Investment management and planned gift administration are two entirely different areas of expertise. Major financial institutions offer both of these services to charities with larger programs, but may have relationship minimums of $500,000 or more that put their services out of reach for start-up programs. Your local bank or brokerage firm can manage your gift annuity assets, but may not have the experience to provide quality gift administration. Don't insist on receiving bundled services at the risk of getting lackluster results in one or both areas. PG Calc has created a model for efficient 3-way partnerships with PG Calc, charities, and asset managers. PG Calc provides gift administration services for our charity clients and we work directly with their asset managers to coordinate cash flow to meet payment obligations.
Some points to remember when selecting an asset manager:
- Performance: Average investment results will provide you with roughly half of the original annuity funding amount upon the death of the annuitant, after adjusting for inflation. With a diversified and well-balanced investment approach, you may see final gift values of 85% or more of the original amounts. Poor investment performance could force the use of other assets to satisfy payment obligations.
- State Requirements: Some states apply specific investment restrictions to gift annuity assets. Your asset manager will need to become familiar with these requirements so that it can manage your program in a manner that complies with state regulations. You may be able to commingle gift annuity assets with your endowment.
- Cost: The fees for investing gift annuity assets should not be significantly larger than those for managing endowment funds. Aside from a few exceptions due to state requirements, the assets typically can be managed in a single pool using a total-return strategy.
- Responsiveness: Managing a gift annuity program requires timely coordination of donors' gifts, managing adequate cash flow to cover scheduled payment obligations, and the periodic liquidation of assets as each individual gift annuity terminates.
