Why Non-Profits Should Work With A Fiduciary Asset Manager

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Is it time to move long-term money away from the bank? The inflation rate in 2021 of the US dollar is 6.2%*, the highest it’s been in a long time. (*Source: US Inflation Calculator)

Needless to say, if you are not investing money your purchasing power will continuously shrink. 

Why Do Non-Profits Need Asset Management? 

No one in this world is excellent at everything they do. What’s even more is that no one can do everything themselves. 

So when the director of a non-profit is trying to do everything themselves and is not willing to hire help, they become the bottleneck of their business. 

One area that a director could really use help with is with investing their organization’s longer-term money in a way that provides the potential for healthier returns. 

I see too many organizations that allow their hard-earned money to be eaten away by inflation in traditional bank investments. 

Plus, the other huge advantage of delegating asset management is that it will free up a lot of time and mental space for the director to spend his/her time fighting for their cause. 

At the end of the day, the money was raised and donated to help a specific cause, and the director can’t do that to the best of their ability if they are concerned about investing their money. 

Always Make Sure You Are Working With A Fiduciary

Unfortunately in this world, finances are an uncommon thing to talk about. With so many different opinions and strategies around, it’s easy to get overwhelmed and just shut down. 

No one wants to make a bad decision, but not making a decision is the worst option.

So here’s the thing, asset managers that are fiduciaries are not allowed to sell products nor receive commissions. The good news is they are legally obligated to take actions that are in the client’s best interest. Their job is to work for you, not sell to you.

On the other hand, stockbrokers, broker-dealers, bank advisors, and insurance agents do not have to act to this same standard. 

The best way to figure out if someone is a fiduciary is to search for them on the SEC database, and/or the CFP Boards’ site. This way you can know from a trusted source if your advisor is fiduciary or not. 

Do They Have A Tried And True Process Of Investing?

Giving money to people is an act that takes a lot of trust. 

Why should you trust a financial advisor? Just because they have the correct credentials doesn’t mean they are the best in the business. 

What I recommend is that you look to see if they have a tried and true process that they have refined over the years. 

Some important questions to answer are:

  • What have they done in the past?
  • What are they doing now?
  • What portfolio options do they offer?

These questions will lead you to understand how knowledgeable they are. 

Not to mention, you should ask them about their process and how they created their process. If they can tell you about past decisions they have made, what they learned and how that has altered their current investment plan, you are talking to someone who knows their stuff.

So next on the agenda is to figure out what portfolio options they offer. There is no “one size fits all” investment plan. Everyone has different goals, on different timelines, and wants a different level of risk. 

If they have a few options with an explanation for why each portfolio will satisfy the needs of different clients, it’s a good sign. 

Local Presence

Financial advisors want to work with the biggest investment accounts so they can make more money. But there comes a point when an advisor cares too much about the capital and not enough about the reason that capital is there in the first place. 

When investing with an advisor it is great to be able to relate to them and be fighting for the same cause. 

One good way to know if your advisor cares about you and your cause is to see how active they are in the community. If they are passionate about their hometown and community, then odds are they will care about your specific cause.

The good news is that we work with non-profits and we are always available to help anyone understand our decisions. For example, we help the donors understand the benefits and tax strategies for donating to non-profit organizations. Being available and personal also allows us to help with the donation process.

This allows the director to have complete transparency with their finances and to convince donors to contribute more. 

How Do They Structure Their Fees?

A good way to figure out how someone will act is to understand what they are incentivized to do. 

With financial advisors, there are a few common ways to structure fees. Some fee structures inspire the financial advisor to close more deals and some fee structures inspire the financial advisor to generate a healthy ROI. 

The most common way that financial advisors structure their fees are: 

  • Commission
  • Fee plus Commission 
  • Fee-Only

Commission 

This type of financial planner only makes money off specific services or products. If you choose to invest in the portfolio or products the advisor offers you, the company offering the recommended product typically pays your advisor. 

His or her incentive may be to guide you to an investment that offers higher commissions. Some of these investments may be sound and entirely appropriate for your situation. Others may not be good investments for you, but offer larger commissions for the financial planner. 

It can also be difficult to tell exactly how much you’re paying because the loads, fees, and commissions are often not broken out as a separate line item. 

Fee plus Commission 

You pay a fee, usually based on the value of your portfolio, to get ongoing advice and service. The fee is ongoing, but your financial plan may also include items that may pay commissions to the financial planner. 

The financial planner will receive his fee and receive more money if you choose to implement certain portions of your plan that pay him commissions. This approach makes it difficult to calculate the true cost of financial advice.

Fee-Only 

They cannot accept commissions from third parties. Their only compensation comes from fees clients pay them. 

These financial planners can also recommend the best products and services for your situation, and you don’t need to worry if their recommendations are being influenced by how much they make from them. This method of compensation encourages objectivity because the planner is able to focus solely on your best interests.

The bottom line is that they make more when you make more.

What Does It All Come Down To?

A good asset manager is one of the most helpful people that a non-profit can have. They can help your organization have a better chance of accomplishing its goals.

Not only that, but a good advisor can educate potential donors.

I hope we have shown the importance of non-profits working with a fiduciary asset manager/advisor. If you have any questions or are looking for a fiduciary financial advisor, we would love to talk to you

I help individual investors build and protect their wealth.

Disclosures

WealthGuard Advisors, Inc. is a Registered Investment Adviser.  California Life Insurance license numbers: Casey Murdock #0F01130.

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