By Dotti Bechtol and Michael Fertig
Are you involved with or have a favorite charity? Is that charity doing all it can to preserve capital and generate income so that it can continue to fulfill and sustain its mission?
The last few years have produced many challenges for nonprofits. The state of the economy has donors and grantors turning conservative and more selective in their giving. It’s more important than ever for endowments, board-directed funds, and other surplus capital to be protected and conserved.
Many engage a professional to help with the critical job of managing the organization’s endowment and surplus funds. Investment advisors can help nonprofits preserve their capital by using their expertise to bring together all the pieces of the financial picture to coordinate with the strategic plan of the organization. By taking a holistic approach toward financial management, an ethical and thorough advisor will work with boards of directors and executive directors to provide clarity in the financial planning and investment process. The advisor will combine its knowledge, methodology, and experience to collaborate with the board to develop a sound approach for helping to meet the goals of the organization. Advisors are trained, certified, and held to a high ethical standard requiring them to put the organization’s interests above their own.
The process begins with ensuring the advisor, the executive director, and the board conduct a thorough discovery process and gain agreement on a complete understanding of the nonprofit’s needs, goals, challenges, and opportunities. A one-size-fits-all approach doesn’t work. Each organization is unique; and there must be well-established communication between the organization and the advisor.
The discovery process must include a discussion about functional segregation of assets, spending needs, and risk tolerance. That discussion will produce a plan on how to protect and grow the funds by allocation of assets and appropriate diversification to keep risk in line with the tolerance level of the organization.
A financial advisor will also bring value-added services to the relationship to build what should be a long-lasting partnership between the advisor and the nonprofit. An example of a value-added service would be helping with governance issues such as ensuring the organization has a sound Investment Policy and Guidelines Statement and guidance on how to galvanize the efforts of the board.
Working with a financial advisor helps ensure that, as a board member, you are doing all you can to protect the assets of the organization and fulfill your fiduciary duties. A recent study on similar fiduciary assets in retirement plans conducted by the consulting firm of Aon Hewitt, and advice firm Financial Engines, shows that the median annual return with the help of an advisor is almost three percentage points higher than the return for those investing on their own, even after taking fees into consideration.
You probably hire a mechanic to repair your car; an architect to design your building; an accountant to understand your taxes. Consider working with an investment advisor to help achieve the goals of your nonprofit. All advisors are not the same. Consider using an advisor that is fee-based. That helps avoid any potential bias that may come from commission-based products.
As a community, we should each do our share by supporting our nonprofits that provide such necessary and valuable services. Join a board, make a donation, volunteer for your favorite charity because a healthy nonprofit sector is necessary to make our community a better place to live, work, and raise our families.
If you’d like to discuss what is keeping your favorite charity from efficiently achieving its mission and what interferes with your organization’s ability to meet its goals, please call Dotti Bechtol, Fiduciary Asset Business Development Officer at 412-227-3208. Dotti will be happy to discuss their nonprofit services, or you can email her at [email protected]. To learn more about Fragasso, visit www.fragassoadvisors.com.
ABOUT THE AUTHORS:
Dotti Bechtol is Fiduciary Asset Business Development Officer of Fragasso Financial Advisors, a fee-based investment management and financial planning firm headquartered in Downtown Pittsburgh, named by Barron’s as one of the top 100 advisors in the United States1. Prior to joining Fragasso, she spent 15 years in the nonprofit sector, serving on Boards and, for 7 years, as CEO of a health-related 501(c)(3). She uses her prior experience to develop clients in the nonprofit community by guiding them toward understanding how to preserve capital and generate, at a minimum, sufficient income to meet their needs. She graduated summa cum laude from Chatham University with a BA in Economics and Psychology. Dotti is on the Advisory Board for the Pittsburgh Vintage Grand Prix, races in their annual race in Pittsburgh and instructs individuals on how to drive on racetracks. She also serves on the Board of Governors for the Rivers Club in Pittsburgh.
Mike Fertig is Managing Director, Foundation and Endowment Assets at Fragasso Financial Advisors. He works with Dotti in developing clients in the nonprofit community that would benefit from Fragasso’s investment management and fiduciary consulting. He joined the firm in 1993. Michael is a graduate of Slippery Rock University with a major in Political Science. He is currently working toward his CFP® or Certified Financial Planner ™ designation through the College for Financial Planning in Denver. Michael serves on committees for the South Hills Chamber of Commerce and also coaches youth baseball through the Bethel Baseball Association and youth football for the Bethel Park Junior Hawks.
1-Factors included in the rankings: assets under management, revenue produced for the firm, client satisfaction, regulatory record, and philanthropic work