Client Snapshot

The endowment for a religious non-profit organization helps core initiatives in Eastern Europe, but over the years, scattered assets and multiple custodians bloated the portfolio and made administration a challenge.

Situation and Outcome

When the organization came to Wescott five years ago, they were in a thorny situation. Investments were scattered across numerous custodians amassed over several decades.  The board had little idea where all the investments were and consequently couldn’t focus on threats or opportunities the portfolio faced.  Accounts were earmarked as both unrestricted and restricted accounts for internal accounting purposes. The client, headed by a volunteer board neither trained nor prepared to track a runaway portfolio, realized something had to change.

Working closely with the client and the organization’s accountant—who’d faced his own challenges in tax return preparation stemming from all the various and disjointed assets—Wescott began consolidating the portfolio.

One investment weakness that emerged was asset allocation.  While it wasn’t appropriate for the objectives they had set out, the client was extremely conservative and significantly overweight in fixed income.  This would not allow the portfolio to achieve term growth in order to meet the objectives the organization wanted to support.

Wescott advisors educated the client on asset allocation and diversification.  On the administrative side, Wescott helped segregate restricted and unrestricted accounts and assisted with record keeping of the restricted account.  Accounting for the dozen contributing organizations was improved.  Deposits were tracked with and through the restricted account and moneys were allocated to each different contributor.

In the end, Wescott significantly reduced the administrative burden of the endowment—for the client and its accountant whose annual tax filing was significantly streamlined.  The investment portfolio is in a much better position now than it was five years ago in helping them meet their objectives.  In order to maintain close relations built over the years with several local banks and credit unions, Wescott suggested keeping a certificate of deposit in each institution.  Now, when CDs mature, Wescott gives advice as to what to roll them into.  This helps the organization maintain its loyalty with area lenders, and improve its balance sheet.

Lessons Learned

Keeping a long-term, big-picture eye on an entire portfolio ensures the client never having to face the custodian and portfolio expansion that caused the board to lose track of its investments.