to help you succeed.
The table below compares different approaches to managing nonprofit investment programs: Self-Managed, Typical Financial Advisor, and eCIO Investment Advisor.
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Oversee Assets as a Fiduciary
Acting in a fiduciary capacity means putting the organization's interests ahead of your own which ensures the organization is well served.
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| Self-Managed |
Typical Financial Advisor |
eCIO Investment Advisor |
Board and board members assume all fiduciary responsibilities and liabilities
It may be difficult to reach a consensus on key aspects of your investment program |
Some financial advisors may act in a fiduciary capacity, others may not
A ‘suitability obligation’ does not meet the same requirements as a ‘fiduciary standard’ |
eCIO is a fiduciary advisor and always acts in a fiduciary capacity
eCIO recommends specific best practices to guide boards toward strong consensus decisions |
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Assess Organization’s Needs
Purpose, risk tolerance, and time horizon are key factors in determining asset allocation and investment policy.
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| Self-Managed |
Typical Financial Advisor |
eCIO Investment Advisor |
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Determined by the board
Influenced by composition and individual views of the membership
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Often applies a personal wealth management focus to institutional clients
Utilizes standard risk/return profiles
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Leads a rigorous group risk assessment for boards and committees through a formal survey
Quantifies organization-specific risk, time horizon, and spending parameters
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Design Asset Allocation
Asset allocation is critical and typically drives the vast majority of your investment return.
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| Self-Managed |
Typical Financial Advisor |
eCIO Investment Advisor |
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May be influenced by members’ personal wealth portfolios and outlooks
Lack of data and tools to model asset allocation scenarios
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Typically chooses from off-the-shelf models
Frequently has limited ability to customize the asset allocation
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Builds a fully customized asset allocation based on risk assessment
Models client-specific asset allocation with both historical data and forward return projections
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Establish Investment Policy
A formal Investment Policy Statement (IPS) is critical to a well-run investment program.
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| Self-Managed |
Typical Financial Advisor |
eCIO Investment Advisor |
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A formal Investment Policy Statement is often missing
It may not be up-to-date or reviewed on a consistent basis
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Generally offers a canned Investment Policy Statement
Frequently lacks a review of the goals and performance of investments to ensure needs are met
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Designs a customized Investment Policy Statement that outlines clear oversight and succession
Regularly reviews and updates the IPS to ensure relevance and that performance of investments and goals are in line
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Select Portfolio Investments
Low-cost, diversified investment options drive a successful investment program.
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| Self-Managed |
Typical Financial Advisor |
eCIO Investment Advisor |
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Based upon individual board member experience and knowledge
Access to limited investment research tools and due diligence process
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May lack access to institutional-quality investment options
Selection process may be biased toward firm-sponsored investments
While investments may be “suitable” they may not meet the fiduciary standard
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Adheres to a research and selection process focused primarily on institutional investment options
Seeks the most cost-effective investment strategies
100% independent in selecting investment strategies
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Report to the Board
Your board should be well-informed on investment program performance to ensure members are fulfilling their fiduciary duty.
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| Self-Managed |
Typical Financial Advisor |
eCIO Investment Advisor |
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Typically only custodial statements are sent to staff and select board members
May not have necessary resources to create investment performance reports
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May lack performance reporting and appropriate benchmark comparisons
Often provides reports designed for wealth management portfolios and/or are difficult to understand
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Provides quarterly video-based institutional account reporting via a user-friendly portal
Evaluates account performance with appropriate benchmarking
Offers dedicated nonprofit investment advisors for consultation to the board
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FAQs
1. Why should a nonprofit consider working with an investment advisor?
Most nonprofits do not have internal investment expertise. A qualified advisor can help manage assets, develop investment strategies, and provide guidance that supports the organization’s financial goals and mission.
2. What does it mean for an investment advisor to act as a fiduciary?
A fiduciary advisor is legally required to act in the best interests of the nonprofit, prioritizing the organization’s needs over their own and avoiding conflicts of interest.
3. What services should nonprofit investment advisors provide beyond portfolio management?
Strong advisors typically help assess risk tolerance, design asset allocation strategies, develop or update an Investment Policy Statement, select investments, and provide clear reporting and education for the board.
