Nonprofit organizations that have existing or possible endowments have a lot of considerations to make. When it comes to assisting an endowment’s growth, investing can be a great addition to individual donations. Forming an investment committee is one of the most important steps toward effective financial planning and long-term sustainability. Not every nonprofit will have a large selection when it comes to finding willing and capable members, but there are certain qualities that could be indicators of a strong investment committee.
Who Should Be Part of the Investment Committee?
Forming an investment committee can be a great tool for the potential growth of an endowment. Committee members will play a vital role in overseeing the endowment’s investments, and their decisions can have long-term impacts. It’s easy to make a list of desirable resume qualifications, but the process of finding suitable volunteers is more complicated. Not everyone will have the necessary skills like a deep understanding of investment strategies, asset allocation, or risk management, but there are other skills that could be equally valuable.
Skills like negotiation, collaboration, and flexibility are incredibly important for any board, but especially when working with an extremely diverse set of expertise and backgrounds. Even if the board members don’t have a working knowledge of investment strategies, their willingness to learn and contribute can provide unique perspectives that benefit the overall mission. Members who are willing to invest time in training and staying updated on best practices could end up being the committee’s strongest asset.
Training & Education
Even if some committee members have a long career in working in the financial sector, it’s still important that everyone undergoes the necessary training to enhance their understanding of investment principles and endowment regulations. Having the expectation of self-study may not provide consistent results, so developing a robust set of outside resources like workshops, seminars, or continuing education programs can build knowledge and rapport. When members have prior negative experiences with investments, it may be more challenging for them to work with the group to come to a consensus. Informed committee members are better equipped to follow through with their strategies and feel confident that their choices are aligned with the organization’s goals.
Time Commitment & Expectations
Managing an endowment and being actively involved in the relevant training that accompanies it requires a significant time commitment from each committee member. Before asking someone to dedicate their time to the committee, expectations, roles, and responsibilities need to be clearly and realistically defined. Many people may feel excited about contributing to the organization’s mission without fully understanding that regular attendance and performing due diligence as committee members are critical to the success of the endowment and the organization. Activities like board meetings, creating reports, and monitoring investment performance can be extremely time consuming. Establishing a culture of accountability, professionalism, and transparency will increase the effectiveness of the committee and ultimately make more efficient use of everyone’s time.
Consider Outside Advisors
If each committee member invests time and effort into training, education, and professionalism, there are still times where complex or especially large endowments require outside guidance for effective management. Professional investment managers can provide their expertise and share their industry knowledge to assist with creating strategies, asset allocation, and keeping everyone informed on risk management. At Fairlight Advisors, we work with nonprofits like yours to help enhance the decision-making process for investment committees through education and strategic action. If your organization is looking to collaborate with external advisors, call 1-844-309-6248 for a consultation.
Talk to the financial experts at Fairlight Advisors to learn more about managing your nonprofit’s investments. Schedule a free consultation today!