Board member as a Financial Advisor

As we all know, one of the safest ways to to keep reserve funds is with the use of CDs. As we also know, most banks don't have high yield interest rates.

My question is, is it safe to put most of our reserves funds in one bank for several CDs only because this particular bank is paying more than others?

We have a board member that has taken the responsibility to insist in recommending how our finances should be allocated. With this, our property
management company believes that we should spread the money in different banks.

It seems that this board member is not allowing the property management to give us any recommendations. For months, he is so persistent that we all
follow his rule.

I can see the board member's point, he wants to get more interest rates return. I understand that the FDIC insurance has been extended until
12/31/13. Of course the laws can change at any given time.

I am also a board member for another community in which I own property. I prompted the question to the property manager and her advice is to not to
put all of the reserves in one bank. She also recommended that we be careful having a board member take over the finances because we are not
experts and liability can be great for us personally.

I'd love to hear your feedback.

The part of the money that is in question is $247,000. The rest of the funds are allocated in CDs that will mature in December and some is in a checking account.

The money in question is $247,000.

I'd prefer to see one for $100,000; another at $100,000 and one for $47,000, divided between 2 banks.

In response to the question of protection, if you have $252k in the bank then the government will guarantee the $250k leaving you with $2000 unprotected. This is in effect until 2014. (I personally would wager that it will become permanent before that date.)

Now some will disagree with me and that is fine. But unless the amount of money exceeded 250k by a significant amount I see no point in taking a lower rate. You might review your bank's performance bi-annually if you are nervous as you could lose interest. But most CDs pay quarterly so you would only lose one quarter's interest should something go wrong.

I would also personally feel very comfortable with the HOA risking less then 1% of the funds to get a higher return. My own belief is that it would benefit some HOAs to take some more risk on in a reasonable fashion. It is not like it is an all or nothing situation.

Yes, I think it should remain very conservative. But if you are in a strong position it could become even more strong with small risks. And certainly leaving a couple thousand exposed is not a large risk.

Because liquidity is the main issue, I still stand behind my above statement.
()Sincrements in several CD funds at 2 different banks.)

But is liquidity always a major issue? I just don't think it is always a major issue and suspect that for many it is absolutely not. If you are at or near 100% funded and have any buildings then at least some of the money could at times be tied up for five or more years at a time.

The reason most HOAs only seem to have CDs is because of complete and utter risk aversion. Don't get me wrong, I don't think that high risk investments are for HOAs. But let us at least understand why things are done the way they are.

Mary,

I would totally agree with you. And if you know for instance that you will be having some very expensive work done soon then you would start increasing liquidity.