Is Your Board Meeting Its Fiduciary Duty on Investments?

Every nonprofit board member accepts a profound responsibility when joining the board of an endowment or foundation: to act as a prudent steward of the organization’s assets. That duty doesn’t end with approving a budget or reviewing quarterly performance reports. It extends to something many boards overlook — periodically evaluating whether the organization’s investment manager is still the right fit.

Issuing a formal request for proposal, or RFP, every five to seven years is widely recognized as a best practice for nonprofit boards. Yet many organizations go a decade or more without ever conducting one. That gap can expose a board to unnecessary fiduciary risk — and may mean the organization is paying more than it should or missing out on strategies better suited to its evolving mission.

What nonprofit board fiduciary duties really mean

Nonprofit board fiduciary duties fall into three core obligations: the duty of care, the duty of loyalty, and the duty of obedience. In the context of investment management, the duty of care requires board members to act with the diligence and prudence that a reasonably careful person would apply in similar circumstances.

For endowments and foundations, this standard is further shaped by the Uniform Prudent Management of Institutional Funds Act (UPMIFA), which governs how most nonprofits manage and invest their assets. UPMIFA requires fiduciaries to manage assets in good faith and in a manner consistent with the charitable purposes of the institution. Central to this obligation is the expectation that boards will exercise ongoing oversight — not simply delegate investment decisions and move on.

In practical terms, that means periodically asking these questions: Is our investment manager still delivering value? Are we paying a competitive fee? Does our current partner understand our mission, our liquidity needs, and our risk tolerance? Are they adding value (educational content, fundraising support, etc.) beyond our quarterly performance review? A formal RFP process is one of the most structured, documented ways to answer those questions and demonstrate that your board is meeting its fiduciary obligations.

While ongoing oversight — including quarterly reviews, performance monitoring, and Investment Policy Statement (IPS) updates — is an essential part of effective governance, organizations should also periodically consider whether their advisory relationship continues to meet their evolving needs. A formal RFP process provides a structured, objective framework for evaluating investment advisors when a change may be warranted.

Why the RFP process is a best practice — not just a formality

An RFP for investment management services for a nonprofit accomplishes several things at once. First, it creates a documented record of due diligence — evidence that your board evaluated the market, considered alternatives, and made a deliberate, informed decision. That documentation matters if your organization is ever audited by the state attorney general’s office, faces donor scrutiny, or deals with a change in leadership.

Second, the RFP process provides a natural opportunity for fee benchmarking. Investment advisory fees can shift meaningfully over time, and organizations that never test the market may be paying more than necessary. Issuing an RFP requires candidates to disclose their fee structures clearly, which allows your committee to compare costs on an apples-to-apples basis.

Third — and perhaps most importantly — an RFP can reveal new possibilities. The investment landscape evolves. Private markets, alternative strategies, and OCIO (outsourced chief investment officer) models have expanded significantly over the past decade, offering endowments and foundations access to institutional-grade solutions that may not have been available when your current relationship began. An RFP is a structured way to understand what’s changed and whether those changes should influence how your portfolio is managed.

When to issue an investment RFP

Industry consensus points to a five-to-seven-year review cycle as best practice for endowments and foundations. Beyond the routine cycle, several specific circumstances may warrant an immediate review:

• A significant change in your organization’s mission or strategic direction
• Material underperformance relative to benchmarks over multiple periods
• Staff turnover at your advisory firm, particularly among key relationship personnel
• A change in your organization’s leadership or investment committee composition
• Concerns about conflicts of interest or fee transparency
• A desire to move from a consultant model to an OCIO model — or vice versa
• The need to expand services to include board education, strategic fundraising support, or both

Triggering an RFP in response to one of these events doesn’t imply dissatisfaction with a current provider. It signals that your board takes its governance role seriously and is committed to making decisions based on current, well-documented information.

How a well-constructed RFP strengthens governance

A thorough investment RFP typically requests information across five key areas: investment philosophy and process, team stability and qualifications, performance history, fee structure, and the proposed service model for your organization. Before you issue the document, your board should revisit — and if needed, update — your Investment Policy Statement (IPS).

