If you’re considering outsourcing all or part of your investment research and portfolio management duties to an OCIO (Outsourced Chief Investment Officer) provider in 2024, this article is written for you.
2024 could be volatile for the securities markets, caused by continued inflationary pressure, interest rate volatility, a $32 trillion national debt, the messes in Ukraine and the Middle East, and the upcoming elections. Add it all up, and 2024 is loaded with uncertainties that could trigger a bear market.
Any way you look at it, investors will be demanding more solutions that protect their assets from severe losses while also trying to take advantage of growth opportunities that may present themselves.
This is why the role of an Outsourced CIO is gaining popularity and prominence with firms owned by independent RIAs and IARs.
In this blog, we’ll look at emerging financial services industry trends driving more RIAs and IARs to partner with experienced OCIO service providers.
1. Increased Demand for Customization and Personalization
Many RIAs and IARs will partner with OCIOs to obtain more personalized investment options for their clients. Generic solutions using model portfolios may no longer suffice as increasing numbers of investors demand relevant custom solutions to invest their assets.
An OCIO can help your firm avoid generic, cookie-cutter portfolios that treat all 60-year-olds equally. Instead, the OCIO can develop custom solutions that are based on the unique requirements of the financial advisors’ clients.
One-size-fits-all solutions won’t cut it when increasing numbers of investors demand personalized solutions.
2. Technology Integration and Digitalization
AI technology solutions are impacting the business practices of numerous industries, and we have just seen the tip of the proverbial iceberg. The rate of change in a lot of industries is simply astounding. And there is a good chance the rate of change will accelerate.
As a financial services firm’s owner, ask yourself what the highest and best use of your time is. Do you have the time and skills to manage your client’s assets? This is one more reason why so many RIAs are making the leap to partner with an OCIO firm.
OCIOs are increasingly adopting advanced technology, like AI, machine learning, and big data analytics. These technologies enhance their ability to analyze markets, optimize portfolios, and make faster decisions.
Watch our video: “Focus on Clients-We’ll Handle the Research”
3. Sustainable and Responsible Investing
Clients are increasingly looking for ways to make an impact with their investments, whether that is with ESG or faith-based investment strategies. This puts more pressure on RIAs and IARs to offer sustainable, responsible investing (SRI) solutions.
Again, an OCIO may be your best option if you don’t have the in-house resources to research viable options for these types of clients. For a fraction of the expense of a full-time OCIO, a fractional CIO can provide the services you need to respond to these types of clients. Then, your clients’ portfolios can be aligned with their values.
4. Focus on Risk Management
In today’s volatile market conditions, you may seek assistance from an OCIO who can provide disciplined risk assessment tools and strategies that potentially reduce the risk of large losses during down markets.
5. Collaborative Approach
A more collaborative approach is replacing the traditional model of OCIOs working in self-contained silos. This trend sees OCIOs working closely with RIAs and IARs, ensuring the investment strategies align with the overall business goals and clients’ performance expectations.
6. Regulatory Compliance and Reporting
With the financial industry facing increasingly strict regulations, RIAs and IARs are turning to OCIOs for help with investment-related compliance and reporting.
This trend is driven by the need for expertise in navigating complex regulatory environments and ensuring compliance without compromising investment performance.
7. Fee Transparency and Alignment
There is growing pressure in the financial advisory industry to reduce the number of fees that clients pay. One example is planning and investing. Technology is making these services much more efficient for advisors to provide to clients.
More knowledgeable investors also demand more transparency for all the fees being deducted from their assets. It is not enough for advisors to adopt a don’t ask, don’t tell strategy for their fees.
The most sophisticated advisors demand to know their performance after all the expenses have been deducted.
There is also the issue of layers of fees being paid to financial advisors, money managers, custodians, and other service providers. Many investors would prefer to avoid paying substantial fees for mediocre results. An OCIO has the potential to improve results and pay for themselves.
8. Emphasis on Client Education
Knowledgeable clients have a better understanding of all the variables that impact the performance of their assets. They want to know what happened, why it happened, and will it continue happening in the future. The more they know, the easier it is to describe all of the forces that impact the future performance of their assets.
This involves providing RIAs and IARs with the resources and tools they need to educate their clients about complex financial topics.
Educated clients also tend to make informed investment decisions and are more disciplined in down markets when some investors are prone to emotional decisions.
9. Increased Use of Alternative Investments
Alternative investments are gaining popularity as you seek ways to diversify your client’s assets. However, the rise of new alternatives can mean spending large blocks of time going through your learning curve.
Or, you can outsource to a CIO already experienced in investing in several alternatives. This includes the skills to conduct the investment research and make the alternatives part of your clients’ asset allocations – all based on current market conditions.
OCIOs may incorporate assets like private equity, real estate, and hedge funds into their strategies, providing RIAs and IARs access to a wider range of investment options. These investments become talking points for investors that help them win new clients and produce better results for current clients.
Get to Know Cornerstone Portfolio Research
Cornerstone Portfolio Research is an independent investment research and portfolio management firm that provides outsourced CIO services to RIA and IAR-registered firms, as well as broker-dealer affiliated firms, and bank-trust organizations.
Cornerstone Portfolio Research was established in 2020, bringing together professionals with more than 70 years of collective research and portfolio management experience. Our team includes professionals who hold CFA ® and CFP ® designations.
Our primary focus is investment management, driven by a deep passion for producing competitive rates of returns. We are committed to assisting advisors, and their clients pursue their most important financial goals.
Bottom line: We are here to free up your time so you can do what you do best – add new clients and serve current clients. You focus on the work only you can do and outsource the rest. Let’s connect for an introductory call.
