Charity Investments

Matthew Harrington
Financial Planning, Charities

The results of the Charity Commission 2021 Covid-19 Survey indicated that 49% of charities have lost income from fundraising activities, whilst 35% have lost income from trading and other income sources.

This loss in income will inevitably impact on the level of reserves available to a charity, and potentially the longer-term viability for the charity to continue.

Coupled with the low-interest rates seen on cash-savings and deposits, more charities are considering investments to help support both day-to-day activities, and future projects.

When planning a new investment, or reviewing what you may already have in place, it is important to consider several key areas first:

Cash-flow – before considering any investment, it is important to ensure maintain a cash reserve to cover your short-term cash-flow needs. Ideally this should be enough to cover a minimum of 3-6 months operating costs

· Objectives – it is important to have a clear idea of what you want from an investment. Are you looking for long-term capital growth to support future plans, or an ongoing income to supplement donations and legacies?

· Risk – any form of investment carries risk. Even cash deposits carry the risk that inflation will erode the true value what you are holding. It is therefore important to build an understanding of the level of risk you are comfortable with and can afford. There are going to be ups-and-downs along the way and so being confident in your risk approach, and sticking to your objectives, will result in a more positive investment experience.

· Time Horizon – any stocks and shares investment should be considered ‘long-term’ (at least 5 years ideally). It is not to say that you can’t access your funds earlier than this, but it could mean you get back less than you invested if you withdraw early.

· Access – always expect the unexpected. Whilst your emergency fund should hopefully cover short-term needs, you may need to draw on a level of your investment capital to cover larger unexpected costs, and so it is important you understand how accessible your funds are. You should also consider this when thinking about cash-deposit accounts

· Investment preferences – from several charities we work with, it is clear that there is a level of responsibility with the funds that you have received. We work with you to understand your preferences and particular approaches you may wish to take with your investment (such as avoiding certain investment types, or taking a pro-active approach to others)

· Security – with any form of saving or investment, be sure that you understand what security or protection is available should things go wrong. Is it authorised and regulated by the Financial Conduct Authority (FCA) or Prudential Regulation Authority (PRA), is it covered under the Financial Services Compensation Scheme (FSCS)? Lovewell Blake Financial Planning Limited are authorised and regulated by the FCA, and we do not advise on any regulated investments.

· Reviews – you should make sure that you have a review process in place for any investment strategy. Things can change over time, be it with the investment itself, or your own objectives, and regular reviews can help to ensure that your investments continue to remain appropriate for what you need.

The Charity Commission has also published detailed guidance for Trustees considering investments which can be found here

Our accountancy and financial planning teams have specialist advisers that can work with your charity to understand your objectives and help you establish an investment strategy to meet your goals.

If you would like to speak to a member of the team


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