Your IPS is the strategic foundation of your investment program. It defines your return objectives, spending policy, risk tolerance, and any mission-related constraints. A strong IPS doesn’t just guide your portfolio; it becomes the benchmark against which every RFP respondent is evaluated. Organizations that treat the IPS as a living document — reviewing it annually — are better positioned to conduct a rigorous, meaningful RFP process.

Integrated strategies supporting your fiduciary responsibilities

At Mercer Advisors, serving an endowment or foundation means going beyond investment management. When we work with nonprofit boards, we bring an integrated approach that supports governance across multiple dimensions:

• Investment management
  We help boards construct and document a rigorous RFP process, evaluate proposals from a fiduciary perspective, and implement institutional-grade investment strategies aligned with your IPS and spending policy. With more than $110 billion in client assets, Mercer Advisors offers access to institutional investment opportunities — including private markets and alternative strategies — that may not be available through smaller advisors. Learn how Mercer Advisors is designed to help endowments and nonprofits invest, govern, and grow.
• Board education and governance
  Mercer Advisors works alongside investment committees to strengthen governance practices, including fiduciary training, IPS development, and preparation for the RFP process itself. We sit on nonprofit boards too — so we understand the practical challenges boards face when balancing mission, governance, and financial stewardship.
• Financial planning
  Spending policy analysis — including total return frameworks and guardrail strategies — helps your board balance current grant-making with the need to preserve purchasing power for future generations. A well-designed spending policy directly informs what you should look for in an investment manager during the RFP process.
• Strategic fundraising support
  Leverage the expertise of our in-house tax, estate, and philanthropic consulting teams to strengthen your fundraising efforts. We partner with nonprofit development leaders to provide strategic guidance on donor behavior, high-impact charitable giving vehicles, and messaging that resonates with donors — helping you maximize the impact of every gift.
• Starting the conversation
  If your organization hasn’t conducted a formal investment RFP in five years or more, it may be time to put the process on your board’s agenda. The goal isn’t necessarily to change providers — it’s to confirm through documented due diligence that your current arrangement continues to serve your mission.

Starting the conversation

If your organization hasn’t conducted a formal investment RFP in five years or more, it may be time to put the process on your board’s agenda. The goal isn’t necessarily to change providers — it’s to confirm through documented due diligence that your current arrangement continues to serve your mission.

FAQs

What is an investment RFP for nonprofits, and why does it matter?

An investment RFP (request for proposal) is a formal document a nonprofit board uses to solicit proposals from investment managers or advisors. It matters because it creates a documented, structured process for evaluating whether your current investment partner — or a potential new one — best serves your organization’s financial goals and fiduciary obligations.

How often should a nonprofit board issue an investment RFP?

Most governance professionals and industry practitioners recommend that endowments and foundations issue a formal investment RFP every five to seven years, even if performance has been satisfactory. Regular review helps confirm fee competitiveness, service alignment, and ongoing fiduciary compliance.

Does issuing an RFP mean we’re planning to change investment managers?

Not necessarily. Many organizations complete an RFP process and choose to remain with their current provider — often with renegotiated fees, an updated service agreement, or renewed confidence in the relationship. The process is about due diligence, not dissatisfaction.

What legal framework governs endowment investment decisions?

Most nonprofit endowments are governed by the Uniform Prudent Management of Institutional Funds Act (UPMIFA), which requires boards to act prudently, in good faith, and in a manner consistent with the charitable purposes of the institution. UPMIFA emphasizes the importance of documented decision-making and ongoing oversight.

What should be included in a nonprofit investment RFP?

A comprehensive investment RFP typically covers investment philosophy and process, team qualifications and stability, performance history relative to benchmarks, fee structures, service model and reporting capabilities, and the firm’s experience with organizations of similar size and mission. Sharing your Investment Policy Statement (IPS) with respondents helps confirm proposals are tailored to your specific needs.

Where can I find a fiduciary investment partner for our endowment’s RFP process?

Mercer Advisors serves as an integrated fiduciary partner for endowments and foundations, helping boards prepare for and conduct the RFP process, evaluate proposals, and implement investment strategies aligned with their IPS and mission. Our team brings decades of experience working alongside nonprofit boards and investment committees across the country. Contact our Endowments & Foundations team to get started.