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Outside expertise can guide nonprofits to better investments

Mark Daly: Investing
Mark Daly: Investing

Is it possible for a paid consultant to add value to a nonprofit board and improve decision making for the investment committee?

Many board members reject the idea because of the cost, but a qualified consultant can be worth his or her weight in gold, especially if your nonprofit lacks members with experience and knowledge of complex investments.

Board members who serve as fiduciaries are charged with the prudent management and oversight of other people’s money. All volunteer boards eventually experience internal disagreement. Emotions, politics and power can cause a breakdown in the decision-making process.

Consider seeking a professional second opinion to validate your investment thesis. We all have certain biases, egos and opinions about investing, and perhaps a third party could minimize internal friction, then allow you to move forward with the business of designing a portfolio that meets your long-term goals and future obligations.

Changes in the economy and the interest-rate climate require constant monitoring and evaluation. Without an investment sound policy, it’s possible to make mistakes by selling out in response to uncertainty, market volatility and uncontrollable events. The recent post-election “melt up” in stock prices is a case in point.

For nonprofit boards, consultants must demonstrate considerable value that far exceeds the cost of the consulting fee. The current obsession with fees and expenses can lead volunteer boards to become penny-wise and pound-foolish. One good decision, made at a critical time in the portfolio, could cover the consulting fee for many years.

Focusing on creating continuity and consistency for future board members helps foster wise decisions for those with little knowledge or experience of investing. Volunteer members come and go, but a robust policy and philosophy will stand the test of time.

Creating a basis for rational decisions during stressful and volatile times can be a lasting gift for your foundation, endowment or nonprofit organization, and especially those who benefit from your wise leadership and generosity.

Mark Daly is managing director, investment officer, Daly & Vachek Investment Consulting Group of Wells Fargo Advisors. dvicg.com; 333-1433. This column appears in the Dec. 21, 2016-Jan. 17, 2017, edition of the Idaho Statesman’s Business Insider magazine as part of a special section on nonprofits. Click here for the e-edition (subscription required).

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