Choosing the right financial advisor for your nonprofit organization is a big decision, and the questions you ask can make all the difference. This guide outlines 12 essential questions to help you find an advisor who aligns with your goals, values, and best interests.
1) Do you act as a fiduciary?
Your board already upholds a fiduciary duty to the organization. The advisor you hire should be held to that same standard and act in your organization’s best interest 100% of the time. Otherwise, they might recommend something that’s just “suitable” for you, so they can earn higher commissions or incentives.
JSA Way: We are a fiduciary for our clients 100% of the time.
2) Are you fee-only?
Advisors can earn income in many ways, including client fees and commissions from selling mutual funds, annuities, or other investment products. Be wary of product recommendations when the advisor earns a commission, and be especially careful when an advisor is introduced to the board through a donor or member relationship.
JSA Way: We do not sell any products, AND we are fee-only, meaning only clients pay us. Please visit www.napfa.org to see fee-only advisors in your area.
3) What services will our organization receive?
A nonprofit needs more than a portfolio. Ask whether the advisor will help draft policy documents, attend committee and board meetings, educate new board members, and provide reporting for your board or finance committee.
JSA Way: We provide investment management, Investment Policy Statement drafting and review, reserve and spending analysis, board and committee education, and board reporting. We refer to partners for audit, tax, and legal work.
4) What are our TOTAL costs?
It’s essential to evaluate the total investment cost, including commissions, custodial fees, investment/product fees, and advisor fees. For example, if custodial expenses are 0.1%, mutual fund fees are 0.7%, and advisory fees are 1.2%, your total cost is 2.0%. Every dollar of cost is a dollar that does not reach your mission.
JSA Way: Our advisory fee percentage is 1.25% on the first $500,000 we manage. Above that, there are several other tiers with increasingly lower percentage rates. For nonprofit organizations, we can often reduce our fee from these levels to support causes in need.
5) Will you help us create and maintain an Investment Policy Statement?
The Investment Policy Statement (IPS) is the most important governance document for invested funds. It gives the board discipline during volatile markets and continuity as members rotate off. A strong IPS covers purpose and scope, delegation of authority, objectives and risk tolerance, time horizon and donor restrictions, asset allocation and rebalancing, spending policy, responsible investing commitments, and a monitoring and review schedule.
JSA Way: We draft the IPS alongside your committee, review it with the full board, and revisit it at least annually or whenever your funding circumstances change materially. We then manage according to that document rather than to the headlines.
6) How much should we keep in reserve, and how much can we spend each year?
Most organizations should hold a few months’ expenses in checking, plus another three to six months in a high-yield savings or money market account, before investing anything long term. Your spending policy should allow larger distributions after strong investment years and scale back in tougher ones.
JSA Way: We help map your cash needs, develop an operating reserve, and set a distribution policy the board can defend. Because most nonprofits are built to exist in perpetuity, the organization’s time horizon is often longer than board members think.
7) How will you handle restricted funds and gifts of appreciated securities?
Endowed, donor-restricted, and unrestricted dollars carry different rules, horizons, and risk tolerances. Ask how each will be invested, tracked, and reported, and whether the advisor can help you accept non-cash gifts.
JSA Way: We can invest restricted and unrestricted funds separately, each according to its own purpose. We also help you build the mechanics and the talking points to accept gifts of appreciated securities and Qualified Charitable Distributions (QCDs), often the most tax-efficient way for a donor to give.
8) What is your philosophy about investing?
Some advisors rely on third-party investment managers, while others perform that work in-house.
JSA Way: We do our own research and buy individual stocks and bonds when possible. We invest in companies we’re proud to own, focus on our best ideas, and invest for the long-term. For a mission-driven organization, that means we can tell your board exactly what it owns and why.
9) Do you invest alongside your clients?
Many advisors provide recommendations to clients but do not follow that advice for themselves.
JSA Way: We think and act as if your money is our own. We hold the same stocks in our portfolio as our clients do and will endure losses and enjoy gains right alongside your organization.
10) How do you measure success, and what has historical performance been?
Every advisor measures success differently. Some compare returns to a benchmark or inflation while others focus on client service. Make sure success for your advisor equals success for your mission.
JSA Way: We are a purpose-driven organization, and our real measure of success is to make your nonprofit better off with us in your life. For investing, we strive to beat a benchmark across a market cycle after paying our fee.
11) What experience and designations do you have, and may we see your ADV?
Build confidence that the advisor has the knowledge and capabilities to serve your organization. The ADV disclosure explains the firm, fees, and any disciplinary action against employees, plus education, experience, designations, and qualifications.
JSA Way: Our team has over 45 years of combined experience. Jason Schmitt, Adam Sweet, Chris Johnson, Erik Barker, Brooke Wolverton, Lucy Cuff, Katie Schaller, and Leah Halvorson are CERTIFIED FINANCIAL PLANNER® professionals, and Rich Vanden Boogard and Adam Sweet are holders of the right to use the Chartered Financial Analyst® designation. We believe these are the most valuable designations in our profession. You can check our ADV here. You can also review brokers on the FINRA site and advisors on the SEC site.
12) How will our board work with your team, and would we be a good fit?
Board and committee membership turns over, and each advisor provides a different “fit” for the organizations they serve. Understand who attends meetings, how often you will meet, and how a new treasurer or committee chair gets up to speed.
JSA Way: We work together as a team, and you’ll get to know our team of advisors. We meet with your committee at least annually and more often as needed. We have built strong relationships with nonprofit clients that:
- Value a long-term partner who helps the board make better decisions over time
- Are willing to adopt a written investment policy and then follow it
- Anchor investment decisions in the mission, not individual preferences
- Want their investments to work as hard as their staff and volunteers do
- Invest for a purpose and focus on the long-term
- Accept feedback or advice
- Communicate openly and have a positive attitude!
