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At Markland Hill Wealth, we love spending time with local and national Charities who need sound independent financial advice.

At Markland Hill Wealth, we love spending time with local and national Charities who need sound independent financial advice. This could be assessing their pension schemes and other benefits packages. It may involve investing reserves or funds for short-, medium- or long-term growth. When UK charities are looking to choose an investment manager to run all or part of their strategy, we urge them to consider several key factors to ensure their investments are managed effectively and align with their mission and objectives. Here are the primary considerations:

  1. Experience and Track Record

  • Reputation: Look for an investment manager with a strong reputation in the industry. This can be found by speaking to advisers such as us, or speaking with other charity trustees who have been through similar processes.
  • Performance History: Review the manager’s historical performance, especially in managing portfolios similar to the charity’s requirements. Whilst this can’t be relied upon as a basis for future returns, it can throw up useful questions about how a manager chooses a strategy and why they have chosen to make certain decisions. This will help you work out if their approach is right for you.
  • Experience with Charities: Some organisations prefer managers with experience in working with charities, understanding their unique needs and constraints. Some investment houses have specialisms and look after certain types of charities like arts or environmental. It is always worth asking what charities they work with and support themselves.

 

  1. Ethical and Responsible Investment

  • Ethical Standards: Especially if you run a charity which includes specific responsible aims, it is important to ensure the manager adheres to ethical investment practices that align you’re your charity’s values.
  • Socially Responsible Investing (SRI): The manager should have expertise in SRI, incorporating environmental, social, and governance (ESG) criteria into investment decisions. To what extent this is important will depend on your own charity investment policy, the source of your organisation’s funds and any specific restrictions on your funds. The more experience a manager has in this area, the easier it may be for them to accommodate any specific requests.

 

  1. Alignment with Charitable Objectives

  • Mission Compatibility: Since the recent Bulter-Sloss court case, the opportunity for a charity’s investment strategy to align with the charity’s mission and objectives is more prevalent than ever before. With some serious questioning, proper alignment rather than just lip service can be achieved.
  • Custom Solutions: We can help you search for investment managers who offer customised investment solutions tailored to the specific needs of the charity. This might include the separation of short and long-term strategies which may involve different investment managers.

 

  1. Regulatory Compliance

  • Regulatory Knowledge: We can help you ensure your chosen manager is knowledgeable about the regulatory requirements specific to UK charities. It is important to have confidence in both reporting and adherence to charity commission legislation.
  • Compliance Record: You should check the manager’s compliance history and their approach to adhering to regulations. This will give you a confidence level in how they deal with rules, regulations and compliance, meaning that the whole Trustee board has peace of mind in the decisions made by the charity.

 

  1. Risk Management

  • Risk Assessment: Assess the manager’s approach to risk management and their ability to handle market volatility. Whilst different charities might have different risk appetites and run varying strategies, your questioning can ensure an investment manager can adequately follow your chosen risk mandate.
  • Diversification Strategies:  Ensure they employ robust diversification strategies to mitigate risk. This is an important consideration giving guidance laid out by the charity commission in the Trustee Act 2000 where section 4 speaks of Trustees need consider the suitability of investments and the need for diversification in the context of the trust’s objectives.

 

  1. Fees and Transparency

  • Fee Structure: It is prudent for any investor to understand the fee structure and ensure it is competitive and transparent. We can help you do this as we understand standard and average industry fee structures.
  • Cost Effectiveness: Whilst costs are important, value is everything. How do you evaluate whether the cost of services offers good value relative to the expected benefits? Applying this full due diligence questioning sequence through your Markland Hill Wealth adviser will help with this.

 

  1. Communication and Reporting

  • Regular Reporting: The manager should provide regular, clear, and detailed reports on investment performance. You can agree this in advance, so you and the Trustee Board know what to expect.
  • Open Communication: It is important to look for managers who maintain open lines of communication and are responsive to queries and concerns. This process will assist with that.

 

  1. Client References and Reviews

  • References: Should you ask for and check references from other charities or similar organisations? Why not. Certainly after you’ve short listed, this might well be appropriate.
  • Reviews and Testimonials: The internet can help with research in these modern times. Look for reviews and testimonials to gauge the satisfaction of their existing clients. This may not make up your whole decision but may lead to more questioning and seeking on clarification depending on what you uncover.

 

  1. Technological Capabilities

  • Modern Tools: Ensure the manager uses modern investment tools and technologies for analysis and reporting. This way the Trustee board will have information at their fingertips to analyse the charities assets, performance and fees quickly in real time.
  • Digital Accessibility: Consider the availability of online platforms for real-time access to investment data and performance. This may be especially relevant if Trustees are scattered far and wide.

 

  1. Educational Support

  • Training and Resources: Most Trustees are unlikely to be investment professionals. We can therefore look for managers who provide educational resources and support to help the charity’s trustees and staff understand investment strategies and decisions.

Summary

Trustees are expected to act with the care, skill, prudence, and diligence that a prudent person acting in a like capacity and familiar with such matters would use. This includes considering diversification as part of their investment strategy. Trustees are often given broad powers to invest in any kind of property or type of investment, similar to those of an individual investor. However, they must still adhere to the principles of prudence and diversification.

By carefully considering the factors outlined in this guide, Charities can select an investment manager or managers who not only deliver strong financial performance but also aligns with their ethical standards and long-term goals at a price point that is valued by all. By doing this, they are fulfilling their duty as responsible Trustees and guardians of these funds.

As Markland Hill Wealth specialise in advising Charities, we are prime placed to offer support in Charity Financial Advice. Contact one of our Independent Financial Advisers today for more information.

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