Financial advisor for a synagogue

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arcticpineapplecorp.
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Joined: Tue Mar 06, 2012 9:22 pm

Re: Financial advisor for a synagogue

Post by arcticpineapplecorp. »

Elis1980 wrote: Tue Jan 24, 2023 12:53 pm Thank you all for the valuable advice. I am preparing a for a discussion at our next board meeting, which will touch on:
  • Discussion on Vanguard's LifeStrategy Conservative Growth, which might be ideal
So if you pitch this particular fund (nothing wrong with it per se) you should be aware of the kinds of losses that are possible in bad times with a 40/60 allocation.

the losses for a 40/60 portfolio last year would have been around -19%

the losses for a 40/60 portfolio during the Great Recession were -19%

source:
viewtopic.php?p=7073838#p7073838

Just know the risks, that's all. If the board is ok with declines of 1/5th of the portfolio ($200,000 loss out of $1 million), ok. They need to be ok seeing the $1 mil drop to $800k at times.
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sleepy06
Posts: 309
Joined: Tue Oct 18, 2016 8:20 pm

Re: Financial advisor for a synagogue

Post by sleepy06 »

Forgive me I do not know how synogogues work. Is there a parent organization that may have resources/best practices that you can follow that with adhere to faith doctrine? Or, other rabbis that could be contacted to interview to understand how their congregation approaches these decisions. It seems a lot of work to reinvent the wheel of what surely exists in good practice elsewhere.

I see no problem leaving the balances in cash while an IPS is dutifully and carefully crafted and information is gathered.
chris319
Posts: 1641
Joined: Thu Jan 28, 2021 6:04 pm

Re: Financial advisor for a synagogue

Post by chris319 »

arcticpineapplecorp. wrote: Tue Jan 24, 2023 7:43 pm
Elis1980 wrote: Tue Jan 24, 2023 12:53 pm Thank you all for the valuable advice. I am preparing a for a discussion at our next board meeting, which will touch on:
  • Discussion on Vanguard's LifeStrategy Conservative Growth, which might be ideal
So if you pitch this particular fund (nothing wrong with it per se) you should be aware of the kinds of losses that are possible in bad times with a 40/60 allocation.

the losses for a 40/60 portfolio last year would have been around -19%

the losses for a 40/60 portfolio during the Great Recession were -19%

source:
viewtopic.php?p=7073838#p7073838

Just know the risks, that's all. If the board is ok with declines of 1/5th of the portfolio ($200,000 loss out of $1 million), ok. They need to be ok seeing the $1 mil drop to $800k at times.
Agreed. Is the board OK with exposing the funds to market risk? Are they going to freak out if the portfolio value declines significantly?

The reason you take on risk is that you're aiming for capital appreciation. To what end are you aiming for this capital appreciation? What are you going to do with the appreciated capital? If you were going to, say, build a new building, that would be one thing. From your OP it sounds like all you need to do is maintain the graveyard and grounds, pay the rabbi, pay the electric bill and maybe some janitorial. It sounds like you can cover those expenses from donations. You just need an inflation hedge for the synagogue's savings. Do you really need to take on market risk for that? Those are the questions I'd be asking if I were on your board.

If I were you I would look into some alternatives that don't involve market risk in case the board balks at the risk. Things like money market, CD's, treasuries, etc.
Financial decisions based on emotion often turn out to be bad decisions.
bsteiner
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Location: NYC/NJ/FL

Re: Financial advisor for a synagogue

Post by bsteiner »

sleepy06 wrote: Tue Jan 24, 2023 8:52 pm Forgive me I do not know how synogogues work. Is there a parent organization that may have resources/best practices that you can follow that with adhere to faith doctrine? Or, other rabbis that could be contacted to interview to understand how their congregation approaches these decisions. It seems a lot of work to reinvent the wheel of what surely exists in good practice elsewhere.

I see no problem leaving the balances in cash while an IPS is dutifully and carefully crafted and information is gathered.
Synagogues are bottom up, not top down like some churches. Each denomination has an organization to which many synagogues belong, but each synagogue is self-governing. The rabbi works for the synagogue, and would be consulted on religious questions, but not synagogue governing questions.

The endowment fund is an endowment fund like it would be for any other charitable organization such as a university.
placeholder
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Joined: Tue Aug 06, 2013 12:43 pm

Re: Financial advisor for a synagogue

Post by placeholder »

These funds mentioned like life strategy or wellesley would only be appropriate if the board can tolerate a loss of principal at some point which these have absolutely done in the past and might well do in the future.
bradinsky
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Location: Ohio

Re: Financial advisor for a synagogue

Post by bradinsky »

Duckie wrote: Sun Jan 22, 2023 9:55 pm
Elis1980 wrote: Sun Jan 22, 2023 9:15 pm The synagogue has a surprisingly large cash balance (low 7 figures).
This year, the board is looking for options to invest the cash.
My board is very conservative
Does your synagogue have any written rules concerning how the money is allowed to be invested? My church (which has nowhere near your high balance) does and it is very conservative at 70% cash (CDs, money markets, savings accounts), 20% treasury bonds, and 10% equities.
One of my board colleagues used to be on the board of a bank before he retired (that was in the 1990s). He made a few calls and we recently received a presentation from a Vice President from a regional bank's wealth management division. The proposal he gave us is for a 1% management fee. After some digging in the fine print, I realized this did not include the mutual funds' embedded management fees or load fees. As far as I can tell, this works out to 2-2.5% of assets under management per year, which I understand from reading this forum to be highway robbery.
No, just no!
From doing some deep reading in these forums, I understand that a "three fund portfolio" -- weighed heavily towards principal protection -- would probably be most appropriate. That being said, neither I, nor any members of our board, have any appetite or ability to manage it ourselves.
You could purchase a balanced fund. Vanguard LifeStrategy Income Fund (VASIX) has 20% stocks and 80% bonds. The Target Retirement Income Fund (VTINX) has 30% stocks and 70% bonds. Or if you want to avoid international you could buy individual funds like 20% Total Stock (VTSAX), 40% Total Bond (VBTLX), and 40% Short-Term TIPS (VTAPX).
Vanguard LifeStrategy Income Fund (VASIX) lost about 10% last year. A board comprised of primarily elderly people might not be pleased with that type of performance.
sleepy06
Posts: 309
Joined: Tue Oct 18, 2016 8:20 pm

Re: Financial advisor for a synagogue

Post by sleepy06 »

bsteiner wrote: Tue Jan 24, 2023 10:48 pm
sleepy06 wrote: Tue Jan 24, 2023 8:52 pm Forgive me I do not know how synogogues work. Is there a parent organization that may have resources/best practices that you can follow that with adhere to faith doctrine? Or, other rabbis that could be contacted to interview to understand how their congregation approaches these decisions. It seems a lot of work to reinvent the wheel of what surely exists in good practice elsewhere.

I see no problem leaving the balances in cash while an IPS is dutifully and carefully crafted and information is gathered.
Synagogues are bottom up, not top down like some churches. Each denomination has an organization to which many synagogues belong, but each synagogue is self-governing. The rabbi works for the synagogue, and would be consulted on religious questions, but not synagogue governing questions.

The endowment fund is an endowment fund like it would be for any other charitable organization such as a university.
Thank you for explaining. It would seem there is much wisdom in this approach.
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