Best Practices for Evaluating Your Investment Advisor

Aug. 31, 2022

Non-profit boards and investment committees have an important fiduciary responsibility. They must always do what is in the best interest of their organizations for their investment portfolios. This responsibility even exists when management decisions are delegated to third party investment advisors.

The fiduciary responsibility, created by the Uniform Prudent Management of Institutional Funds Act—the template law governing management of endowed assets in most states—requires the exercise of reasonable care, skill, and caution in selecting, instructing, and monitoring “agents” (i.e., those with discretionary authority to invest your portfolio).

As you can tell, this is no small task. How does one go about evaluating or re-evaluating an investment advisor? Consider these best practices at your organization.

Are you meeting your goals?

Most non-profits look for investment managers that are meeting their portfolio goals today, and whom they believe are on track to continue meeting them into the future. Most of the time, a holistic view of performance, risk, asset growth, and withdrawals can go a long way toward contextualizing your organization’s goals.

In other words, answering these questions will help you understand whether your investment managers are up to snuff. For example:

  • Is capital growth a priority for your portfolio, and how much growth has your portfolio experienced?
  • Is your portfolio taking withdrawals, and if so, have your needs been met or have withdrawals grown over time?
  • What is your organization’s average annual return target and is that target being met?
  • How does performance compare to your investment benchmark and against peers?
  • Do you measure performance net of investment management fees?
  • Over what time frame are you assessing results and is there a bias toward a certain type of market environment (e.g., is performance being driven by a bull or bear market for stocks or bonds)?

What level of engagement is right for you?

If it isn’t yet clear, meeting your fiduciary duty is an ongoing exercise.

Engagement with your advisor is crucial to helping board members stay informed and make timely decisions. Your advisor should be familiar with your organization and its mission, and they should understand why your goals are what they are, including how they plan to meet them.

There should be clear expectations up front for how much time and with what frequency the board would like to review their portfolio. Board members should also assess the advisor’s ability to communicate between meetings, whether they’re overburdened with too many clients, and their ability to respond to requests quickly and efficiently.

Does their support go beyond portfolio management?

Your advisor should be evaluated beyond only results, but also in the total value they bring to your organization. Besides portfolio management, other areas of support might include:

  • Cash Flow Modeling and Projections – to determine the range of future outcomes and help the board make important decisions for how to invest and withdraw assets
  • Policy Design – helping your organization with establishing and updating investment, spending, endowment, gift acceptance, and other important policies
  • Fundraising – generating ideas for donor development and planned giving strategies
  • Education – to help keep your board and staff up-to-date and informed about your portfolio, the market environment, training for new board members, and best practices across the non-profit space

Is it time to take a fresh look?

Almost all non-profits use a formal investment policy. Yet, according to a 2019 study, roughly one-third of large organizations (more than $10 million) and nearly half of small organizations (less than $2 million) conducted no formal annual review of that policy[1]. Change happens. Your investment advisor should help your organization conduct a regular reaffirmation of its policies.

This regular review can also extend to your broader advisory relationship. Some non-profits choose to conduct a new request for proposal (RFP) for investment services every 3- to 5-years. This can help bring board and committee members, especially new ones, up to speed on your options, as well as provide a point of comparison to how your portfolio is being managed today.

Investments results, a high level of engagement, a broad array of services, and regular affirmations are crucial to helping your organization get the most out of its investment advisory relationship. Now may be an excellent time to evaluate your advisor based on these best practices.

Learn more about RFPs

The new year is a great time to evaluate your investment advisor. Get started by learning the basics in this 30-minute on-demand webinar, Navigating the RFP Process. Plus, when you register, you’ll also get access to our Sample RFP and Investment Advisor Scorecard that you can review with your Investment Committee.

Get started

[1]The Study on Non-Profit Investing 2019:

This material contains the opinions of Manning & Napier Advisors, LLC, which are subject to change based on evolving market and economic conditions. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. The reader should not assume that investments in the securities identified and discussed were or will be profitable.


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