As a fiduciary, do you have a roadmap to success for yourself and your not-for-profit?


April, 2013 |

“The benefit of a properly structured IPS is that it acts as a guidepost, allowing for your organization now and in the future to know how and why assets are invested, in a systematic way.” —Jim Pratt-Heaney

Many individuals are actively involved in a variety of not-for-profit organizations through their own family foundations or other outside entities. These organizations have helped countless individuals, as well as our environment. Yet fulfilling one’s passion and being involved with not-for-profits does come with some liability. In particular, if you are on the board or investment committee, you are a fiduciary and have accepted responsibility for the interests of the particular organization.

A fiduciary is legally responsible for managing the affairs and assets of the organization to a professional standard of care, which typically involves more than an average per-son might expect. Without diligently meeting these standards, a fiduciary may expose himself or herself to personal liability. Good intentions are not a buffer, and proper documentation and compliance is important.

By definition, a fiduciary is some-one who “is in a position of authority whom the law obligates to act solely on behalf of the person [or organization] he or she represents and in good faith.” (Merriam-Webster). To this end, an understanding of the organization’s mission, as well as the trust provisions of the entity, is an essential starting point. Next, when dealing with the assets of the organization, an investment policy statement (IPS) prepared with assistance by professional investment people and legal counsel, is a must. There should be documentation as to how the money managers were chosen, as well as a review of controls on the accounting of investment expenses. The ongoing monitoring of managers should be documented to avoid conflicts of interest between board members and investment decisions.

The task of structuring an investment policy statement (IPS) is important, as it provides a framework defined by general investment goals and objectives. Also included are the strategies to meet these objectives:

  • Financial asset allocation and annual contributions and distributions
  • Investment objectives time horizon and risk strategy
  • Asset classes to be used and those to be avoided
  • Asset allocation targets and rebalancing ranges
  • Monitoring and control procedures

The benefit of a properly structured IPS is that it acts as a guidepost, allow-ing for your organization now and in the future to know how and why assets are invested in a systematic way. This allows you to stay focused over the long term during short-term volatility and provides a basis to monitor the performance of both the assets and those individuals who are managing them professionally.

Realizing that you are a fiduciary for a not-for-profit, and using a blueprint in the form of a properly structured investment policy statement, should provide you with greater confidence in supporting the goals of the organization and those it seeks to help.

Download the PDF here: As a fiduciary, do you have a roadmap to success for yourself and your not-for-profit

Jim Pratt Heaney

Bill is one of four founding partners of Coastal Bridge Advisors.   Bill leads the Corporate Executive Services, Lending and Alternative Investment operations of the firm. Bill is also responsible for overseeing business development and the firm’s west coast operation. With a career spanning almost 30 years, Bill began his career at Merrill Lynch in 1986. …

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