Building a successful financial advisor practice can quickly become a major challenge for many RIAs due to the rapidly rising costs of building in-house investment teams and adding sophisticated technology infrastructure. The traditional approach to investment management can be expensive, with costs including salaries, benefits, bonuses, and taxes for investment professionals and ongoing fees for research, software, and regulatory compliance.
Fortunately, there’s a strategic solution gaining traction: that is, partnering with an Outsourced Chief Investment Officer (OCIO). By delegating investment management responsibilities to a dedicated OCIO firm like Cornerstone Portfolio Research, RIAs can realize significant cost efficiencies while freeing valuable resources to focus on core business activities.
Cornerstone Insights: Financial advisors are more successful when they wear fewer hats.
Cornerstone is an independent investment research and portfolio management firm with 70+ years of combined experience in the financial services industry. We understand the unique challenges RIAs face, and our OCIO services are designed to address those challenges head-on, particularly in cost reduction and overall efficiency.
In this blog, we’ll discuss the fundamentals of cost-efficiency using OCIO services and how Cornerstone can help streamline operations by reducing expenses and optimizing resources.
The Cost Challenges of Traditional Investment Management
Running an in-house investment team can be a significant expense. A closer look identifies some common cost burdens:
- Salaries, bonuses, and benefits: Hiring and retaining higher-quality investment professionals comes at a substantial premium. This includes base salaries and bonuses, stock options, and employer-sponsored benefits like healthcare and retirement plans.
- Investment research and analysis fees: Staying on top of market trends and identifying investment opportunities requires ongoing research and analysis. These services can be very expensive, especially for smaller RIAs with limited resources.
- Portfolio management software and technology costs: Modern portfolio management requires sophisticated software and technology platforms. These tools come with licensing fees, ongoing maintenance costs, and potential IT support expenses.
- Regulatory compliance expenses: The highly regulated financial services industry demands substantial resources for compliance, including hiring and training staff and maintaining compliance systems. Regular audits, risk assessments, and ongoing monitoring also add to the costs. Non-compliance can result in hefty fines, penalties, and legal expenses, increasing the financial burden on RIAs.
These expenses can quickly erode your firm’s profitability. By partnering with an OCIO firm like Cornerstone Portfolio Research, you can potentially reduce these costs and improve the bottom line.
Cornerstone’s Cost-Effective OCIO Solution
Cornerstone offers a comprehensive OCIO solution designed to help your RIA/IAR streamline operations and cost efficiency. Read about some key advantages that set us apart.
Economies of scale: Cornerstone leverages its size and expertise to negotiate lower fees for investment products and services, benefiting all of our RIA partners. Through our relationships with investment managers and service providers, we can secure more favorable terms that translate into cost savings for your firm.
Streamlined technology platform: We utilize a robust and efficient technology platform that automates many portfolio management tasks. This reduces administrative burdens for your team, freeing them to focus on client service and other strategic alternatives.
Scalable expertise: By partnering with Cornerstone, you gain access to our team of experienced investment professionals. You’ll be partnered with a CFA Charterholder, a highly-regarded industry designation. We have the tools and expertise to handle advanced portfolio management. You get research and investment models tailored to your approach, not generic ones.
Focus on core business: By outsourcing your investment management to us, you can free up time and resources by spending less time managing portfolios and more time building client relationships and developing new business opportunities.
A Transparent Fee Structure
One of the major advantages of partnering with Cornerstone is our transparent fee structure. Our fees are clearly outlined, allowing you to budget for OCIO services confidently. You don’t need to give up equity or pay a six-figure salary plus bonus and benefits to hire a CIO. We keep our fees low, ranging from 5 to 20 bps, with many relationships falling into the 5 to 10 bps range.
We believe in open communication and financial clarity, so there are no hidden costs or surprise charges. This stands in stark contrast to the potential hidden costs associated with managing an in-house investment team. Beyond salaries and benefits, there can be unforeseen expenses related to technology upgrades, staff turnover, and potential compliance issues.
With Cornerstone, you know exactly what you’re paying for, allowing for more accurate financial planning and cost control.
Beyond Cost Savings: The Value Proposition
While cost savings are a significant benefit of partnering with Cornerstone, our value goes far beyond reduced expenses. Here are some of the additional benefits you can expect:
- Enhanced investment capabilities: One significant benefit of using our services is access to professionals with specialized knowledge and extensive experience. Our team understands market nuances and can offer insights and strategies that might be beyond the reach of an in-house professional. We can help you develop and implement sophisticated investment strategies tailored to your client’s specific needs and risk tolerance.
- Access to a wider range of investment opportunities: Cornerstone has access to a broad universe of investment products and strategies than most RIAs could access on their own. This allows us to create more diversified and potentially higher-performing portfolios for your clients.
- Risk management expertise and compliance support: We have the resources and expertise to effectively manage risk in your clients’ portfolios and help you navigate the constantly evolving regulatory environment.
- Improved scalability for future growth: Your investment management needs will evolve as your RIA grows. Partnering with Cornerstone provides a scalable solution that can adapt to your changing requirements. We offer weekly high-level communications and can hold virtual meetings with you and your clients as needed. All of our services are white-labeled with your RIA’s name.
Investing in Growth With Cornerstone
By partnering with Cornerstone Portfolio Research, you’re not just outsourcing investment management; you’re making an investment in your RIA’s future growth. The cost savings and operational efficiencies you gain can be reinvested in strategic initiatives that will fuel your firm’s success.
You deserve the benefits of working with a CIO and a CFA® Charterholder without the typical hassles of outsourcing. Let us handle the back-office tasks so you can focus on what really matters – showcasing your expertise and serving your clients.
Reach out to us today to schedule a consultation. Discover how our OCIO services can streamline your operations, enhance cost-effectiveness, and drive your firm’s growth.
