What Non-profits and Foundations Should Seek in an Asset Management Firm

Most non-profit and foundation boards face tightening budgets and fundraising challenges in the era of COVID-19. What has not changed is the fiduciary duty that board members have to their non-profit corporations and foundations to responsibly manage their endowments, including the selection of an asset management firm.

In times of economic and societal stress, the choice of an appropriate wealth manager or financial advisor takes on even greater importance. Below are a few checklist items that should be reviewed in selecting a professional wealth manager or financial advisor.

1. Determine Who Is Paying the Advisor

Following the release of the 1976 film “All the President’s Men,” the phrase “follow the money” became one of the most overused sayings in popular culture. Its lasting popularity is partly because it’s pretty good advice for examining what can affect a professional’s motivations and judgments.

Non-profit and foundation boards need to ask tough, critical questions about compensation in selecting a new advisor or evaluating a current one.

First, a board should always know if an advisor receives “commissions” or receives any form of compensation by recommending financial products, investments, or funds. Next, it should inquire about any “soft dollar” arrangements, including third-party paid research and technology that is provided to a financial advisor at no charge or a reduced charge.

We recommend only selecting an advisor or firm that has the same fiduciary responsibility as the board or directors, such as a fee-only, full-time fiduciary advisor. Such advisors are paid solely from their clients, with no incentive to provide financial advice other than in their clients’ best interest.

2. Understand the Liquidity of Recommended Investments

Unfortunately, there are far too many examples that could reasonably be included here of non-profits and foundations promised large returns, only to lose millions of dollars that they could never recover.

While knowing whether the advisor is obligated to act solely in the best interest of their clients is a starting place, knowing the investment mix is just as important. Most small non-profit and foundation endowments cannot sustain a large loss of their principal investments, so the ability to access or convert investments funds quickly is imperative.

Even large endowments typically place strict limits on the percentage of assets that can be placed in investment vehicles with lockup periods that restrict liquidity. In short, know and understand the investment mix and the relative liquidity of those investments.

3. Experience, Education, and Credentials Matter

Quick question: Do you know your financial advisor’s education and background?

Can your board identify whether the advisor is a CERTIFIED FINANCIAL PLANNER™ (CFP®) professional? Who is making the investment recommendations or decisions regarding the management of your endowed funds? What are their education and experience? Are they a Charted Financial Analyst® (CFA)?

If your board can’t answer these questions, now is the time to ask your advisor. Professionals with designations such as the CFP® and CFA certifications are bound to the top ethical and educational standards that should be expected from any wealth advisory firm.

4. Consider the Financial Stability of the Advisor

In a time of COVID-19, paycheck protection loans, and government bailouts, the financial strength of many businesses is under tremendous stress. The board of any non-profit or foundation should inquire into the financial stability of their financial advisor or wealth manager.

Ask questions about the firm’s financial situation. Questions should include whether its revenue is from limited sources or diverse, what are its assets to liabilities, and whether they have any past or present legal and litigation issues that might compromise the firm’s financial condition. This should include regulatory issues that the advisor has faced and the outcome of such proceedings.

Finally, given the current environment, asking whether the advisor has received government assistance such as the Paycheck Protection Program (PPP) is appropriate in examining the advisor’s financial stability.

Responsibly managing corporate assets is at the core of any board’s fiduciary responsibility. Take the time to make sure your financial advisor provides investment advice and management in the best interest of your non-profit or foundation. If you would like to talk with a fiduciary wealth advisor about your institution’s or foundation’s investments, Clayton Wealth Partners is glad to help.


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Clint Patty, J.D.

As Managing Partner, Clint serves on the management team providing leadership, supporting business development efforts and providing client consultation.