Investment account for nonprofit

[JoeWras]

Does anyone have experience with serving on a small nonprofit that has an investment committee and investment account?

Is it possible to get an account at VG, Fidelity or Schwab? Internet searches about this are surprisingly sparse.

I'm on the board of a fairly small nonprofit that has grown a pretty good pile of restricted money over the decades. It just languishes in sub 0.5% CDs. One is for an "endowment." Some endowment 0.5% is!

We had our first meeting of the newly formed investment and finance committee and people were surprised when I was throwing out the fact that we could stuff it in a 3 month T-Bill at 2.9% right now. So the question became, how to buy a T-Bill? I said, just go to your Fidelity screen and press a button.

Nope. The Treasurer said that won't happen because our investment account is some guy attached to our bank who primarily just cashes our stock gifts. She also somewhat sardonically said I shouldn't ask about the fee for that. She's going to ask if we could do the T-Bill thing, and what he would charge. But man, this idea of not being able to do a little self management is killing me. We just want to buy a few T-Bills or brokered CDs, and then for our longer term cash, perhaps VBIAX balanced fund. It nearly seems impossible to do this in the situation we have.

We know that even if it is possible, it will take a ton of paperwork and probably medallion signatures and all that. At least there are local Fidelity and Schwab offices near that could help. But is it even possible? Our treasurer asked someone at Schwab and they seemed to push back on her, talking about high fees and high minimums. Perhaps it was a misunderstanding.

 

[Dash man]

You might consider a consultation with an attorney that is familiar with nonprofits, foundations and charities. There could be state laws that vary from state to state on investments related to nonprofits.

 

[pb4uski]

I'm Treasurer of two non-profits.

One is a non-profit corp social club and we have both a bank CD earning a pathetic rate of interest and $10k worth of I Bonds bought in 2022 and we'll probably buy another$10k in 2023.

The other is a non-profit corp condo association and we have an account at Fido and can buy brokered CDs, USTs, TIPs, etc. The Fido account was set up before I became treasurer so I don't know was the process to set it up was. According to our declarations we can't invest in anything that puts principal at risk so we are limited to full faith and credit USTs, FDIC insured CDs and the like. While we had more there in the past we have less than $5k there now so I don't think there are any meaningful minimum balances required.

 

[OldShooter]

I've been involved with several nonprofits. Setting up the account(s) is no big deal; any broker/dealer will do it. Just fill out the forms. In my case the nonprofits had portfolios ranging from just $1M to about $20M. In all cases, we paid for FA services. There are IPSs in all cases, including lists of prohibited investments. There are multiple accounts for accounting convenience, like an endowment account and a separate board discretionary account. In one case where we do have a few million in equities, I insisted that the equities be segregated in a separate account, making for easy benchmarking of the FA's performance.

Why use FAs? As one investment committee member observed: We need a throat to choke.

IOW, if the market turns south and you are running the money, the nonprofit's board will tend to wonder whether the loss would have been smaller if amateurs weren't managing the money. If the market does well, then of course the amateurs just got lucky.

So, personally, I would stay away from running the money or would strictly limit investments to government securities.

 

[JoeWras]

I've been involved with several nonprofits. Setting up the account(s) is no big deal; any broker/dealer will do it. Just fill out the forms. In my case the nonprofits had portfolios ranging from just $1M to about $20M. In all cases, we paid for FA services. There are IPSs in all cases, including lists of prohibited investments. There are multiple accounts for accounting convenience, like an endowment account and a separate board discretionary account. In one case where we do have a few million in equities, I insisted that the equities be segregated in a separate account, making for easy benchmarking of the FA's performance.

Why use FAs? As one investment committee member observed: We need a throat to choke.

IOW, if the market turns south and you are running the money, the nonprofit's board will tend to wonder whether the loss would have been smaller if amateurs weren't managing the money. If the market does well, then of course the amateurs just got lucky.

So, personally, I would stay away from running the money or would strictly limit investments to government securities.

Thanks!

Yes, we are working on an IPS and prohibited investments. Only long term would be exposed to the market, and that would only be a portion. Mostly, this would be to get easy access to the current treasury market.

I poked around and found the Fidelity paperwork. It all makes sense and only looks a tiny bit more complicated than similar bank applications.