OCIO Model Explained: Is it Right For Your Financial Advisory Firm?

OCIO Model Explained: Is it Right For Your Financial Advisory Firm?

With the growing popularity of Outsourced CIO solutions, more independent RIAs and IARs are gravitating to this money management solution. Staying ahead of the curve in today’s increasingly competitive financial space requires some outside-the-box thinking.     Some innovative thinking can be the difference between success and mediocre results. 

Money management is a time-consuming process when it is done right. This does not take into account all of the other hats that are worn by financial advisors: Planning, risk management, operations, HR, compliance, and several other tasks. It’s no wonder financial advisors who want to grow are always seeking more efficient business models to streamline operations and better serve their clientele. 

What’s driving this shift towards outsourcing? Perhaps it is the need to stay abreast of frequent changes that impact portfolios, regulations, operations, asset classes, and tax laws. An OCIO can help your firm stay abreast of these frequent changes.

Whether you’re weighing the pros and cons or are just curious about this growing phenomenon, read on to gain a clearer perspective of outsourced CIO solutions for RIAs and IARs.


Read: “Why an Outsourced CIO Could Be Your Shrewdist Investment.”


Understanding the OCIO Model

At its core, an outsourced CIO solution allows independent RIAs and IARs to delegate their investment research and management duties to experienced, credentialed, external investment management professionals. Instead of juggling these duties internally, advisors outsource work to CIOs who manage their clients’ investment portfolios. This greatly reduces the amount of time it takes for financial advisors to manage their clients’s portfolios.

Why Consider Outsourced CIO Services?

Chief Investment Officers (CIOs) play a pivotal role in producing results for the clients of RIAs and IARs. They conduct research, build portfolios, manage risks, and make changes as necessary. However, only bigger firms have the luxury of an in-house CIO. 

This creates a need for an Outsourced CIO solution. 

Increasingly, Registered Investment Advisers and Investment Adviser Representatives are turning to Outsourced CIOs to bolster their capabilities and cater to the investment needs of their clientele. This shift isn’t just the latest trend; it’s a strategic move that produces major benefits for advisory firms and their clients.


If you aren’t staying current, then you are falling behind.  


Expertise and Experience: An OCIO brings a wealth of knowledge and specialized expertise to your firm. An OCIO can provide a fresh perspective on investing client assets and streamline operations using advanced best practices for portfolio management. 

Their vast experience being focused on investment management enables them to spot market trends, adapt to evolving regulations, and anticipate potential risks. Meanwhile, by partnering with an OCIO, you and your team can focus on nurturing client relationships with an emphasis on business growth while being confident your investment process is in the hands of experienced professionals.

You want experienced professionals making investment decisions for your clients. Their knowledge can translate into improved results for advisors and their clients. 

Cost Efficiency: Let’s face it, high-quality, full-time CIOs are extremely expensive – in the hundreds of thousands of dollars. And this doesn’t take into consideration, benefits, bonuses, taxes, stock options, and other types of benefits. 

And, then there are all of the expenses associated with supporting the professional. 

Partnering with an Outsourced Chief Investment Officer can produce significant cost savings for your firm, including: 

  1. An OCIO brings specialized expertise, allowing your firm to tap into top-tier investment management without all of the overhead. 
  2. Based on their established industry connections, OCIOs may negotiate better terms with vendors and other service providers.
  3. The right OCIO can make your firm more marketable. Whether it is a joint sales call or the addition of the OCIO’s biography to a website, they can be a powerful boost to your marketing efforts (investors want to know who is overseeing the investment of their assets). 
  4. OCIOs help your advisory firm focus on core client relationship-building and retention activities, enhancing revenue opportunities.

Simply put, partnering with an OCIO is a strategic move for advisory firms aiming to grow their firms by adding an important resource for a reasonable expense.

Risk Management: In an industry where risk management can make or break a firm, partnering with an OCIO is an investment that makes risk management an important element when you manage your client’s assets. 

An Outsourced Chief Investment Officer can give your firm a competitive edge in risk management. Their expertise can provide a fresh perspective on markets, the economy, securities, sector investing, and buy/sell disciplines.  OCIOs can also serve as a dedicated resource for constantly monitoring portfolio risk and making timely buy/sell decisions.


Watch our new video: You focus on managing client relationships. We handle your investment research and portfolio management. 


Focus on Core Competencies: By offloading investment research, portfolio management, and risk management responsibilities, you and your team can focus on what you do best: acquiring new clients, maintaining relationships, providing planning services, and meeting with current clients.

While the benefits of the OCIO model are pretty evident, outsourcing to the right CIO is still of critical importance. The more marketable the OCIO, the more marketable the firm. 

The transition to an outsourced CIO solution can be a game changer for financial advisory firms that want to grow.

Final Thoughts

Can OCIOs pay for themselves? Without a doubt. They can cover their costs and then some by partnering to increase a financial advisor’s AUM. They can make the firm more marketable for new clients. They can improve the advisor’s current client retention rate.

The OCIO model represents a fundamental shift in how investment responsibilities are handled by financial advisor firms

Ultimately, whether to embrace the OCIO model boils down to the growth strategy of your firm. For example, there is no reason to free up your time if you do not want to grow. 

One thing is crystal clear: it’s a model that’s here to stay, and for many financial advisors, it might just be the game-changer they have been looking for.

Consider Cornerstone Portfolio Research

Here’s how you win when you partner with our team of OCIO’s:

  • No need to relinquish equity just to bring on a CIO.
  • Say goodbye to the burden of higher six-figure CIO salary, taxes, and extra benefits.
  • Partnering with us doesn’t mean increasing your client fees. Our OCIO fees are affordable, typically between 5 to 20 bps.
  • Stick with your chosen custodian; we’re fully custodian-agnostic.
  • Your investment strategy? It remains intact. No major overhauls are required.
  • Benefit from tailor-made research and investment models. We don’t believe in a one-size-fits-all approach.
  • Forget the hassle of re-papering clients, transferring assets, or initiating new accounts.
  • We prioritize your client’s comfort and security. Changes are implemented gradually to ensure a smooth transition.
  • Tax implications? Always on our radar when suggesting modifications.
  • Stay in the loop with our comprehensive weekly communications.
  • Need to touch base virtually? We schedule meetings with you and your clients when necessary.
  • Every service we provide is white-labeled with the name of your RIA.
  • Showcase us on the “Our Team” section of your website.
  • If succession planning’s got you stumped, we’ve got the solution.
  • Count on full-time access to a seasoned CIO during regular business hours.
  • Unique requirements? We’ve got your back.
  • And remember, you’ll be collaborating with a CFA charter holder – a badge of distinction in our industry.

Ready to learn more about our outsourced CIO solutions?  Connect with us.

An OCIO Can Help Your RIA


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.