A registered investment advisory (RIA) firm advises on and often manages the investment assets of behalf of others. RIAs have a fiduciary duty to act in the best interest of clients and deal fairly with them. RIA firms managing at least $100 million in assets must register with and are regulated by the Securities and Exchange Commission (SEC).
Investment consulting is an arrangement in which one party offers investment guidance to another. This guidance typically encompasses portfolio construction, manager selection, and potentially other activities. A true investment consulting relationship does not include the consultant taking on trading, portfolio monitoring, or fiduciary responsibilities.
An outsourced chief investment officer takes on the advisory responsibilities of an investment consultant but also assumes responsibility for implementing the guidance. Additionally, an outsourced chief investment officer handles monitoring and trading of portfolios while typically serving in a fiduciary capacity.
Most of the focus of endowment management is on the selection of asset managers within the endowment portfolio. However, other factors should be considered as well. The overall investment philosophy and allocation represent important decision points in any endowment. Additionally, the development of a spending rate is key. Once these decisions have been made, endowment management includes the ongoing monitoring, rebalancing, and reporting activities for the endowment.
Planned giving is a charitable donation that has a future benefit to charity. Many planned giving arrangements involve a larger amount of assets than what donors would typically contribute as a current or immediate gift. Non-cash assets such as appreciated securities or real estate are often good fits for planned gifts. Split-interest gifts are a type of planned gifts that generate cash flow to the donor.
Examples of planned gifts are charitable gift annuities, charitable trusts, donor advised funds, and endowments.
A charitable gif annuity is a type of planned gift. A donor enters into a contract with a charity in which the donor donates assets in exchange for a fixed stream of income and an income tax deduction. A charitable gift annuity is typically tied to the lives of one to two donors.
Learn more from our blog about how to grow your charitable annuity program.
A charitable trust is a type of planned gift. There are two primary types of charitable trusts.
The first type is called a charitable remainder trust. It involves the donor placing assets in a charitable giving vehicle in exchange for a stream of income and a charitable tax deduction. The trust may last for a period of years or for the lifespan of the donor(s). Once the charitable remainder trust concludes, its remaining assets are available for the charitable beneficiary.
The second type is a charitable lead trust. In some ways, it is a mirror image of a charitable remainder trust. A charitable lead trust involves the donor placing assets that will support an income stream to a charity. An income tax deduction (or an estate tax deduction if the trust is a testamentary trust) is also generated through a charitable lead trust. Once the charitable lead trust concludes, its remaining assets are returned to a non-charitable beneficiary.
A donor advised fund can be thought of as a charitable giving fund. A donor places assets in a donor advised fund and receives an income tax deduction. The donor may then request grants from the donor advised fund to various charities at future dates. It is important to note that while the donor typically is able to direct the donor advised fund program sponsor regarding investments and grants, these items are technically the decision of the program sponsor.
Charities which have planned giving programs are equipped to seek out and engage with donors who have significant capacity to give. Planned giving programs include development professionals who are knowledgeable about structuring planned gifts and/or developing estate plans. Planned giving programs allow donors to support a charity in significant, unique ways.
Planned giving fundraising is a means of solving estate-planning needs for donors while producing major gifts for the organization. The process begins with identifying donors who have the capacity to enter into planned gift arrangements. While building a relationship with these high-capacity donors, planned giving professionals may offer to assist with the creation of an estate plan. During the estate-planning process, the development professional may ask the donor for a planned gift.
Estate planning is developing a plan for what will happen to one’s assets when one passes away. A primary goal of estate planning is to ensure that assets are directed to the intended people and entities. Also of significant importance is minimizing taxes. Many people include charitable beneficiaries within their estate plans. Estate plans can be altered after they are initially established.