Charities – Back to basics

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Published on
6th April 2021

Just like the need to regularly review your own finances, it is important that a charity does the same when it comes to the management of its money.

With UK Interest rates at their lowest levels in living memory, it is important that charities take the time to understand their short to long term capital and income requirements. With this knowledge, the charity can then establish its willingness to take risk with designated funds.

The Charity Commission has some useful guides designed to help Trustees navigate the complex world of investments, such as the Charities and investment matters: a guide for trustees document highlighted at the bottom of this blog.

One of the first steps for a Charity to consider is to decide its overall Investment Policy and the objectives of the Charity.

This includes the need to understand and act within the charity’s designated investment powers including the need to exercise care and attention when making investment decisions. The charity should agree a suitable balance between risk and reward, with funds segmented based on timescales, needs and aspirations.

It is important that the Trustees take and consider advice from someone experienced in investment matters before making or reviewing investments. This could be from a suitably qualified Investment manager or Investment adviser but does not need to be someone outside of the charity. If a trustee is providing advice and guidance, they should have suitable financial expertise.

The charity should decide who they believe is most appropriate manager or managers to manage their investments based on their own requirements.

The need to review and compare Investment managers is an important component of the Trustees responsibilities, helping to demonstrate that they are acting in the charity’s best interests. This is best achieved by considering proposals from several managers, rather than just selecting from one. This approach enables the Trustees to make an informed decision based on a range of comparable solutions.

This approach also applies to Reviews, where it is important that the charity seeks an external source to monitor the performance of an investment manager, rather than rely solely on the manger’s own information.  This can be achieved by appointing an Independent adviser or by requesting external market comparison data.

This article only briefly touches on some of the responsibilities for Charity Trustees,  please contact me if you require assistance in this area

Jonathan Noake

Chartered Financial Planner

G+E Private Wealth Ltd

Click here to view Jonathan’s contact details 


Reference documents and links

The charity commission guides are available via this link.