Non-profit organizations like foundations, endowments, pensions, and charities often require investment consulting services to help manage their assets. As stewards of donated funds, non-profits have a fiduciary duty to generate returns to support their charitable missions. Selecting the right investment consultant is crucial for non-profits to achieve their financial and social objectives. This article will examine key factors for non-profits to evaluate when choosing an investment consultant, including consultant capabilities, services, fees, and alignment with organizational goals.
Understand range of services investment consultants provide to non-profits
Non-profit investment consultants offer a diverse range of services to help clients manage assets effectively. Core services include asset allocation advice, investment policy development, manager selection, performance monitoring, and risk management. Many consultants also provide outsourced CIO services, Socially Responsible Investing (SRI) advice, and education/training for board members. When selecting a consultant, non-profits should assess which services are most relevant to support their needs and priorities. Larger endowments and pensions may require sophisticated asset allocation and risk modeling, while smaller foundations may need more basic policy and manager selection help.
Evaluate consultant capabilities, experience, and client types
Non-profits should research consultant qualifications thoroughly before engaging their services. Relevant factors include years of experience, client types and assets advised, and stability of consultant team. Larger consulting firms often have greater research capabilities, while smaller specialists may provide more customization and partner-level attention. Optimal consultant experience level depends on the non-profit’s size and complexity; those with over $100 million in assets often benefit from seasoned consultants with institutional expertise.
Ensure clear understanding of consultant services pricing models
Investment consultants use various pricing models, including retainers, project fees, and % of assets advised. Retainers provide ongoing services for a fixed annual cost, while project fees charge hourly for customized engagements. % of assets models charge a fee based on total assets advised. Non-profits should understand exactly how their consultant will charge fees and the projected cost based on their assets. Comparing multiple consultant bids is wise to assess cost-effectiveness.
Confirm consultant recommendations align with non-profit’s investment policy
A consultant’s advice should always align with the client’s investment policy statement. During selection, non-profits should articulate their return objectives, risk tolerance, liquidity needs, time horizon, and any unique constraints. Consultants with proven expertise advising similar non-profit clients often best understand appropriate policy considerations. Non-profits should ensure the consultant’s investment philosophy and process match their policy.
Choosing the right investment consultant is a very important decision for non-profit organizations seeking to prudently manage assets. Evaluating consultant capabilities, pricing models, and alignment with organizational investment policy is key for a successful partnership. With thoughtful due diligence selecting an advisor, non-profits can effectively steward capital to sustain their missions.