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How dynamic, risk-managed investment solutions are performing in the current market environment

4th Quarter | 2023

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Current market environment performance of dynamic, risk-managed investment solutions.

By Jerry Wagner

With tax season upon us, investors may be thinking about the most beneficial—and tax-efficient—ways to make charitable donations.

One popular solution is the donor-advised fund (DAF), a charitable investment account that allows investors to contribute funds for an immediate tax deduction, invest the funds for tax-free growth, and grant the money to a qualified charity.

But many DAF programs come with high fees and may not offer investors access to the risk-managed investment strategies needed to maximize the potential of their giving account.

To help meet those needs, Flexible Plan Investments (FPI) has created FPI Charitable.

What is FPI Charitable?

FPI Charitable offers investors a dynamically risk-managed, tax-smart way to support their favorite charitable causes.

Here’s how it works: Investors make contributions into an account with the sponsoring organization—in this case, National Charitable Endowment (NCE), a 501(c)(3) charity established to support donor-advised fund accounts. Once the account is funded, NCE owns and legally controls its assets, which allows the investor to take a deduction for the full value in the initial year. Thereafter, the investor determines how the assets are invested and distributed.

After the FPI Charitable account is created, the investor has no administrative responsibilities. NCE conducts the due diligence, communicates with the charities, sends grants, and provides grantee reports. The grants to the charity can be anonymous or in the name the investor chooses for the account (e.g., The Jones Family Endowment).

FPI can continue to manage the account after the contribution, helping to maximize the tax-free growth of the charitable account while seeking to mitigate downside risk. FPI Charitable offers investors access to a variety of FPI’s Quantified Fee Credit (QFC) investment strategies. FPI’s QFC strategies provide multiple layers of dynamic risk management; seek to take advantage of opportunities that arise in different market environments; and provide diversification among asset classes, investment methodologies, and time horizons. The QFC strategies make use of only FPI-subadvised Quantified Funds. Affiliated fund fee credits on the QFC strategies reduce the FPI portion of the advisory fee to as low as 0 bps, depending on the size of the account. And, of course, the investor’s financial adviser can continue to provide planning and consulting as well.

In many ways, having an FPI Charitable account is like having your own foundation, but so much simpler. With no legal and administrative hassles, no large initial donation, and even better tax treatment, it allows the average investor—not a Henry Ford or a Bill Gates—to make a deductible charitable contribution this year, maximize the potential of their giving account over time using Flexible Plan Investments’ dynamically risk-managed investment solutions, and build a legacy that supports the charitable causes of their choosing for years to come.

For advisers, FPI Charitable offers several planning opportunities: 

•  Cash can be contributed to offset the tax effect of an unexpected windfall or bonus. 

•  Appreciated stocks can be contributed to avoid capital gains tax on their sale after they are contributed in kind to the account. 

•  You don’t have to be able to use all of the deduction in the year the account is funded. Contributions carry forward for five years.

(Note: While Flexible Plan Investments’ president and founder Jerry Wagner was a practicing tax attorney, Flexible Plan Investments does not provide tax, financial-planning, estate-planning, or insurance services or advice. Readers are encouraged to seek the counsel of their own qualified tax accountant or attorney on these matters.)

How do I set up the account?

Contributions can be made at any time right up to each year’s end. The amount contributed is invested using the same paperwork (ours and the chosen trustee’s) as a normal FPI account, as well as the establishment form for NCE, as the sponsoring organization. Please feel free to contact our service team at 800-347-3539, ext. 146, to request or get assistance with the paperwork.

The account can be held at any trustee. We favor Axos Advisor Services, where most of our accounts are custodied, and the fees are low (or waived in most cases).

Donations can be invested in any of our many QFC strategies, including our turnkey QFC strategies. Investors will not be billed separately for our fees for these strategies. We receive subadviser fees from the affiliated funds used in these strategies in our capacity as a subadviser, regardless of the size of the account. Only the fee of the investor’s financial adviser will be deducted from the account by FPI. Strategy changes can be made at any time.

For investors interested in using principled investing strategies to amplify their giving, our QFC Faith Focused Investing, QFC For A Better World, and QFC Common Ground strategies provide ideal solutions. As a bonus, our principled investment strategies allow investors to give back 10% of our net advisory fees collected for these strategies to a charity of the investor’s choice each year, including NCE.

What does it cost?

In addition to the services listed earlier in the article, NCE also provides the accounting of the charitable activity of the trust and maintains the legal and accounting expenses of the 501(c)(3) strategy organization that makes all of the tax and grant services possible.

For these services, DAF sponsoring organizations charge a wide variety of fees. They commonly range from 0.6% to 3% per year on the first $500,000 in assets contributed and then lower percentages on additional tiers of contributions. Because I want our clients to have the lowest-cost option possible, we worked out a novel arrangement with NCE.

I have created my own account with FPI Charitable. NCE has agreed that it will use my account to satisfy its normal 0.65% minimum tier fee and that any clients that invest after me will pay a lower tier. At present, that tier is at just 25 basis points per year, subject to an annual minimum fee of $295. The minimum account size is $50,000.

And since NCE agreed to aggregate accounts for fee purposes, as more clients sign up for FPI Charitable, their assets can take all FPI clients in the program to an even lower tier level.

Make the most of your charitable legacy

If you have ever wanted to start a legacy of charitable gift giving, are looking to consolidate and account for all your charitable giving in one easily administered spot, or just need a charitable deduction to offset some windfall of income you received this year, please join me in opening an FPI Charitable account.

To learn more and get answers to frequently asked questions about donor-advised funds, visit https://flexibleplan.com/our-solutions/donor-advised-funds. Financial professionals who want to find out more about the financial-planning benefits of donor-advised funds, learn how to set one up, or get answers to related questions can watch our on-demand webinar here. To request or get assistance with the paperwork, contact our service team at 800-347-3539, ext. 146.



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