Financial Advisers and the Non-Profit Sector

Sections of this topic

    An Ethical Question:

    The following is based on a question raised by a financial planner….

    In the non-profit world, there is an ethical prohibition against anyone profiting by advising/encouraging another to make a gift to a non-profit organization. There is also a specific prohibition against anyone being compensated by a percentage of any amounts donated to an NPO.

    It’s OK for a financial adviser to be compensated by a nonprofit organization for advising on and/or managing its assets; and, it’s OK for a financial adviser to be compensated for advising on and/or managing the assets of potential donors.

    It seems like it would strengthen the relationship between a financial adviser and his/her individual (wealthy) clients to be able to offer advice/direction regarding their giving … and the benefits they’d derive from giving.

    But the advisor should not seek nor accept compensation based on the money that moves from the donor to the NPO.

    Four related thoughts:
    1) By offering a useful service to wealthy clients, without “additional”
    compensation, financial advisers are likely to get more referrals to
    other wealthy clients.
    2) The recommendations a financial advisor makes to his/her wealthy
    clients should be based on his/her knowledge of whether a nonprofit
    does good work, manages its finances effectively, and if the potential
    donor’s needs will be satisfied by giving to that nonprofit organization.
    3) It is considered unethical for an NPO to provide financial planning
    advice to a (prospective) donor if the intent of that advice is to get
    that individual to make a gift to the NPO.
    4) If a (potential) donor wants/needs financial advice about making
    a gift to an NPO, and asks the NPO, the NPO must (ethically) refer
    that person to his/her independent financial planner.


    Have a comment or a question about starting, evaluating or expanding your fundraising program? Email me at With over 30 years of counseling in major gifts, capital campaigns, bequest programs and the planning studies to precede these three, we’ll likely be able to answer your questions.