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The Charity Commission’s guidance says that “Trustees must take advice from someone experienced in investment matters where they consider they need it”.

But that is easier said than done. How often do Trustees ‘consider’ they need advice? And if they do, who do they go to get it?

Helpfully, The Charities Commission guidance provides a list of options for Trustees in search of help, it suggests:

·       an investment manager

·       an investment adviser (who may be independent or tied)

·       a fellow trustee, if one of the trustees has suitable financial experience and ability

·       some other individual who meets the criteria set out above

It then goes on to say “Trustees need to be careful to ensure that they receive impartial advice.”

That all sounds very straightforward but, as with most things in life, there is scope for grey areas. To have truly ‘impartial’ advice, Trustees need to think carefully about the scope of what their advisers will be advising them on. Investment Managers in general only advise on their own products, so when they provide performance reviews a conflict of interest is unavoidable. This means it’s important to explore whether Investment Managers are suitable to give advice that relates to Charities and Endowment fund assets, or whether this undermines the search for impartiality.

Firstly, it’s very important to say that, in the main, Investment Managers do an excellent job for the Charities and Endowment Funds they look after. Often providing insights into the options for Trustees without charging for information that can help direct them to the right strategy for them.

However, this being said, most Investment Managers would agree that a Charity should in some capacity use an independent consultant to review and provide comment on, not only the funds used, but whether the strategy is fit for purpose. This oversight and help can aid Trustees in making strategic and manager decisions. Focus on short term grant or funding needs, whilst maintaining focus on the level of overall performance from the Charities or Endowment assets. This can also help ensure that, on an ongoing basis, if more suitable funds become available, the Charity or Endowment will be made aware of their options.

When assessing fees for Charities and Endowments compared to other institutional investors (like pension Scheme’s) there generally seems to be a much higher costs. This, in part, will be due to Ethical Constraints and sometimes the need to ensure portfolios are bespoke enough to effectively manage ethical risks. Sometimes, however, this can be due to Managers not effectively being reviewed against the relevant competition in the market.

Ethical, Thematic and Social investing is a hugely powerful tool that Charities have to actively ensure the money they hold on behalf of their good causes is used to better society. Sometimes, it’s hard to know what’s available without seeking an independent consultant who has spent time searching the market, even going so far to look for funds that link with stray cat charities… There’s something for all charities out there. It’s just really important that Trustees spend time seeking out the questions they need to ask if they want to get the answers they need.

As a new Trustee, I’ve also found it difficult to give advice to my Board without feeling personally liable for advice I provide. How can we encourage appointment of Trustees who have the right skill set to provide invaluable investment advice, without undue additional risks being placed on them personally? Possibly for sums of money they cannot afford to be personally liable for? Although this would be a great option for Charities and Endowments, it seems a heavy responsibility for the individual Trustee trying to be helpful to a Charity it has promised to give service to.

What is the answer?

I’m afraid it’s difficult to say. Whilst truly ‘impartial’ advisers cost money, they also offer value –  they are the most independent and most easily able to access the different options in the market easily.