With the growth of the non-profit sector, many non-profits are looking to invest their assets to generate additional income. This has led to an increasing demand for non-profit investment advisory services. Choosing the right investment advisor can be challenging given the unique needs and constraints of non-profits. When evaluating non-profit investment advisory firms, there are several key factors to consider including investment philosophy, experience working with non-profits, fee structure, and customer service. This article provides reviews and recommendations on selecting the best non-profit investment advisory service.
Evaluate investment philosophy and asset management approach
A non-profit’s investment philosophy will determine the advisor’s approach to managing the organization’s assets. Non-profits should look for advisors that specialize in socially responsible investing and can craft portfolios that align with the non-profit’s mission and values. The advisor should have a well-defined strategic asset allocation process. Active managers that incorporate environmental, social, and governance (ESG) factors may be preferred over passive index approaches. Understanding the advisor’s beliefs on strategic asset allocation, diversification, and rebalancing can help non-profits choose a manager well-matched to their goals.
Select advisors experienced with non-profit clients
Experience working specifically with non-profits is essential in an investment advisor. The advisor should understand non-profit-specific issues like managing restricted assets, spending policies, and the Uniform Prudent Management of Institutional Funds Act (UPMIFA). They should have expertise on building endowments and managing investments for donors. Prior experience guiding non-profits through market volatility is also beneficial. Review the percentage of the advisor’s clients that are non-profits and the longevity of those relationships to gauge their expertise.
Evaluate fee structure for cost-efficiency
Non-profits should look for advisors with transparent and competitive fee structures. AUM-based fees may have breakpoints to lower costs for larger portfolios. Flat retainer fees can also be cost-efficient depending on services provided. Look for advisors that don’t charge loads, commissions, or 12b-1 fees which can reduce returns. Understand all direct and indirect fees charged and how advisor compensation aligns with the non-profit’s interests. Low-cost index approaches can be attractive for smaller non-profits focused on controlling expenses.
Prioritize customer service and reporting
Select an advisor who makes client service a priority and has resources dedicated specifically to non-profits. Look for 24/7 access to online accounts and advisors available by phone, email, and in person. The advisor should provide detailed quarterly reporting on performance, asset allocation, fees, and investment holdings. Expect proactive recommendations informed by their experience with other non-profit clients. Visit offices to meet the team and understand how responsive they are to inquiries.
Choosing the right investment advisory service is critical for non-profits to prudently manage assets and have confidence their investments align with their mission. Evaluating investment philosophy, non-profit experience, fee structure, and service model can help identify the best advisor for an organization’s specific needs and constraints.