Financial Advisors Increase AUM When They Work With An OCIO

Financial Advisors Increase AUM When They Work With An OCIO

How can you increase assets under management as a financial advisor? Does your firm have an effective marketing strategy for making that happen?

The growth of many financial advisors is limited to market appreciation, reinvested income, and new money from current clients. 

Perhaps they get a few referrals each year that convert into revenue-producing clients who offset some of the normal attrition experienced by most financial advisors.

This may be a sub-optimal strategy if your goal is to add many new clients who rely on you for high-quality planning and investment services.

How About Adding an OCIO (Outsourced Chief Investment Officer)?

Building a better mousetrap starts with building a team of experienced financial professionals. We know this is important because “Our Team” is one of the most-visited pages on financial advisors’ websites. 

It can be argued that founders and partners are the most important professionals who are profiled on the “Our Team” page. However, it can also be argued that the next most important professional is one responsible for making day-to-day investment decisions.

Sure, you could outsource the investment work to a third party, but that can work to your disadvantage. Investors have to hire you and a third party. That is two decisions instead of one.

You could designate one of your firm’s principals to be the CIO assuming they have the time and skills. At the same time, this strategy also has its challenges.

For example, you have to convince investors that this professional has the skills and time to wear multiple hats, all of which are important. Keep in mind that larger competitors may sell against that arrangement. This is part of their competitive advantage.

Effective investment research, asset allocation, risk analysis, and portfolio management are critical functions that take substantial amounts of time and expertise. 

Your investment results will drive your assets under management—because performance impacts both your current client retention rates and the performance of your AUM. 

An employee hire is another option. The problem with that is that the overhead of a high-quality CIO can be expensive. When you add up their salary, benefits, bonuses, and taxes, you may have to raise your fees simply to cover their expenses.

We believe an alternative worth exploring is a high-quality Outsourced Chief Investment Officer. An OCIO can be an independent contractor that will work on a 1099 basis so there is none of the overhead associated with a CIO who is an employee. 

Perhaps a better reason for outsourcing your CIO is that you do not have all of the time drag from recruiting and interviewing. You are spared the hiring risk of potentially being stuck with an employee who fits poorly, too. 


Want to know more about the OCIO difference? 


Why Can the Right Outsourced CIO Mean More Assets and Revenue for Your Firm?

The right Outsourced CIO is a triple threat. They can:

  • Make your firm more competitive and therefore more marketable
  • Enhance your investment process, potentially improving performance
  • Increase your current client retention rates 

All of these benefits are produced by a member of your team of professionals. How do investors know the OCIO is a member of your team? The OCIO can be profiled on your website’s “Our Team” page. 

Additionally, the OCIO can be available to interact with prospects and clients. Better performance impacts asset amounts and current client retention rates. As a result, both have a positive impact on the revenue of your firm. 

You may also want to consider changing your minimum asset requirement for new clients. You can justify bigger accounts when you are competitive with the larger firms in your market(s).

While you’re at it, you may want to make changes to your fee schedule or at least your minimum fee requirement. The more resources you bring to the table, the easier it is to justify higher fees. 

That is especially the case when the OCIO has years of experience and is a CFA® Charterholder (Chartered Financial Analyst). Investors may not know the value of this designation, but you do.

When it comes to marketability, the right OCIO brings credibility and trust to the part of the relationship that matters the most. A dedicated professional will be managing your clients’ assets. 

You win because your firm is more marketable. Your clients win because they have the potential for better results. This is vital because most financial advisors do not have audited, GIPS-compliant track records. 

They need another way to help prove they are competent professionals who can produce competitive rates of return. 

Remember the marketing angle: Not only do you have a competitive advantage when you are compared to other firms your size, but you are also more competitive against bigger firms that also have CIOs.

The OCIO may also bring other credentials to your firm; perhaps an educational background, certification, or years of experience. The strength of the team has a lot to do with the marketability of the team. 

It usually pays to remember investors can benefit when they get the best thinking of a team versus the best thinking of an individual, too. Teams are more marketable. 

How Can an OCIO Accelerate the Growth of Your Firm and Improve Your Quality of Life at the Same Time?

There are a lot of ways to manage your clients’ assets. However, our main point is how your firm is best served to manage your clients’ assets and grow your firm at the same time.

What solution makes your firm more marketable? We do not believe outsourcing to another firm is your best solution. You could invest in asset allocation funds, but the mutual fund family does not actively help you win new clients.

You may believe the third party makes your firm more marketable. Nevertheless, does your firm really win when you market the third party more than your own firm?

Similar to your other alternatives, an OCIO can help you do a better job managing money, but the right one is closely integrated and available to interact with prospective and current clients, as well. 

There is another benefit: Your time.

This is one of your major assets. How you allocate your time has a major impact on the growth of your firm. The more of it that you spend managing money, the less time you have available for winning new clients and servicing existing clients. 

Outsourcing this work to an OCIO is an alternative worth exploring. Your timing could not be better, either: The number of investors who change financial advisors can double or triple in volatile markets. 

You also have the Do-It-Yourself-ers, who are not comfortable managing their own assets when there is substantial volatility. Just as investors give financial advisors credit for market appreciation in Bull Markets, they also blame their advisors for declining values in Bear Markets. 

This creates major marketing opportunities for enterprising financial advisors during volatile markets. You may also want to spend more time servicing current clients during market volatility, too. 

Your worst-case scenario can be clients who do not know what is happening, why it is happening, and what you are doing about it. 

So, keeping current clients informed is a smart way to increase your client retention rates during down markets. That way you are still their advisor when the markets turn around.

Both of these activities take more of your time. Meanwhile, the last thing you want is poor performance exacerbating the challenge of managing your time during volatile markets.

Let’s also remember quality-of-life. When you have the right professional managing your clients’ assets, you can spend more time with your family and lower your golf handicap.


Interested in the benefits that an Outsourced CIO can produce for you and your firm?


You have four alternatives when it comes to managing your clients’ assets:

  • Make portfolio management the responsibility of a current partner or professional
  • Hire a full-time Chief Investment Officer
  • Route the assets to a third party (TAMP, SAM, Fund)
  • Partner with an OCIO 

Each of these alternatives can be an effective way to manage your clients’ assets. However, only one of the alternatives is the most cost-effective way to manage assets and win new clients.

Want to learn more about selecting the right OCIO for your firm? Read our eBook that will help you make the right selection decision. Or, you can contact us to schedule a no-obligation interview to learn more about our OCIO services. 

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.