If you sit on a charity board or investment committee, chances are you’ve seen proposals filled with graphs, benchmarks, and financial jargon. But how can you tell if what you’re being sold is genuinely in your organisation’s best interest?
At Stockspot, we believe in cutting through the noise and giving boards the tools to ask the right questions, investing for your charity or NFP shouldn’t be hard. Here are five red flags that could be quietly eroding your returns.
1. They say: “We outperformed the market”
But they forgot to say ‘pre-fees’. Investment performance that looks good on paper often excludes fees, the very thing dragging down your actual return. Always ask for net-of-fee returns.
2. Unclear benchmarking
Is a fund being compared to the right index? Some advisers use inappropriate benchmarks (like comparing a bond fund to cash) to make themselves look better. Always ask: “Why this benchmark?”
3. Tactical asset allocation
Sounds clever, but research shows it rarely works long-term. If your adviser is constantly adjusting your portfolio based on predictions, they’re trying to time the market, and that’s a gamble, not a strategy.
4. High layers of fees
Between brokerage, performance fees, platform charges and referral commissions, many traditional advisers quietly charge up to 3% annually. That’s money directly diverted from your cause. Reducing fees is one of the easiest ways charities and not-for-profits can maximise their investments
5. Alternative assets with no liquidity
Private equity, hedge funds, and unlisted assets can sound impressive, but they’re illiquid, expensive, and often underperform passive strategies. For charities, flexibility and transparency matter more than exclusivity.
The solution? Simplicity.
Look for simplicity and seek this from your investment partners. Ask them to
- Explain things in plain English
- Be upfront about every fee
- Use academic research to guide decisions
- Help you stick to a disciplined, long-term plan
If your adviser can’t tick all those boxes, it might be time to rethink. At Stockspot we’re here to help build low cost, diversified ETF portfolios for our NFP and charity clients and we’ve written a whitepaper to help ensure more NFPs are aware of the pitfalls that could be eroding their returns. Download the whitepaper here.
We’ve also created a comprehensive guide to investing as a charity or not-for-profit, available to download below.
