How an OCIO Can Help Your RIA Firm Navigate Volatile Markets

An OCIO can assist RIAs with risk management

Warren Buffett famously said, “The stock market is a device for transferring money from the impatient to the patient.”

This certainly rings true when the markets are at new lows or even all-time highs. Investors who aren’t patient or have a poor investment strategy may suffer greatly.  The risks to your firm when markets are volatile are many, including frustrated clients or even the loss of clients, which can impact your profitability. 

So, how can your RIA firm provide timely financial advice to current clients and look for opportunities to expand your practice during periods of uncertainty and volatility? How can you do all this without stretching yourself too thin?

That’s where the services of an OCIO can be a significant game-changer for your RIA/IAR.  In this article, we’ll talk about the growing trend of financial advisory firms partnering with OCIOs. We’ll explore their role in risk management, technology, and the value OCIOs provide through their services.

Chapter 1

Why Are More Financial Advisory Firms Turning to OCIOs?

Deciding between an inhouse and an outsourced OCIO for your financial advisory firmThe rise of Outsourced Chief Investment Officers (OCIOs) marks a growing trend in the financial services industry. In fact, OCIO assets in the US are projected to reach over $4 trillion by 2026.

Outsourcing offers numerous advantages for firms, financial advisors, and clients alike.

Addressing Evolving Challenges

The financial services industry is undergoing a period of significant transformation. Today’s advisors deal with a complex global economy, growing market uncertainties, stricter regulations, and changing client expectations.

These factors pressure independent RIA firms to adapt, excel, and maintain profitability in a fiercely competitive setting.

Enter the OCIO Advantage

OCIOs are an extension of your firm’s investment team, providing investment research and portfolio management expertise and resources.

By partnering with an OCIO, your firm gains access to specialized knowledge, streamlined workload, cost-efficiency, consistent strategy, and scalability. An OCIO offers flexible solutions that adjust to your changing needs, removing the necessity for continual internal resource growth.

These are some reasons why the role of an outsourced CIO is gaining popularity with firms owned by independent RIAs and IARs.

Ultimately, partnering with an OCIO can empower financial advisors to navigate market complexities like the ongoing volatility in the global markets.

Chapter 2

Global Economic Influences on Investment Strategies

An OCIO can interpret world economic investment impacts and strategies for your clients portfoliosIn today’s interconnected world, events from one place can affect the entire global economy, leading to a complicated set of challenges for you as a financial advisor.

These challenges stem from various macroeconomic factors, including:

  • Economic dynamics
  • Interest rates
  • Currency valuations
  • Trade dynamics
  • Political instability
  • Global debtT
  • Technological progress

Understanding the possible impacts of these events on investments and evaluating the risks is vital.

Moreover, the fast flow of information only adds to the complexity of making investment decisions. Keeping up with these changes, grasping their impact, and adjusting strategies as necessary are essential for achieving success.

This is where an OCIO can provide valuable expertise and resources, helping your firm cope with uncertain global markets and make informed investment decisions for your clients.

Chapter 3

How OCIOs Help With Risk Management and Adaptive Strategies

An OCIO can provide risk management strategies to RIAs

OCIOs, like Cornerstone Portfolio Research, can provide your RIA/IAR with the insight and agility needed to navigate the markets, ensuring well-informed, strategic investment decisions that align with client goals.

We also have access to advanced risk management tools and technology, allowing us to monitor market trends and potential risks in real-time.

Risk Management Expertise

OCIOs specialize in developing unique, specialized risk management strategies that focus on mitigating potential losses in market volatility.

  • Building diversified portfolios: OCIOs can create highly diversified portfolios for your clients that are tailored to the client’s risk tolerance. Diversification is a powerful tool for mitigating risks and reducing the impact of market fluctuations on client investments.
  • Enhanced transparency and client confidence: OCIOs can provide clients with research, technology, and detailed reporting. This results in greater transparency, clarity, and confidence for clients regarding their investment portfolios.
  • Constant monitoring and communication: Effective communication is crucial during market uncertainties.  OCIOs like Cornerstone Portfolio Research maintain constant oversight of your client portfolios, providing regular monitoring and performance reports. This enables you to stay informed and adapt your strategies as needed without the burden of constant market monitoring.

