For many nonprofits, the question isn’t if professional investment guidance will be helpful; it’s when.
Early on, managing reserves and small investment accounts internally may feel manageable. But as assets grow, donor generosity increases, and boards ask more thoughtful questions, the responsibility around stewardship naturally becomes more complex.
So how do you know when it’s time to partner with an investment advisor?
This post walks through the common signs nonprofits experience as they grow, along with what an advisor can help with and how to choose the right one.
The Common Triggers That Signal It’s Time to Partner with an Investment Advisor
Here are a few indicators that partnering with an investment advisor could strengthen your nonprofit’s financial strategy.
You Have a Healthy Operating Reserve and Additional Funds to Invest
Many nonprofits reach a tipping point when they’ve intentionally built several months of operating reserves, often 6–12 months of expenses, to help the organization stay prepared for uncertainty, cash-flow disruptions, or unexpected events.
Those reserves are typically best held in highly liquid, low-risk vehicles, such as:
- Bank savings or money market accounts
- Money market funds used for short-term cash management
These types of accounts are designed to prioritize access and stability, allowing leadership to move funds as needed to cover operations.
The next question becomes: What about the dollars beyond those reserves?
Once your nonprofit has clearly defined how much cash must remain readily available, additional funds may no longer need to sit in cash-only accounts. While money market vehicles can be appropriate for short-term needs, they are generally not designed to support long-term growth and may struggle to keep pace with inflation over time.
At that stage, many organizations begin to explore a more intentional investment strategy for:
- Board-designated reserves
- Early endowment or quasi-endowment funds
- Excess cash not needed for near-term operations
Professional investment guidance can help:
- Clearly separate operating reserves from long-term investable assets
- Match each pool of money to the appropriate level of liquidity and risk
- Ensure cash remains accessible without leaving long-term dollars underutilized
In short, once your nonprofit is confident it can weather uncertainty, the focus often shifts from “How do we protect this cash?” to “How do we responsibly put additional funds to work in support of our mission?”
Your Board Is Asking Tougher (and Smarter) Questions
At some point, the conversation in the boardroom starts to change.
Instead of simply reviewing balances, board members begin asking things like:
- “Are we actually on track, or just hoping for the best?”
- “What happens to our funds if the market takes a downturn?”
- “Are these investments really structured to support the mission long-term?”
If this sounds familiar, that’s not a red flag. It’s a sign of a healthy, engaged board taking its fiduciary role seriously.
But it can also be uncomfortable.
Many nonprofit leaders find themselves trying to translate market movements, explain performance without much context, or reassure board members using basic account statements that don’t tell the full story. Over time, that can create uncertainty or even tension, despite everyone having the best intentions.
This is often the moment when informal updates stop being enough.
Professional investment oversight can help bring clarity to the conversation by:
- Providing consistent, easy-to-understand reporting
- Putting performance into proper context (not just numbers on a page)
- Answering questions and explaining the potential pros and cons of different moves
When your board starts asking better questions, it may be time to make sure you have equally strong answers and a structure that helps everyone feel confident moving forward.
You’re Receiving (or Expecting) a Large Gift or Bequest
This is usually a very good problem to have.
A major cash gift. A bequest notification. A very generous stock donation. A donor who wants to make a meaningful, one-time contribution that could shape your organization’s future. These moments are exciting, and they often come with a pause afterward when leadership and the board think:
“Okay… now what’s the smartest way to handle this?”
Significant gifts tend to raise important questions:
- How do we invest this in a way that truly honors the donor’s intent?
- Is this money meant to be spent, preserved, or grow over time?
- Are we confident we’re handling this in a way that aligns with UPMIFA and best practices?
Without a clear plan, even generous gifts can introduce stress. Boards may worry about making the “wrong” decision. Staff may feel pressure to move quickly while also getting it right. And donor trust is always on the line.
This is often when professional investment guidance becomes especially valuable, helping organizations:
- Create a thoughtful, long-term plan for one-time or restricted gifts
- Navigate donor intent with clarity and care
- Support compliance and documentation that gives boards peace of mind
Handled well, a major gift can become a lasting legacy for your mission. But it usually requires more than good intentions. It requires a strategy everyone can stand behind.
Your Endowment Has Grown Significantly
Many nonprofits don’t start out with a large endowment.
It may have begun as a modest fund, seeded by a few generous donors, a board-designated reserve, or a single legacy gift. Over time, through continued donor support, disciplined saving, or favorable market conditions, that endowment grows.
And that’s a good thing.
But as the balance increases, the responsibility grows with it.
What once felt manageable: periodic check-ins, simple investment choices, informal oversight, can start to feel less sufficient when the endowment becomes a more meaningful part of your organization’s future. Boards begin to recognize that this fund now matters in a bigger way.
