Investment ideas for a non-profit

Sep 29, 2018

  1. bmarsh
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    bmarsh Super Genius

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    One of my clients is the treasurer of a non-profit, they have an account currently being managed by Big box Wirehouse, and they are not to happy about the performance and representative.

    It is currently invested in an advisory account where the rep is charging 1%

    I have not worked with a non-profit before so I was hoping someone had some suggestions. They have about $1.2 million that they need to have relatively liquid for construction funding when they are ready.

    I currently hold only a series 6, if that helps.

    Any suggestions would be appreciated.

    Thanks
     
    bmarsh, Sep 29, 2018
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  2. Tahoe Ray
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    Tahoe Ray Guru

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    A lot depends on their expectations.

    Laddering ROP fixed annuities (3, 4, 5 year surrenders) can make sense for a portion.

    Anything under 1 year (liquidity) should ideally be in money market.

    Bond funds are dicey right now but you could consider a floating rate fund.

    Lots of options but again, it really depends on their expectations and timing.
     
  3. Allen Trent
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    Allen Trent Guru

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    Proceed with caution. Depending on the annuity chassis the carrier uses (annuitant driven or owner driven) there can be potential problems with non-profits owning annuities from what I was told in the past.

    You have to select a living person to be the "annuitant" & in some cases, if the annuity matures, the money becomes the annuitants money depending on the contract language. Will the carrier allow you to change the annuitant if the person leaves the non-profit or the board, etc? Who do you select to put as the annuitant? If the annuitant dies, but has moved to another place, will you know when they die or where to get a death certificate to file the claim. Large Surrender charges can impact the non-profits balance sheet & their liquidity.

    generally speaking, I would shy away from a non-profit (or a business) holding annuities. Likely better for the entity to hold CDs, Municipal Bonds, Bond Mutual Funds & possibly some other securities for a portion of their money. For a for profit business, owning an annuity can cause other issues if the carrier fails to report the interest every year on a 1099, as a "non-natural person" cannot get the tax deferral benefit afforded to living people. They get taxed on the inside buildup.
     
  4. scagnt83
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    scagnt83 Worldwide Expert of Everything

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    Life Insurance. There used to be some turn-key solutions out there. Im not an expert in the non-profit arena at all... but I believe the regs have become pretty strict about which officers can actually be insured. So Im not sure how much you could get into it or how effective it is in today's environment.

    Laddering annuities can work too. What kind depends on their needs and expectations.
     
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