Smart Money: Spooked by the news?

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William C. Fisher
William C. Fisher
The financial headlines show the ugly economic data pouring in like a fast flowing river. First-quarter GDP numbers exhibited a measly 1.8% increase and second-quarter estimates weren't much better.

Housing prices continue to decline, consumer spending is low and manufacturing companies are showing weak activity. Unemployment figures show few jobs being created, certainly fewer than what is needed to lower a 9.1% unemployment rate. There is even talk of a possible “double dip” recession.

“If one looks at unemployment and housing, it's clear that for all practical purposes, we have yet to fully get out of recession,” said Harvard economist Ken Rogoff.

So what are CFOs and Finance Committee members expected to do?

At a recent nonprofit financial conference, Phil Jacobson of United Capital Financial Advisors (a firm IAG is affiliated with) asked attendees some questions:

1. How many had an investment policy statement (IPS) in place?

Surprisingly, it was 96%. These CFOs are prepared for the future.  They have a roadmap for good and bad times.

2. Who prepares your quarterly investment reviews?

Seventy percent of the CFOs said consultants or investment advisors prepared the review. Thirty percent did it themselves. Because the goal is to produce reports that are unbiased and include action steps, CFOs should be wary of the conflict of interest when an investment advisor prepares the report. Having the CFO prepare the report is an economical solution.

However, this effort might be shortsighted if the CFO doesn't have the necessary data, and isn't trained to evaluate the IPS and the investment advisor's performance. Often, an independent consultant is a worthwhile expenditure.
When sufficient attention is given to investment policies, an investment portfolio should weather difficult economic times like these.

William C. Fisher is president of Investment Advisory Group LLC, a business development company partnering with some of America's leading financial companies to provide independent financial services to nonprofit organizations.