Something’s Gotta Give

A lot of charitable-giving organizations may be struggling financially. If you play it right, you could win some new clients.

In a few weeks, those brave enough to open their year-end investment account statements will likely be severely disappointed with the results. This is certainly true for the charities and foundations that have built up seven-, eight-, or nine-figure reserves, but are facing a perfect storm of events that could wash away those significant sums.

Current conditions are so dreadful that the year-end meeting of any charity or foundation “investment committee” should ideally be held in a psychiatrist's office, or at the corner bar.

But you don't have to dispense any pills or booze to help these groups out. Instead, assisting in an evaluation of their current situation and providing acceptable alternatives should be enough to soothe their nerves. And your mood (and money under management) may be elevated considerably in the process.

The Situation

According to a recent survey of charities made by the non-profit tracker Guidestar, respondents anticipate that the current financial crisis will bring a rare decline in giving during the fourth quarter of 2008, when compared to the same period last year.

That unsurprising drop-off will be exacerbated by an expected increase in the demand for services provided by charities and other non-profits in the coming months and years.

Ideally, the growing gap could be filled by well-heeled donors digging even deeper into their respective pockets. Or perhaps the local, state and federal government agencies could shift resources to where the money is needed most.

But these sources are suffering from the same economic uncertainty, income reduction and asset shrinkage as the rest of us, and understandably are reticent to give away money that they don't have, or will never get back.

The “Rainy Day” Is Here

Which brings us to the funds that charities and foundations have squirreled away for just such an event. No matter where they previously chose to invest reserves, it's likely that they, too, are experiencing some degree of statement shock.

The aggressively invested assets have been roundly pasted — indeed, even overseers of the illustrious Harvard endowment fund recently sent out a letter warning of “unprecedented” losses in the portfolio.

Those organizations that were shrewd enough to avoid the stock market meltdown may be in no better shape, as many of the supposedly safer fixed income instruments they employed could be down, or worse yet, out.

You To The Rescue

Before you can bring these organizations and their assets out of the pits, you have to know where to find them. The best place to start is the aforementioned Guidestar (www.guidestar.org).

Registration at the site is free, and once you've signed up you'll be able to search by group name or geographical location. Clicking through to each listing's page provides basic information, such as the group's mission and contact information.

But the real nugget of knowledge you need should be obtained via a link to the organization's most recent IRS Form 990. This document will detail the income, expenses and outgo of the non-profit.

Most importantly, it contains the balance of the entity's investments, as of the most recent filing date. It also may contain the names and addresses of the current board of directors or trustees.

Note: If you want to avoid having to pore over the raw data of the thousands of charities in your area, you can search more efficiently with Guidestar's “Premium” service for $1,000 per year, or $100 per month.

Calling Them Up

Once you zero in on nearby charities and foundations that have significant enough assets, advocates or a personal interest to make it worth your while, your next step is to contact them to express your interest in helping.

Hopefully, the organization's investment committee or board has already been in discussions about any reaction needed to the recent calamity. At a bare minimum, they should have a meeting scheduled for after the first of the year.

An aggressive sales pitch for your services won't bring you any invitations to get involved in the deliberations. Instead, ask if there is anyone looking after the charity's investments, and if the group would like you to show up for a free, confidential, no-obligation listening session and review.

The Meeting

In some ways, meeting with a charity or foundation investment oversight committee is very much like meeting with individuals, or corporate retirement plan clients.

But there are differences. First, there may be a wide range of investment experience and acumen on the board, and it's usually the loudest voice that holds the most sway, not the wisest.

Second, their current money manager may have been selected for reasons more political than fiduciary. It might be an individual or institution that is a big donor to the organization, for example, or one favored by a large benefactor.

So use delicacy and decorum. But if you can ensure that the tools used to monitor the endowment include basics such as an investment policy, proper asset allocation, and appropriate benchmarks, you'll help the supervisors protect themselves as well as the organization.

Of course, they wouldn't have allowed your proverbial nose under the tent if they were completely satisfied with their current money manager. So, have at least a brief answer ready for the question, “What would you do differently?”

The Proposal

Here's where you earn your keep, because you may be facing some members who are convinced that this is the stock market buying opportunity of a lifetime, even while others express concern about the very foundations of capitalism.

Frightening though these times may be, most boards understand the need for growth by necessity. In fact, the most recent Commonfund Benchmarks of Foundations study found the average targeted annual return rate was 8.5 percent.

So you can certainly talk about short-term volatility being the price of long-term gains (after all, they don't have a lot of high-yielding, ultra-safe alternatives at their disposal right now). Then leave the decision up to them as to how much risk they can handle in pursuit of their reward.

But once they quantify that figure, you can show them how to increase their net returns with better asset allocation strategies, as well as lower internal expenses (including yours).

Once the group is ready to make a change and decides you're the one with whom they want to work, the process may still take at least a few months to complete. Pressing the committee members to make up their minds is a good way to ensure the final decision won't be made in your favor.

You've Done Your Good Deed

Even if you don't end up winning a mandate to manage the charity's assets, at least you were able to demonstrate your financial advisory skills in front of several well-heeled and even-better-connected individuals.

That opportunity could lead to presentations before other charities in similar straits, or perhaps the chance to take over management of the board members' personal assets.

At the very minimum, your willingness to provide some direction and advice during these dire times will have earned you eternal gratitude from those concerned about the organization's future.

Maybe they'll even buy you a well-deserved drink.

Writer's BIO:

Kevin McKinley CFP© is Principal/Owner of McKinley Money LLC, an independent registered investment advisor. He is also the author of the book Make Your Kid A Millionaire (Simon & Schuster), and provides speaking and consulting services on family financial planning topics. Find out more at www.advisortipsheet.com

TAGS: Philanthropy
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