Nonprofit Financial Management: 4 Ways a Wealth Management Firm Can Help

  • January 8, 2019

BY: BLAIR HULL, Associate, Philanthropic Services
(318) 243-5066 | bhull@argenttrust.com
and LUCIUS McGEHEE, Executive Vice President, Argent Trust
(318) 251-5851 | lmcgehee@argentfinancial.com

Lucius McGehee

Blair Hull

Nonprofits searching for ways to further their mission should explore forming strategic partnerships with for-profit business that can help improve fundraising efforts and enhance operations. Prudent nonprofit financial management is vital to the success and sustainability of every charity, foundation or mission-based tax-exempt organization.

Many nonprofit organizations face a host of seemingly insurmountable problems. According to the Nonprofit Finance Fund’s (NFF) “2018 State of the Nonprofit Sector” report, financial sustainability is a concern for 62 percent of American nonprofits and, partly because of this lack of funds, 57 percent can’t meet the huge demand for their services. Many for-profit firms have the expertise to help nonprofits overcome these problems.

Wealth management firms – with their expertise in providing tailored investment planning – are ideally positioned to advise nonprofits on a variety of issues, including fundraising, financial reporting and governance. Here are four areas where nonprofits can benefit from a close partnership with a wealth management advisor:

1. Are you harnessing the fundraising power of your team?

Most nonprofits have a thorough understanding of their primary assets (investment portfolio, company-owned real estate and buildings and other financial and fixed assets). What many nonprofit leaders underestimate, however, is the power of their most valuable asset: their team of program staff, senior executives, board and committee members and volunteers.

These individuals hold the key to the organization’s success in fundraising. The most successful nonprofit leaders work closely with their wealth management partners to build upon the community connections of all team members. These team members are the people who, for example, will know when wealthy donors are planning changes to their estate or if a local corporation is searching for new charities to fund.

2. Are you maximizing your organization’s physical assets?

With limited support staff, most nonprofit financial officers are tied up with day-to-day accounting, administrative and grant management activities. That means there’s little time to work with the CEO and board members on long-range planning and fundraising issues.

A wealth management company can add significant value in two important areas. First, the firm and its advisors can assist the finance officer in evaluating the costs and benefits of the organization’s physical assets. Does it make financial sense to own or rent a building? Are operating expenses (maintenance, insurance and telecommunications services, for example) in-line with industry averages? Second, a wealth management expert help manage donations of real estate, oil and gas properties, timberland or farmland to maximize the income-generating potential of those assets. An advisor with financial and tax reporting and property management experience can save a nonprofit time and money.

3. Is your financial reporting telling the whole story?

Like any organization with multiple stakeholders, nonprofits are required to prove their value and fairly present financial results. But financial statements alone don’t always provide stakeholders and potential donors with the information needed to make contribution decisions. Wealth management advisors can assist nonprofit leaders and board members in designing reports that include mandatory financial information, but also shine a light on the organization’s achievements and quantify the outcomes of individual programs and activities.

4. Is fundraising strategy included in the board member onboarding process?

Nonprofits should have a comprehensive onboarding process for all board members so they are knowledgeable about the history and mission of the organization and how it interacts with funding partners. A wealth management firm can help leaders create an onboarding process that identifies ways each new board member can contribute to the organization’s fundraising efforts.

Nonprofits play a vital role in strengthening our communities and helping solve some of world’s most critical problems. By partnering with the right wealth management company and focusing on these four areas, those organizations will be able to manage their assets more effectively and achieve the goal of financial sustainability.