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If Donors Are Investors, They Need A Motley Fool

The Nonprofit Outcomes Toolbox: A Complete Guide to Program Effectiveness, Performance Measurement, and Results
More and more we hear of people “investing in” charities. I’ll discuss the trend with Dr. Robert Penna, my guest this week on Tony Martignetti Nonprofit Radio.

As that continues, investors will need investment advisory services, like The Motley Fool, Raymond James, MorganStanley SmithBarney and others. They’ll seek advice on where to place their money to get maximum return on investment. There are companies providing such services today, but they all serve wealthy donors investing in our charitable sectors.

The need for this expertise will reach modest investors, just as Motley Fool offers a comparatively low-cost, web-based advisory practice for people who need not have millions in investible assets. They recommend buying, selling, holding or watching individual stocks.

I expect we’ll see the same spring up for charities, where recommendations will be made to invest in, avoid or watch particular nonprofits, and it will be a startling change for the U.S.’s roughly 1.3 million public nonprofits. An organization could find itself on a “do not invest” list. This also raises provocative questions.

What will the sectors look like? Will they be mission based? Regional? I see them cutting across mission and geography, to give us the highest yield domestic violence shelter in San Antonio; or the “invest first” recommendations for mentally retarded and developmentally disadvantaged adult services in Illinois; or, what will cause the most turmoil, the “do not invest” advice for social justice in the southeast.

What will investment recommendations be based on? Most likely return on investment. Dr. Penna and I will discuss that this Friday.

What will ROI advice be based on? Probably outcomes and impact, and you’ll hear more about those different measures on Friday.

Rating services like Charity Navigator and GuideStar will be necessary to the investment advisory process, but will others enter that game? Will the advisory services perform their own ratings? Will they compete on the basis of their ratings models? Do the models have to be public, or might they be proprietary, as they are for today’s advisors in stock and bond markets? Will GuideStar and its ilk provide investment advice themselves?

This will all be a natural progression of charitable giving, as that phrase is replaced by “social investing” and as the pressure increases on charities to make, measure and show return on investment.

I don’t know whether this is good or bad. It is unavoidable: our nonprofit community it turning into capitalist nonprofit competition.

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