Are you part of the growing trend among independent RIAs and IARs partnering with OCIOs (Outsourced Chief Investment Officers) to improve the quality of their investment-related services?
The true test of your OCIO partnership lies in its ability to improve the investment returns of your client’s assets.
Sure, you can transfer a lot of investment-related work to an OCIO, but the true test will always be the OCIO’s ability to improve your clients’ results.
Have you taken the time to develop a set of financial criteria you can use to evaluate the success of your new OCIO partnership?
In this blog, we’ll look at eight key performance indicators that you can use to measure the success of a relationship with an Outsourced Chief Investment Officer.
1. Alignment with Your Firm’s Objectives
Because OCIOs have different capabilities, strategies, processes, and services, your selection process should be heavily weighted to ensure that OCIO’s investment advice is aligned with your firm’s business practices. If an OCIO wants to immediately make major changes to existing portfolios, this may not resonate with your current clients or expectations.
A regularly scheduled evaluation of your OCIO’s advice and results can help identify issues that may not be compatible with your firm’s business strategy. This includes how well the OCIO’s strategies adapt to ever-changing market conditions and your client’s investment requirements.
Thorough evaluations from time to time are part of your foundation for a successful relationship with an OCIO – no surprises and happy clients.
Finally, consider the overall strategic value the OCIO brings to your firm. This can be based on why bigger firms have CIOs and the value they bring to these firms. Adding and retaining new clients should be at the top of your list.
2. Performance Metrics
You can start by measuring the performance of the portfolios managed by the OCIO and compare it to your previous in-house management results. The investment performance of the OCIO can also be compared to relevant benchmarks agreed to in advance. Some benchmarks are relatively straightforward, while others have to be manufactured so they have some relevance to what the OCIO is doing.
Risk-adjusted returns, net returns, and real rates of return are also important criteria when comparing client performance to various criteria that impact results, purchasing power, and other benchmarks.
Watch our video, “Focus on Clients, We’ll Handle the Research.”
3. Client Satisfaction and Improved Retention Rates
It’s possible that one of the main reasons why you hired an OCIO was to assist in building higher current client retention rates. You can evaluate your OCIO’s impact in several ways based on multiple forms of feedback. Gathering client feedback regularly should give you additional insights into client satisfaction and the likelihood they will continue using your firm’s investment services.
The quality and frequency of the OCIO’s communication about current investments and future market trends are also crucial for keeping current clients fully informed. It is also a way to keep prospective clients informed about the impact of future market conditions.
You should also get feedback from your clients regarding how easy it is for them to access and understand their investment results. If your information needs to be clarified, there is a possibility you will lose clients.
4. Flexibility and Adaptability
Because the markets are constantly evolving, evaluating how adaptable and responsive your OCIO is to the volatility is an important measurement.
It can be easy to make money in bull markets. It is more difficult to preserve capital in bear markets.
5. Transparent Communication
Frequent, transparent communications are the backbone of any partnership between a financial advisor and an OCIO. The OCIO should provide clear, comprehensive reports to you and your clients. The OCIO should also be readily available for discussions related to their performance (looking back) and the outlook for future market conditions (Looking forward).
Review the quality and frequency of the communication, ensuring it meets your expectations and needs.
6. Cost-Effectiveness and Efficiency
While cost should not be the only criterion, it’s essential to consider the value your clients receive from the fees that are being paid. Analyze the fully loaded cost structure of the OCIO services and weigh them against the benefits and results they bring to your firm.
An OCIO’s added value should also help streamline your investment process, allowing you to spend more time adding new clients and serving current clients.
Evaluate how much time and resources have been saved due to the OCIO’s involvement. Consider factors like reduced administrative burdens, enhanced research capabilities, and access to broader investment opportunities.
7. Compliance and Risk Management
The OCIO should manage investment risks and ensure your investment services comply with industry regulations.
This includes managing client assets in volatile markets with the standards you have established for your firm.
Why Consider a Partnership with Cornerstone Portfolio Research?
Cornerstone Portfolio Research is an independent firm specializing in investment research and portfolio management. With over 70 years of collective experience, we assist financial advisors with managing their clients’ assets.
Recognizing the challenges smaller advisory firms face in competing with bigger firms, we offer Outsourced CIO services for improving investment results and managing risk in volatile securities markets.
Our services integrate smoothly into your investment practices, philosophy, and operations.
Our approach includes:
- Seamless integration into your workflows, using your CRM and other software, without requiring system changes
- Participation in client and prospect meetings to help grow relationships
- A white-labeled process that uses your branding to avoid potential client confusion
- Clients stay with current custodians. No new paperwork
- Marketing assistance with clients who have larger asset amounts
We support firms that will benefit from expanded investment management services. We add the credibility you need to win larger client relationships.
Is it worth a few minutes of your time to learn more? Let’s schedule an introductory call.
