The RESOURCES of a nonprofit organization are vast — your staff, leadership team, board of directors, community reputation, financial assets, and your facility are just a few examples. Numerous stakeholders are dependent on your efficient allocation of those resources to fulfill your mission and meet community needs in a sustainable fashion. So, while the resources are vast, managing them can also be incredibly complex. If you are an Executive Director, CFO, or Board Member, you will have to make critical decisions that impact all your resources. Today we explore how a financial advisor can prove very helpful and possibly become your nonprofit’s best friend.
Do We Even Need a Financial Advisor?
Some organizations take the approach of managing all their financial resources “in-house.” The CFO, Finance Committee, or Foundation Board may be equipped with several financial professionals or other investment-experienced members. While that model can be successful for some, it can be challenging for others.
The financial advisor brings exposure and access to opportunities in the investment markets and insights that a more casual observer can miss. Furthermore, an independent financial advisor can be added or removed based on the health of the relationship, which can be a bit more difficult with a staff or board member.
Most boards meet on a quarterly or semi-annual basis. When financial adjustments are required, you may not have the luxury of waiting until the next appointed meeting of the group. A financial advisor functioning within a well-crafted Investment Policy Statement can pay for themselves quickly.
If your organization has over $200,000 in cash reserves,
you can benefit from a financial advisor.
If your foundation/endowment has over $1 million in assets,
a financial advisor is a critical fiduciary and part of your team.
So, How Should We Choose a Financial Advisor?
- Start with who you know. If we are considering a new accountant or mechanic, we start with those we know, or seek the recommendations of others we trust. Networks of connections are powerful and influential. Leverage existing relationships or known financial professionals to start. What has been the experience of others? Ask for an introduction if needed. People love to tell their story to friends and new acquaintances.
- Strongly consider those dedicated to serving organizational needs like yours. We don’t go to our favorite bakery to get a steak. Likewise, seek a firm with a deep history of success and ongoing commitment to the services you seek. Some may try to impersonate experience and know-how. Be sure to seek demonstrated success. It’s totally acceptable to ask for references.
- Invite them to visit you. As nonprofit leaders, we love to build relationships and spread our reach to new contacts and networks. Engage with potential partners to see how good the fit could be. Do they understand your mission? Are they magnetized by your cause? We want that same high-level of enthusiasm and engagement to exist throughout our relationship.
- Ask for a proposal. As professionals in the field, we can quickly spot needs and opportunities to be a source of help. Request the candidate financial advisor to draft a proposal for consideration. In 1-3 pages you will receive a concise summary of the scope of a relationship, anticipated costs, and expected value to be received. Now your staff or committee is prepared with something to begin an assessment and identify alignment between the parties.
At this stage, we are frequently asked if an organization should conduct a full-blown RFP (Request for Proposal). While most might answer “Yes,” we see more organizations moving away from the traditional RFP process. Because, more information about competing firms is available today than ever before, the days of getting 60 to 100-page responses from 7-10 candidate firms are dwindling. Even when “equipped” with such data and responses, most board committees are unable to uncover meaningful distinctions between the responding firms.
If your financial assets exceed $5 million and you have a committee that is highly skilled
at conducting an RFP process, consider that avenue.
If your financial assets are less than $5 million or you do not have a committee highly skilled with an RFP process, either go with an alternate selection methodology or
hire a consultant to help.
Given the complexity of managing a nonprofit organization and its expansive resources, a financial guide can be a critical contributor to your present and long-term sustainability. Your professional advisor, as your teammate, can spot financial blind spots and help you successfully circumnavigate the landscape. Moreover, with an independent, outside observer and his/her honest and open communication with your staff and committee, your financial advisor may really become your organization’s new best friend!
We invite you to learn how our leadership, expertise, and support enable non-profit organizations to take great care of their total financial situation — to navigate economic and financial uncertainties.