Advisors and Not-For-Profit Boards

By Rosemary Smyth, MBA, ACC, Author on Wednesday, September 3rd, 2014


There are many advisors that volunteer, give back to their community and use their skills and talents to become board members for not-for-profits, foundations or endowments. They bring their strong financial background to the table and usually take on the role as of treasurer or part of the finance committee for the charity. Their intention is to contribute in a meaningful way, while also being exposed to the pillars of the community and other liked-minded people at events. They are building their network by wearing their “not-for-profit hat” and connecting with others to discuss what’s happening at the charity.Before you enthusiastically jump in to sit on every not-for-profit board in town, there are a couple items to consider- mainly conflicts of interest and the role of the charity’s investment advisor.

If you do choose to be a board member for a not-for-profit you’ll be required to disclose any conflicts of interest and asked not to solicit business from other board members. There are many ways that conflicts of interest occur on boards and the standard rule is that if you think you may have a conflict of interest, - you probably do.

Some boards are very clear about their director’s roles and responsibilities and do not allow advisors who are current board members to also act as a charity’s investment advisor. They also may have policies that no alumni or society members can act as the charity’s investment advisor either. To add to that list, non “arm’s length” contacts of board members may also be prohibited from acting as the charity’s advisor.

If you are an advisor and are approached by a not-for-profit to respond to a request for proposal (RFP) as they are looking for an advisor for their assets (and you are not on their board) there are a few things to keep in mind.  

The charity will have selection criteria for advisors that will include:

  • Experience

  • Track record

  • Credentials

  • Willingness to attend meetings to give updates on the portfolio

  • Firm’s history

  • Experience with other not-for-profits

  • Fees

  • Services

 
To prepare for a RFP presentation for the not-for-profit, remember that for various reasons, they may not have a clear investment policy or up-to-date board manual. They may also lack resources for audits, lack accreditations, lack directors’ insurance for board members, lack structure for big donations, have board members with different levels of risk, have board members with strong beliefs about investing in a socially responsible way and have board members that are unaware of their fiduciary responsibility.

When the charity does their due diligence, they’ll also be asking their current board members if they are clients of the selected advisor, as that is also another conflict of interest. The not-for-profit would also be disclosing which board members have controlling interest in companies which would preclude the advisor from investing.

There are many ways that advisors can be a resource for not-for-profits and give suggestions as to what areas to focus on. For example, they can set up an investment policy. Try to avoid giving a board a lengthy list of changes all at once as that would be overwhelming, especially if they only meet once a month. Each board is different and can change dramatically as board members come and go. Some boards are quite reactive and only deal with issues when they arise, which can be quite challenging.

Advisors often say that once they have sat on a board, they are more willing to become a board member for other charities as opportunities arise. If you currently are a board member for a not-for-profit, ask to be profiled on the not-for-profit’s website and update your company profile, LinkedIn profile and brochure materials to reflect your role.



Rosemary Smyth, MBA, CIM, FCSI, ACC, is an author, columnist and an international business coach for financial advisors. She spent her career working at leading investment firms before pursuing her passion for coaching. She lives in Victoria, BC. Visit her website at www.rosemarysmyth.com. You can email Rosemary at: rosemary@rosemarysmyth.com and follow her on Twitter @rosemarysmyth
 

 
 

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