As a board member, it’s your responsibility to operate as one of the principal financial stewards of your HOA. That entails choosing banking programs that perfectly balance growth, safety, and liquidity, as well as an insurance company that offers the most coverage with the lowest premium.
Starting with the right California community management company will help. Although many firms offer general knowledge, higher-caliber companies have entire branches of their organization dedicated to banking and insurance. To help you determine if your current (or prospective) community management company has what it takes to be your financial partner, let’s look at a few questions you should ask.
1. What role do you play in our banking and insurance?
You want a community management company that leads, not follows. Ideally, your firm’s services should include proactive insight into your association’s banking and insurance requirements. You should feel like you have a consultant on your side, not merely someone who does the legwork after you make a specific request.
On the banking side, your community management company should be reviewing how much interest your accounts are earning, whether your entire balances are FDIC insured, and how much of your funds are liquid. The company should also be reviewing your financials on a monthly basis, making adjustments, and opening new accounts at the direction of the board.

On the insurance side, you want your management partner to continually review your policies to see if you might be able to get broader coverage without an increase in premiums. A good property management company may even find a policy that provide more coverage with lower premiums.

2. Can you get better terms for me?
If your community management company doesn’t offer your high-rise or master-planned community the best terms, then you’re with the wrong company. Large, nationwide firms have the relationships, size, efficiencies, and leverage to help their clients get higher returns on investments and lower rates on loans. With insurance, larger companies are able to negotiate better policies because they have a bigger book of business. This helps distribute risk for insurers and is the best way to properly steward HOA budgets.
Read our in-depth white paper Four Things You May Not Know About Community Insurance for more details.
3. Do you have internal safeguards in place?
Simply put, smaller or less-experienced firms are more vulnerable to potential fraud because they often lack the staffing support to properly segregate essential functions. When the same associates perform accounts payable and accounts receivable duties, the opportunity to misuse funds increases. Large firms can build internal firewalls to eliminate this risk. Additionally, the best firms embrace transparency and regularly conduct internal audits to verify their processes.

4. Can I see results?
Your community management company should be able to demonstrate specific results to back up claims that its strategies work. For instance, when it comes to insurance, FirstService Residential has concrete examples of how it has benefited HOAs, such as:
  • Saving clients up to 28 percent on insurance premiums, which translated to more than $33,000 per year for one client
  • Negotiating additional umbrella policies on a per-loss rather than a per-unit basis, potentially resulting in massive savings in the event of a loss
  • Saving one HOA $50,000 on an insurance policy once the association took ownership of its property from the developer
As for banking and investments, the firm:
  • Increased the annual revenue of an HOA in the Bay Area by $9,000 with banking alternatives that provided better yields
  • Recommended investments to one client that raised the portfolio yield from 0.06 percent to 0.41 percent
  • Helped a client protect a $4-million settlement across four fully insured accounts, keep the money liquid, and get a great return
  • Provided an investment recommendation that beat those of a national brokerage firm, giving the HOA an additional $6,000 per year in interest (while syncing the return with requirements of the association’s reserve study)
Getting the most bang for your buck when it comes to insurance coverage and banking programs can make your HOA’s money go a lot farther. Find out how a national community management firm with a strong local presence can make this happen for your California association. Contact FirstService Residential, California’s leading community management company.

Tuesday September 13, 2016