First National Clients Outperform Nation
The services at LifeScape are critical and life-changing for children and adults with disabilities.
But to continue to provide those services requires exceptional management of the nonprofit’s endowment fund.
“It’s critical. Our future depends on it,” CEO Anne Rieck McFarland said. “The rest of our funding is declining and less stable, so we have to ensure our principal is protected. We need resources that we can benefit from today but also ensure we have resources going forward.”
For more than 30 years, the responsibility for managing the endowment has been entrusted to the Wealth Management team at The First National Bank in Sioux Falls. “This 30-year relationship represents the relationship the bank had with South Dakota Achieve and now LifeScape. Over those 30 years the relationship was reassessed many times,” Rieck McFarland said.
“They have high integrity. They’re responsive. We have confidence in them. They understand what we do. They listen to what we want and what strategies we think are important. In a word, it’s a partnership.”
It’s also been a successful partnership. According to an annual endowment survey report, LifeScape’s Foundation has outpaced the average investment performance of other foundation endowments by 2.2 percent each year over the last five years and by 2.4 percent for fiscal year 2017.
During fiscal 2017, LifeScape Foundation had a 14.6 percent return, net of fees, compared to an average of 12.2 percent, according to the NACUBO-Commonfund Study of Endowments, performed by Commonfund, an independent asset management firm focused on nonprofit institutions. Similarly sized Foundations had an average return of 11.9 percent.
Produced for the National Association of College and University Business Officers, the report’s 809 participating college and university endowments had an annualized trailing three-year return of 5.2 percent net of fees, compared to LifeScape Foundation’s 6.2 percent. Trailing five-year annualized returns were 7.9 percent net of fees, compared to LifeScape Foundation’s 10.1 percent net of fees.
“We have not continued our relationship for so many years just because it’s ‘what we’ve always done’,” Rieck McFarland said. “It’s through conscious effort and exploration we have continuously determined they’re the entity we’re going to be working with. Performance-wise, we’re pleased.”
“It’s not an isolated instance,” said Adam Cox, executive vice president and chief wealth management officer.
“We have very similar reports nearly every year,” he said. “We’ve increased our work with nonprofits and their endowments at a pretty good clip. People are looking for better performance and better returns and better advisory experience.”
First National Wealth Management operates as a fiduciary, as opposed to many brokerage firms.
“We are universally obligated to act in the client’s best interest and not our own,” Cox said. “Less than 2 percent of advisors across the country operate under a full fiduciary standard like we do, so we’re a very small minority.”
“First National also has more Chartered Financial Analysts on staff than any institution managing money for the public in South Dakota,” he added.
“Our sophistication is by far and away the biggest differentiator. And we have a community-builder mindset. The value we bring isn’t just in the return itself, it’s the real dollar outcome of an 8.5 percent versus 6.5 percent return, which can mean, perhaps millions more dollars to further their mission. That’s the real impact of our investment performance.”
The First National Wealth Management works with 32 nonprofit organizations, with assets totaling $495 million. That’s an increase from the 29 relationships it managed one decade ago that totaled $208 million in assets.
One of those relationships is a decades-long one with First Congregational Church.
“Our relationship is quite positive. They have been very responsive to any questions we’ve had and helped lead us through the economic downturn of 2008 and 2009 with great results,” finance administrator Tanya Harris said.
“We’re able to trust what they say, and they’ve been very good about getting us into a conservative fund that still allows us to grow our endowment. The team they have put together for us is excellent.”
The bank also manages endowments for other churches, cemeteries and a variety of nonprofit organizations.
“What I like best is we eat our own cooking,” said Kyle Cipperley, investments manager for First National Wealth Management. “We put our clients’ money, including nonprofits, in primarily the same investments we have our own 401K plan in here at the bank. It is important for us to invest our own money in things we put our clients in because while we cannot promise market outcomes, we can share in the same results by having our personal money invested alongside them. It is what I would want if my role was reversed with our clients.”
“First National Bank’s employees personally connect with the nonprofits we serve,” he added. “They volunteer there and personally raise funds to support their missions.”
Rieck McFarland has experienced that in her role at LifeScape for years.
“They’ve taken the time to get to know us and understand our mission, our work and our challenges. They recognize the critical nature of the asset we have with them and what we need from it. But they extend that support beyond being our wealth management advisor to supporting us in other ways. We appreciate who they are in this community, and you feel proud to have a relationship with them.”