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Dec 9, 2010 2:43 am

Hello all! I am relatively new in the industry and have recently come across an opportunity to manage a non profit organizations assets. I was going to propose a fee based wealth management platform with a moderate risk tolerance portfolio (60% equities and 40% fixed income sources) and reduce my fee to somewhere around 75 bps. I was going to avoid investments in the tobacco sector due to the nature of the organization.  Besides a fee based account, is there anything else that I can propose to the organization? (ex. REITS) Do you feel my preliminary thoughts are about right in terms of my proposal and fee and is there anything else in this market that I should be aware of? Does anyone know anything about the impact of taxation on investments in a non profit organization? I know this is not a widely popular area of expertise for advisors so any help would be wonderful. Thanks for the help in advance! 

Dec 14, 2010 12:15 am

Anyone??? I will now be accepting wrong answers as well... Even if you aren't aware and could offer an opinion, it would definately be welcome. Thanks guys!

Dec 14, 2010 1:08 am

You don't have to worry about taxation of the investments since you are dealing with a non profit organization so you can be as tax inefficient as you want to be.  How about stocks and do covered calls on them for the stock portion??

Dec 14, 2010 1:50 am

Familiarize yourself with UPIA for your state - some states have adopted it and some have done it with modifications, etc.  (Uniform Prudent Investment Act) and/or UMIFA and UPMIFA around endowments.  Use a firm IPS and if it is a decision by committee, don't expect to win this business right away if you don't know the lingo.  You'll be put up against people who know this business inside and out if it's a board level decision or assets worth while. If there is  CPA or attorney on the board they will expect you to know this. 

 Don't undercut your fees because they are non profit.  Just because they are non profit does not mean that they should know KNOW the cost of services and KNOW the cost of goods.  Non profits CAN profit - it is how the profits are employed that distiguishes them from profit organizaitons.  Non profits simply cannot benefit shareholders or owners and must reinvest profits back into the organization's infrastructure, operations or services.

You aren't doing yourself any favors if you price yourself so low that you can't stay in business trying to help them!

Dec 16, 2010 3:12 am

Thank you guys, you have been a big help. I am have a meeting with the board in a few weeks. I appreciate all of the help!

Dec 17, 2010 4:41 am

I've found that once you think you are close to landing some big fish like this, you're not as close as you think. Often times, there is some inside connection, political, or bribe involved. Same goes for large pensions, other big pools of money run by some gatekeeper or board of directors. By all means, do what you can to get it, but don't count your chickens...

Years ago, I was actually having some success in this area. I landed a couple big operating accounts for unions, a pretty large corporate cash account. I got run out of town, and I think part of it had to do with the fact that I was a young gun newbie, scaring the older/bigger guys. So, they got the accounts later, and maybe they're the ones that wound up with the bigger pension money I was hoping to have a shot at someday. This was in a town that had a ton of Union labor, and high science industrial stuff going on.

Ever since, I've focused on building relations one brick at a time, and I got only one major account that would have an impact on revs if they left me.    I'm now in mid net worth ville, mostly retired folks.

Dec 20, 2010 4:04 pm

Hey BigFirepower, thank you for your input. I actually have an inside connection and thats how i am getting my foot in the door. It is not a huge case but it is a nice start. I am sorry it didn't work out for you. Where I am from, there are millions of not for profits in my area. I just started to use my afternoon propsecting time to target them as well. Made a few good contacts. Starting with smaller organizations and will be looking to grow with them.

Dec 20, 2010 4:53 pm

The first one is the toughest. The stuff I was working on back then, was just starting to really fall into place. So, if there are quite a few of them, you might have a good thing going, if you can get some traction. But, really, it isn't pretty in that realm sometimes, potential for conflicts of interests, etc.

Dec 21, 2010 3:13 pm

I have learned quickly about the conflicts of interest. When I first started looking at the larger organizations, some of the board members were also handling the investments. Another difficulty I have found is that some of the smaller ones that I recently have targeted use all their revenue to support their cause. I really can not argue with them against that but for the longevity of their cause they need a more sound financial situation. Very stubborn people at times....