Adaptive Investment Strategies

OCIOs should be highly adaptive as market conditions adjust: 

  • Tactical asset allocation: Leveraged with deep market insights, an OCIO can dynamically adjust asset allocations to capitalize on short-term market opportunities and mitigate risks. This helps position client portfolios for optimal performance.
  • Client-centric solutions: Since every client’s needs and goals change, OCIOs can offer crucial flexibility and customization. This adaptability helps investment strategies remain tax-efficient and aligned with client objectives, even during personal events like retirement, loss of a spouse, selling a business, and other life situations.
  • Socially aware portfolios: In response to a growing demand for ethical or values-based investing, OCIOs help you build portfolios that aim for financial returns and reflect your clients’ social,  environmental, or moral values.
Chapter 4

Benefits of Strategic Asset Allocation in Uncertain Markets

Cornerstone Portfolio Research can provide financial professionals with investment strategies for their clients

An OCIO can deploy several strategic asset allocation tactics to manage risks and seize opportunities during market volatility

  • One common strategy is diversification, spreading investments across various asset classes to reduce exposure to any single market movement. Balancing the portfolio with a mix of equities, fixed income, commodities, and alternative investments can mitigate the impact of market downturns.
  • Rebalancing is another tactic OCIOs use to maintain the original or desired level of asset allocation and risk. This may mean selling certain assets that have appreciated and buying those that have underperformed, thus buying low and selling high.
  • Dynamic asset allocation may also be utilized, allowing for adjustments in the investment mix in response to changing market conditions and economic forecasts. This involves shifting the weightings of asset classes to take advantage of market trends and economic changes.
  • Using hedging strategies through options, futures, and other derivatives can protect the portfolio from significant losses, effectively insuring against adverse market movements.
Chapter 5

OCIOs Leverage Technology and Data Analytics

Cornerstone Portfolio Research, an OCIO, can provide data analytics to RIAs and IARs

OCIOs embrace cutting-edge technologies such as AI, machine learning, and big data analytics. This technology enhances their capacity to analyze markets, fine-tune portfolios, and expedite decision-making.

These tools include:

  • Portfolio management software
  • Automated rebalancing
  • Risk management tools
  • Data analytics

By using these technologies, your RIA/IAR firm can benefit by:

  • Making more informed decisions for your clients: With access to deep market insights and data analytics, you can effectively anticipate market trends and tailor investment strategies to meet your client’s needs.
  • Enhance client engagement: Real-time portfolio updates and transparent communication facilitated by technology help build trust with your clients, especially during fluctuating market conditions.
  • Boost operational efficiency: Using tech solutions from OCIO, your advisory firm can focus on adding value and building new and existing client relationships. This involves automating manual tasks, cutting down on paperwork, and improving data accuracy.
  • Navigate market complexities: Using analytical tools from OCIOs can help RIAs and IARs spot new opportunities and handle risks better, ensuring a data-driven way to navigate market uncertainties.
Chapter 6

The Benefits of Partnering With an OCIO

Cornerstone Portfolio Research is an outsourced chief investment officer

As the owner of an independent RIA or IAR,  you wear many hats, which can often burden you from a time management standpoint.  Ask yourself if you have the time, expertise, and technology to effectively oversee your clients’ assets while overseeing your practice and look for ways to grow it. 

Partnering with an OCIO, like Cornerstone Portfolio Research, offers even more benefits for you as advisors and your clients, including:

  • Let an OCIO do the heavy lifting of investment research and portfolio management for you.  Focus on nurturing your current clients and prospecting for new clients. Partnering with an OCIO can help you level the playing field by accessing the same investment expertise and resources as larger firms.
  • By outsourcing investment management, you can free up time to focus on your personal life and well-being.
  • Refine your internal workflows and compliance review process.

Partnering with an OCIO can provide value to you as an RIA/IAR, but what about your clients? 

Here are a few benefits:

  • OCIOs have the expertise and research to develop and implement investment strategies that could improve client returns.
  • Clients increasingly seek personalized services, prompting OCIOs to collaborate with you to understand these needs and craft tailored solutions. This approach can lead to better satisfaction and improved client retention.
  • OCIOs can assist you in creating fee structures that are efficient and competitive, allowing these savings to be transferred to your clients.
  • Working with an OCIO opens up opportunities for clients to invest in a broader range of asset classes and strategies.

Partner With Cornerstone Portfolio Research

At Cornerstone Portfolio Research, we understand the importance of your time, and we adjust to your processes without significant disruptions. Our services integrate smoothly with your investment practices, philosophy, and operations.

With over 70 years of combined experience, Cornerstone provides valuable investment research and portfolio management services to RIAs and IARs, helping you efficiently manage your clients’ assets.

Reach out to us today to discover how our experienced team can guide your firm through the complexities of a volatile market, ensuring long-term success and stability. 

Cornerstone Portfolio Research (“Cornerstone”) is an SEC registered investment adviser. Registration as an investment adviser does not imply a certain level of skill or training.  This publication should not be construed by any consumer or prospective client as Cornerstone’s solicitation or attempt to effect transactions in securities, or the rendering of personalized investment advice over the Internet.

The statements in this publication are the opinion of Cornerstone regarding Outsourced Chief Investment Officer (“OCIO”) services. These are not personalized recommendations and you should consider your own criteria when choosing an OCIO.

A copy of Cornerstone’s current written disclosure statement as set forth on Form ADV, discussing Cornerstone’s business operations, services, and fees is available from Cornerstone upon written request.  You should not assume that any discussion or information contained herein serves as the receipt of, or as a substitute for, personalized investment advice from Cornerstone or the professional advisors of your choosing.