Can Small RIAs Benefit From OCIOs Like the Big Firms Do?

Can Small RIAs Benefit From OCIOs Like the Big Firms Do?

Life in an independent RIA can be great, as far as the freedom from long international chains of command goes. However, one of the few drawbacks may be that your pockets are not as deep. Resources may not be as plentiful as they are on a massive corporate scale. 

This might tempt some independent advisors to envy big houses’ asset management resources, in particular. However, the good news is that you do not have to. 

Can the Playing Field Be Leveled?

Sometimes the outcome of a ballgame depends less on the size of your team than on who you have in your dugout. While we cannot guarantee outcomes (because we do not claim to know the future), we believe the secret weapon that could help you win is an outsourced chief investment officer (OCIO).

This independent contractor can join your team (meaning you can list them on your meet-our-team page), but they can be paid a flat fee or a small number of basis points: There is no salary to pay, no benefits or insurance to cover. In fact, you do not even need room for their lunch in the fridge. 

Possible Increased Income

Bringing a financial heavy hitter onto your team could even help facilitate your making more money, long-term in more ways than one. First, many OCIOs are willing to meet with prospects, should you choose to green-light them by doing so. Since those prospective clients get one-to-one time with your CIO, it seems appropriate to charge a premium for the privilege. 

Second, once you have the certifications, experience, continuing education, and accomplishments of a top-of-the-line outsourced CIO on your team, it may be time to optimize your fees. Big-league ball games generally mean a salary upgrade for players coming up from the minors. 

Third, for the same reasons, you may want to consider increasing your minimum asset requirement. We cannot guarantee results any more than you can, but with the credentials of an outsourced chief investment officer increasing your firm’s prestige, you might opt to start swinging for the fences.


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Investment Expertise

A reputable fiduciary OCIO can be a financial all-star; a champion who brings both power and prestige to your asset allocation and investment decisions. They also bring investment expertise and experience for both decision-making and selecting strategies to net your clients maximized results. 

Even when a portfolio’s investments enlarge or the client opts to utilize more complex assets, you can be prepared. Everything from monitoring managers to precisely-timed trade executions can be offloaded, freeing you to nurture existing relationships and seek new prospective clients. 

The best outsourced CIOs are trained experts, as well. Therefore, adding a Chartered Financial Analyst® (CFA®) does a lot more than expanding your team with an impressive bio. When an OCIO of this caliber signs on, you will have a heavy hitter warming up in your bullpen for every game, rain or shine. 

Wider Diversification Opportunities

Even modest-sized account holders can enjoy much of the same variety of options that larger investment firms may offer. At the same time, you should not have to reduce your face-to-face hours with clients in order to facilitate this benefit. 

Your outsourced chief investment officer can provide a deep, comprehensive approach to better investment portfolios—while you relax and focus on growing your book of business. While you reach out elsewhere, your OCIO can include an additional asset class, investment vehicle, or strategy to fit them like a glove.

Compliance & Regulatory Adherence

If you are an ERISA fiduciary, a quality OCIO’s expertise could potentially make meeting your compliance and regulatory requirements easier, as well. With regulations sometimes seeming to change every inning, this is another reason to have a financial all-star in your dugout. Increased complexity should not stop you from taking the field. 

Your outsourced chief investment officer can lend their expertise, keeping client portfolios in compliance, even when the same plans grow to new, biggest-at-the-firm sizes. Meanwhile, as a fiduciary, better OCIOs can remain completely accountable for their performance against your specified objectives.

When every plan needs an administrator who is legally responsible for signing and filing tax forms, making the necessary disclosures, and so on, another set of eyes wouldn’t hurt. Considering the potential personal liability for dropping the ball in any of these vital areas, there is a lot to be said for delegating the burden where you can. 

Beautiful mature business woman


Breathing Room

The amount of investment management and other work that you offload is completely your decision to make. If you would rather keep hands-on with all but the hardest or most tiresome tasks, that is up to you. 

Nevertheless, we believe your firm’s optimal results happen when you hand off all that you can. Mega firm advisors rarely have to sweat the drudge work—and neither should you. After all, you chose a boutique service model to make things easier for you and your clients, right?

When all is said and done, you cannot consistently provide next-level value to the people you advise if you are perpetually fatigued. Burnout can hurt you, if you ignore it. 

Your home life can also begin to suffer as a result. Guilt from snapping at loved ones and friends can increase your worries, which in turn, can make you even grumpier. After a while, it can all become an awful vicious circle. 

This makes hiring the right OCIO potentially beneficial to your health and well-being. Delegating risk management and the other tasks that perpetually keep you running behind can create a profound amount of breathing room. As a result, you could start serving clients bright-eyed again.

Coffee-fueled fast talk only goes so far. People can read your genuine level of engagement (from yards away, at times). Empathy is one of the hallmarks of a great advisor. So, de-stressing and getting the sleep you need benefits both you and your advising clients. 

Win the Game

For the reasons listed above (and more), we are convinced that a reputable OCIO could be your firm’s ticket to the majors. However, if you would like more information first, we have prepared a free eBook for you, “12 Reasons to Outsource Your Portfolio Management.”

We are prepared to meet your firm’s investment resource outsourcing needs by providing solid investment solutions, whether you are facing a volatile market or clear economic skies. Contact us today. 

CPS eBook Reasons to Outsource

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.                 

More about the author: Thomas Balis

Thomas holds a Bachelor of Science in Business from Ohio State and has since earned the Chartered Financial Analyst® (CFA®) designation as well as the Accredited Portfolio Management Advisor (APMA®) and Chartered Mutual Fund Counselor (CMFC®) certifications.