In the current volatile market, it is more important than ever to make sure your clients feel confident about their investment allocations. However, this need can raise the question: What is the best way to go about it?
I believe the answer is “By providing a seamless solution that helps them relax, no matter what is happening on Wall Street.” One of the easiest ways to streamline your process is through outsourced CIO (OCIO) services. Never underestimate the ability of a strong OCIO to help protect investors in volatile markets by bringing in more visible stability.
Let’s explore these questions:
- Why is client confidence especially important now?
- How can you build more reliability into your firm?
- What is an outsourced chief investment officer (OCIO)?
- Could a quality OCIO help boost your client retention?
Stay On Course, Conspicuously
If you are finding that clients have become skittish about their investments amid this year’s bear market, you are not alone. Volatility has been part of our financial system since the beginning. Nevertheless, many people do not understand the cycle well enough to manage their assets effectively in response.
You and I know that volatility can be helpful—because it allows investors to buy or sell assets when they think prices are out of whack with their intrinsic value. This is one reason why markets tend toward efficiency over time: Prices reflect all available information, so investors trying to keep up with every piece of news will get better returns than those who try to predict the future (or worse yet, those who do not invest at all).
We tell them that volatility is not permanent; that it is just a phase in an ongoing cycle of booms and busts that have always characterized the markets. Regardless, it is more important in times like this to keep visibly on track. This does not mean pretending to be perfect, but it does require an emphasis on delivering value in the most tangible, noticeable ways possible.
That is why I suggest outsourcing your CIO with a vetted fiduciary. The right one should be able to help your firm provide a more recognizable, unified kind of stability. Foremost, this is possible because delegating your record-keeping can free up time for more direct interaction with clients. It is almost a cliché to say, but half an advisor’s work, at times, is hand-holding.
Especially as interest rates continue to rise, that is a huge value-add where retention is concerned. At the same time, it may be essential insurance against losing clients who may be eager to blame their declining investment choices on you (rather than staying the course adequately) and jump ship.
What Is an OCIO?
For those who are not certain, let me briefly explain how an outsourced chief investment officer (OCIO) operates: This executive interacts with you (and, as desired, with your clients) mostly online (such as by Zoom). At the same time, they become a genuine addition to your team (and you can list their bio on your About Us page, adding clout and prestige).
A fiduciary outsourced CIO can provide your firm with experienced, well-informed investment consulting. Generally speaking, they can also provide Reg-BI-compliant record keeping. Each of these can add up to clients seeing more of (a potentially more relaxed version of) you. That increased availability, in turn, can often lead to better retention rates.
It does not include the costs of a full-time, in-house hire, either: You have no bonuses to pay, no benefits to provide, and no additional office furniture to lease. Select the right well-vetted, accredited OCIO and you can have all the benefits of a CIO on-premises with none of the usual expenses or possible drawbacks.
Keep Calm Behind the Scenes
The biggest reason most clients seek out financial advice in the first place is because they want help in building and maintaining a portfolio that supports their long-term goals. Many do not just want to hear about how their investments are doing; they want to know how those investments will help them achieve their life goals and dreams.
At the same time, they want advice from someone trustworthy. It should be someone whose at-rest expression looks trustworthy, as well: Just as children know when poker-faced parents have been arguing, investors can sense when the swagger is gone from your step. This is no time to fake-it-til-you-make it.
You need to know that your RIA or independent broker-dealer firm is weather-ready and running on all cylinders. That peace of mind can positively influence clients, reinforcing their sense of well-being—where a lack thereof can speak volumes against you. This is a fact of our reality that never plays fair: The most epic value-deliverer in recent memory, if perceived as lacking sufficient confidence, could wind up hemorrhaging clients.
This is a profound obligation, but it does not have to be a miserable burden, at all. Providing seamless access to the kinds of third-party solutions that come with a reputable OCIO can help you keep you genuinely confident behind the scenes. As a result, you could be more confident in meetings, no matter what is happening on Wall Street at the time.
A positive professional connection with the right outsourced CIO can allow you to remain in control of the relationship with your clients while simultaneously benefiting from their expertise and experience. In some cases, that experience can span decades; seasons of volatility, calm, and all in between.
The Right OCIO Is No Trick (It’s a Treat)
Partnering with a fiduciary outsourced CIO can help you provide exceptional service while maintaining your independence as a broker-dealer or RIA firm. It could also assist you behind the scenes with investors in volatile markets by providing them with visible stability.
As AUM within defined contribution plans continues to increase, plan sponsors will likely have more and more responsibility to ensure their participants have access to the investment options they need. The key word here is “access:” When times are good and markets are generally stable, it is easy enough to offer participants plenty of choices.
However, when unexpected market movements or other economic downturns arise, ensuring their continued access becomes much more difficult. Make sure you are well prepared to avoid getting spread too thin by having an ally in play whose insights could make the entire process far less difficult.