Q: What is an FSP?
A: Instead of starting your own nonprofit (along with the time and administrative challenges that entails), you can work with an existing 501(c)(3) public charity to form an FSP, which has the tax-deductible benefits of the public charity as well as the power to donate and invest funds (in endeavors mission-aligned with the new FSP). This FSP can serve as an alternative fundraising option that impact ventures can provide to their prospective investors, allowing them to donate capital to the FSP (which will, in turn, be invested in the impact venture that shares a mission with the FSP).
Q: Can the FSP also issue grants or serve other charitable purposes beyond just investing in the impact fund?
A: Yes, depending on the established mission and capital disbursement plan for the FSP,
it can execute on multiple strategies if they are in alignment with those pre-set guidelines.
Q: How is LOHAS compensated for an FSP and supporting services?
A: LOHAS charges below market rates. The management fees of LOHAS and its FSP administration partner are limited to a small annual fee tied to an FSP’s
assets under management as well as a minor transactional fee each time funds are deployed from an FSP that have no expectation of return (e.g., a donation versus an investment).
Q: Does LOHAS raise the funds for its clients’ FSPs?
A: While LOHAS supports its clients’ fundraising efforts and may lead donors to a client’s FSP (for an additional fee), the purpose of a LOHAS FSP is to give the impact venture another tool in their fundraising toolbox (providing an innovative option to the venture’s prospective investors).
Q: Is LOHAS a registered investment advisor (“RIA”) that can advise the FSP or impact venture on investment decisions?
A: No, but because LOHAS does not act as an RIA or wealth manager, our team can offer unbiased guidance and support.
Have more questions regarding FSPs? We have more answers! Apply to set up your own FSP, and we’ll share responses to some other frequent questions we receive.