While some organizations decide to issue an investment management RFP to find an investment partner, that process can be time-consuming and complex. This guide lays out a more efficient alternative that involves interviewing a select group of advisor firms to make your decision.

‍Hiring an investment advisor for a nonprofit organization is a critical decision that involves specific considerations due to the organization’s unique financial goals and responsibilities.

What’s the alternative to issuing an RFP for investment management services?

An efficient alternative to an investment RFP is to schedule interviews with a select group of two or three qualified advisory firms. Opting for this method streamlines the selection process, reduces the time investment significantly, and provides a dynamic process for interactive questioning, thereby facilitating the evaluation of each firm’s compatibility as a collaborative partner. Including your organization’s key stakeholders in the interviews is a good idea to ensure a comprehensive perspective in the decision-making process.

Some of the key items you will want to consider when meeting with potential advisory firms include

• Experience With Nonprofits: Seek investment advisors with experience working with nonprofit organizations. They should understand the regulatory and governance requirements and nonprofits' unique financial challenges.
• Fiduciary Duty: Ensure that the advisor agrees to adhere to the fiduciary standard to act in the best interests of your nonprofit. This is crucial for maintaining transparency and avoiding conflicts of interest.
• Investment Approach and Philosophy: Discuss the advisor’s investment philosophy, risk management strategies, and how they tailor their approach to nonprofit organizations. Ensure their strategies align with your organization’s investment objectives and mission.
• Experience With Similar Organizations: Consider advisors who have experience working with nonprofits similar to yours in terms of size, mission, and financial structure. They are more likely to understand your specific needs and be a sounding board when financial questions arise in the future.
• Communication and Reporting: Evaluate the advisor’s communication style and reporting frequency. Ensure they can provide clear and regular updates to all your stakeholders on the performance of your nonprofit’s investments.
• Help With Drafting Governance Documents: Your advisor should be able to help you draft or update your governance documents to ensure your program is compliant. These documents include the Investment Policy Statement, Committee Charter, and Spending Policy.
• Fee Structure: Evaluate the advisor’s fee structure and ensure it aligns with your organization.  Request information on 1) the advisor’s fee, 2) underlying fund expenses, and 3) custodial expenses.
• Credentials and Qualifications: Look for advisors with relevant certifications, such as Chartered Financial Analyst (CFA), Certificate in Investment Performance Measurement (CIPM), or Certified Financial Planner (CFP). These qualifications indicate expertise in the field.

Hiring Your Next Investment Advisor Doesn’t Need to be Complicated 

In summary, opting for targeted interviews with pre-selected advisory firms may offer a streamlined and effective alternative to the RFP process.  Engage key stakeholders and focus on crucial criteria, including nonprofit experience, fiduciary integrity, and strategic alignment. The ideal advisor will instill confidence that they can partner with your staff, committee members, and board to provide strong financial stewardship.

Additional RFP Resources

Our experience helping many nonprofits complete investment management RFPs led us to develop a library of helpful resources to make the process easier.

• 5 Pitfalls to Avoid When Issuing an Investment Advisor RFP
  Steer clear of these 5 mistakes nonprofits make when issuing an RFP. Click to view resource.
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• The Alternative to an RFP: A Simplified Approach to Selecting Your Investment Advisor
  Use this resource as a guide to selecting your advisor without issuing a formal RFP. Click to view resource.
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• How to Create an Investment Management RFP for Nonprofit Organizations with RFP Template
  This 3-part guide covers what to include in your RFP to ensure timely and complete responses and an RFP Template to help get started. Click to view resource.
  
  
• How to Evaluate an Investment Advisor’s Completed Request for Proposal
  Download a scoring matrix that helps you objectively compare each proposal. Click to view resource.

• Should You Issue an RFP to Select Your Investment Advisor?
  Understand the pros and cons of issuing a formal RFP. Click to view resource.

We’ve Helped Many Nonprofits Establish Investment Programs

eCIO’s sole focus is helping nonprofits with nonprofit investing. Click here to schedule a 15-minute complimentary consultation with one of our investment advisor experts to learn more.