Questions tend to surface, such as:
- Are we managing this with the level of care it deserves?
- Do we have the right structure in place for long-term stewardship?
- Would this approach hold up if leadership or board members change?
This is often the point where partnering with an investment advisor experienced in nonprofit endowments makes sense. An advisor can help bring more formality and confidence to the process by:
- Developing or refining an Investment Policy Statement (IPS)
- Establishing best practices for oversight, spending, and accountability
- Supporting boards and committees as decisions become more complex
In many cases, it’s not about fixing a problem; it’s about recognizing that your endowment has grown beyond a “set it and forget it” approach. Professional guidance can help ensure that growth continues to support your mission, not complicate it.
The Risks of Waiting Too Long to Partner with an Investment Advisor
Most nonprofits don’t delay bringing in an investment advisor because they’re careless. They delay because things feel mostly fine. The accounts are intact. The markets haven’t caused a crisis. Everyone is busy.
But over time, waiting can introduce risks that are easy to overlook.
Mismanagement or Underperformance Can Go Unnoticed
Without a clear strategy, benchmarks, or regular performance reviews, it can be difficult to tell whether investments are truly doing what they’re supposed to do. Funds may be more conservatively positioned than intended, or taking on more risk than the board realizes. Either way, underperformance often isn’t obvious until it’s compounded over years.
Fiduciary Responsibilities Become Harder to Defend
Board members have a duty to act prudently and in the best interest of the organization. As assets grow, informal decision-making and limited documentation can make it harder to demonstrate that duty is being met, especially if questions arise later from auditors, donors, or regulators.
Donor Confidence Can Be Impacted
Major donors and legacy givers want to know their contributions are being stewarded carefully. If reporting is unclear, inconsistent, or overly complex, confidence can erode, even when intentions are good. Transparency and structure help reinforce trust.
What an Investment Advisor Can Do for Your Nonprofit
A nonprofit-focused investment advisor isn’t there to take control away from your board or complicate your process. Their role is to bring structure, clarity, and confidence to decisions that already carry a lot of responsibility.
Here’s how that support typically shows up.
Create or Update a Thoughtful Investment Policy Statement (IPS)
An IPS acts as a shared roadmap, aligning your investments with your mission, time horizon, liquidity needs, and risk tolerance. An advisor can help develop or refine this document so decisions are consistent, well-documented, and easier to defend over time. Then they can also help ensure the policy is adhered to, reviewed, and updated.
Support Fiduciary Compliance with UPMIFA
UPMIFA sets the framework for prudent investment and spending of institutional funds. An experienced advisor helps ensure those standards are reflected in your strategy, processes, and documentation, supporting boards as they carry out their fiduciary responsibilities.
Deliver Clear, Transparent Performance Reporting
Instead of dense statements or numbers without context, an advisor can provide customized reporting that helps boards understand:
- How the portfolio is performing
- How it compares to appropriate benchmarks
- Whether it continues to align with organizational goals
This clarity can make board conversations more productive and less stressful.
Provide Ongoing Education for Boards and Staff
Markets change. Regulations evolve. Board members rotate. An advisor can help keep everyone aligned through ongoing education, answering questions, explaining trade-offs, and ensuring new members feel confident stepping into their fiduciary role.
Help Facilitate Stock Donations and Other Complex Gifts
Non-cash gifts like appreciated stock can be powerful tools for fundraising, but they require the right accounts, processes, and coordination. An advisor can help facilitate these gifts, manage the investments once received, and support internal teams so the experience is smooth for both donors and staff.
Ultimately, the right investment advisor doesn’t just manage assets, they help create a structure that allows your leadership and board to make informed decisions, steward donor gifts responsibly, and stay focused on advancing the mission.
How to Choose the Right Investment Advisor
Once you’ve decided it may be time for professional guidance, the next question is often:
“How do we know who to trust?”
Not all advisors are the same. And for nonprofits, the differences really matter.
Start With the Fiduciary Standard
A helpful place to begin is understanding how an advisor is legally required to act.
A Registered Investment Adviser (RIA) is held to the fiduciary standard under the Investment Advisers Act of 1940. This means they are required to act in your nonprofit’s best interest 100% of the time and to strive to avoid, disclose, or eliminate conflicts of interest.
For boards carrying fiduciary responsibility themselves, this alignment can matter a great deal.
Other types of financial professionals, such as brokers, registered representatives, or insurance agents, can operate under different standards.
In those models, advice may be considered suitable at the time it’s given, and compensation can be tied to specific products or transactions. That doesn’t mean those professionals are doing anything wrong, but it does mean their role, incentives, and obligations may be structured differently.
