Reserve Funds: Six Ways to Improve Association Returns
According to our 2018 HOA budget survey, 72% of board members reported that they weren’t confident in the returns they were getting on reserve funds and/or operating funds. To ensure you’re getting the most out of your reserve funds, here are six ways to improve your returns. Read the full article and download a complimentary guide here.
1. Invest only in money market accounts and CDs
As a fiduciary, your job is to protect your association’s assets. That means you should only invest in FDIC-insured money market accounts and CDs and avoid risky investment vehicles like mutual funds, bonds and stocks.
2. Look to HOA professionals for advice
Trust your financial services provider and HOA management company to help you make the best investing decisions. Some board members spend significant time researching information themselves via financial publications or on the internet, which takes time away from their job of developing great HOA policies.
3. Know your HOA investment basics
Work with your community management services firm to help you understand basic HOA financials as well as state reserve fund requirements.
4. Partner with a financial services firm
Work with an HOA-specific financial services company. Make sure they have a large portfolio and existing bank relationships so that they can obtain competitive rates for your association.
By partnering with FirstService Financial, FirstService Residential clients on average earn rates that are 4 to 5 times higher than the national average. For instance, FirstService Financial helped one Las Vegas single-family home association increase their interest by more than $30,000 (268% improvement) and are helping manage their CD ladder.
5. Review HOA investments on a quarterly basis
Review your reserve fund investments on an ongoing basis. Many times, banks offer teaser rates to individual customers (especially if you’re not working with a financial services company).
6. Have an Investment Policy in place
Last but not least, consider creating and implementing an HOA Investment Policy. As Vice President of FirstService Financial Karla Chung explained,