Could an Outsourced CIO Help You Become an Independent RIA?

Could an Outsourced CIO Help You Become an Independent RIA?

If you are thinking about becoming a Registered Investment Advisor, but you do not have the in-house resources to make it happen, it may be time to consider an OCIO model. An OCIO is essentially a hybrid that brings together the benefits of a CIO (Chief Investment Officer) with those of your RIA to-be. 

These types of arrangements are perfect for advisors who want to offer comprehensive wealth management services, but lack the time and expertise needed to manage clients’ assets themselves. So, if you want to become an RIA faster than expected, here’s how an OCIO may be able to help.

This article answers these questions (and more):

  • What are some of the challenges for new independent IRAs?
  • Can an outsourced CIO help a new IRA find success faster?
  • How could an OCIO be an advantage as you go independent?
  • Could your client retention be assisted by outsourcing?
  • What’s the potential advantage of offloading asset management?

Why Go Independent?

You may have heard that independent RIA’s can have higher client retention rates than broker-dealers or banks. This is because they often offer a better value proposition by providing the same services at a lower cost to clients. However, the biggest benefit of being an independent RIA could be not having to worry about retirement matches, 401(k) plans, or other incentives offered by firms with large teams of advisors. 

As an independent RIA, you can make beneficial decisions for your clients without any restrictions or limitations handed down by an international hierarchy. You are no longer held back by the policies and procedures of your previous company. You should have the flexibility to take on new clients and pursue new business opportunities in different markets from those you were previously limited to. 

You can also have more control over how much work you take on so that it is achievable from a time-management standpoint as well as an administrative perspective. However, the longer you operate, the more there can be a sort of ironic twist: gaining size makes having a solid level of back office support not just convenient but necessary for an RIA firm’s survival.

This is often true for all aspects of the business; from compliance to financial reporting and cash management, to tax preparation (even if you do tax planning, professionally, for others). As independent advisors become more successful, they often find themselves struggling with operational complexities, such as scalability and compliance.

Going independent means gaining the ability to run your firm in ways that were previously impossible—but without this level of back office support, your odds of long-term operations can decline. The good news is that an OCIO can help you scale your business by recommending changes in your technology infrastructure and implementing best practices to improve the productivity of your firm.

The OCIO Advantage

At an independent RIA, the role of an outsourced chief investment officer (OCIO) is to manage the firm’s investment portfolio. Normally, this means that all investment decisions are made by the OCIO and not individual advisors within the organization. However—while we believe this is the optimal approach—how much asset management you delegate is completely up to you.

If you offload every task that you can, your clients could potentially profit from the extensive experience of a quality OCIO. There are many other possible ways for an outsourced CIO to help streamline an independent RIA that you may not have considered, as well. 

For example, an OCIO can provide client and prospect investment proposals, white-labeled blog and newsletter content, and practically anything else you require. Additionally, if you know you would need additional help, but you could not afford a full-time employee’s salary and overhead costs (or paying for benefits), outsourcing may be ideal for you.

It gets even better when you consider the sheer amount of work hours you could devote to building client trust, maintaining relationships, and reaching out to new prospective clients. As an independent advisor with an OCIO on board, you could be free to operate as you see fit, making decisions based solely on what is in the best interest of your clients. 

Business handshake and business people. Business concept.

Meanwhile, a fiduciary outsourced CIO can make sure that client goals are met by looking at their financial situation, risk tolerance, and long-term investing horizon. When clients have questions about how to invest in today’s market environment or any upcoming changes across various asset classes, he or she can help guide those conversations for you.

Additionally, they can provide an extensive list of services including; Investment Policy Statement (IPS) development and implementation, monitoring retirement plan specifics such as eligibility requirements, vesting schedules, and distribution options for defined benefit plans.


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Trust, But Verify

Before you make the jump to hiring your CIO, do your research. Evaluate the firm’s services and investment options, fees, investment philosophy, and results. If you have questions about any of these topics but do not feel like you are getting clear answers during your initial conversations with an advisor or company, keep looking.

Overall, consider what is best for both your clients and your team. Although your client’s needs come first, so should the advisors’. The best way to ensure both may be to find someone who will be able to work well with both, building a meaningful relationship through their engagement with your firm. 

Finally, take into account the firm’s needs as well: if you’re looking at an outsourced CIO service that doesn’t align with these principles or match up with how your firm operates (because, for example, its business model doesn’t fit yours), then it might not be right for you. The secret to optimal success from an RIA-OCIO partnership is making sure that your goals align well.

There are so many advantages to making an OCIO part of your bid to go independent. Have a conversation with us.  Contact us to learn more. 

CPS eBook Reasons to Outsource


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.