For nonprofits, that distinction is important.
Working with an RIA can offer:
- Clearer alignment between the advisor’s role and the board’s fiduciary duty
- Greater transparency around advice and compensation
- Ongoing guidance designed to reflect the organization’s evolving needs, not just a single transaction
This is especially relevant as assets grow, oversight increases, and decisions need to be documented and defensible over time.
Starting with the fiduciary standard helps boards understand how advice is delivered, and whether that framework supports the level of stewardship your nonprofit is responsible for providing.
Ask About Total Fees
When it comes to investment advisors, transparency around fees is essential.
Start by asking for a clear explanation of all costs associated with the relationship, not just the headline number. This includes:
- How the advisor is compensated
- Whether fees are ongoing or tied to transactions
- Any additional costs embedded in investment vehicles, reporting, or administration
Different advisors use different fee structures, and none of them are inherently right or wrong. What matters is that your board understands how fees work, what you’re paying for, and how those costs may impact the portfolio over time.
We’ve dealt with nonprofits that thought they understood what they were paying their advisor. When we took a look at their statements, we were able to identify other layers of fees they didn’t realize they were paying.
For nonprofits, this clarity supports good governance. Board members are often expected to demonstrate that expenses are reasonable, well-understood, and aligned with the organization’s responsibilities. Clear fee disclosure makes those conversations easier and helps avoid surprises later.
Understand Who Holds the Money
An often overlooked question to ask is a simple one: Where are our funds actually held?
It’s worth understanding whether your advisor manages the investments only, or whether they also serve as the custodian holding the assets. In many nonprofit relationships, a reputable third-party custodian, such as a well-known financial institution, holds the funds, while the advisor provides investment guidance and oversight.
This separation of roles can be meaningful for boards.
Having an independent custodian can:
- Add an extra layer of oversight and accountability
- Provide direct access to account statements and online reporting
- Help reinforce internal controls and good governance practices
For board members with fiduciary responsibility, knowing who holds the assets and how that role is structured can provide additional comfort and clarity. It also makes it easier to explain to donors, auditors, and future board members how funds are safeguarded.
Look for Nonprofit Experience
Not all investment experience translates well to the nonprofit world.
While many advisors are excellent at managing individual or corporate portfolios, nonprofits operate under a very different set of expectations. Governance structures, board dynamics, donor intent, and regulatory considerations all play a role in how investment decisions are made and explained.
That’s why it’s worth asking whether an advisor has direct experience working with nonprofits similar to yours.
An advisor familiar with the nonprofit landscape is more likely to understand:
- How boards and investment or finance committees function
- The importance of clear documentation and decision-making processes
- The nuances of restricted funds, endowments, and board-designated assets
- How regulations like UPMIFA influence investment and spending decisions
- How your endowment intersects with fundraising, donor conversations, and major gifts
This experience can make a meaningful difference in day-to-day interactions. Conversations tend to be more efficient. Reporting is framed in a way that supports board oversight. And your organization is given access to resources it can use to strengthen governance, decision-making, and long-term financial stewardship.
Ask Better Questions (Get Our Guide to Learn What to Ask)
Choosing an investment advisor doesn’t have to feel intimidating or like you need a financial background to get it right.
Most nonprofit leaders and board members simply want to ask good questions and feel confident in the answers. That’s why we created a resource designed specifically for nonprofits:
12 Questions All Nonprofits Should Ask When Choosing an Investment Advisor
This guide walks boards and leadership teams through the most important questions to know about their investment advisor, covering topics like fiduciary responsibility, fees, reporting, custody, nonprofit experience, and compliance, so nothing critical gets overlooked.
It’s designed to:
- Support thoughtful, well-documented decision-making
- Help boards compare advisors more clearly
- Create alignment and confidence around the table
Whether you’re just beginning the conversation or reevaluating an existing relationship, this guide can help you move forward with greater clarity and peace of mind.
Download the guide and start the conversation with confidence.
Knowing When Your Nonprofit Is Ready to Partner With an Investment Advisor
Knowing when to bring in an investment advisor isn’t about timing the market or fixing a problem. It’s about recognizing when your nonprofit’s financial responsibility has grown and making sure your structure has grown with it.
If your board is asking better questions, your assets are becoming more meaningful, or donor trust is a top priority, it may be the right time to take a closer look at your investment approach.
If you’re unsure where to begin when evaluating an investment advisor, start with the right questions.
Download our guide, 12 Questions All Nonprofits Should Ask When Choosing an Investment Advisor, to help your board navigate this decision with clarity and confidence.
Because thoughtful stewardship today helps protect your mission for years to come.
