Outsourcing Your Managed Portfolio Gives You More Control

Outsourcing Your Managed Portfolio Gives You More Control

Why Financial Advisors Outsource Investment Management 

Financial advisor firms are faced with a critical choice that impacts how they manage their clients’ assets. Do they manage their clients’ assets themselves or do they outsource the decision-making to a third party (TAMP, Separate Account Manager)?

This decision should be based on how their clients are better off followed and whether or not their firms are also better off. This has to be a win-win for both parties. 

Let’s assume you decide your firm and your clients are better off using an asset management service that is provided by your firm. 

If that is your decision, then the next question is who makes the investment strategy decisions? You or a Chief Investment Officer who is hired to manage your clients’ assets.

A full-time CIO may be cost-prohibitive for your firm (salary, benefits, bonuses, taxes), but there is a cost-effective alternative. You can outsource the work (investment research and decision-making) to an outsource CIO who becomes a marketable member of your firm.

This article will provide several compelling reasons why you and your clients can be better off when you outsource this work to your own CIO. 

Your Value Proposition

The outsourced CIO solution can add tremendous value to your firm. Not only does it add another professional to your team it also positions your firm as a money management firm and not just an asset gatherer. 

And, since we believe this is the most important form of financial advice it can make your firm more valuable.

There are other types of financial advice (planning, tax, risk, legal), but we do not believe that they have as great an impact on your clients’ financial futures as high-quality asset management. 


Interested in the edge afforded by an Outsourced CIO?


Smaller Firms Compete with Bigger Firms

The outsource CIO solution can help you compete with bigger firms that have more investment professionals on their staff. You can add a CFA with decades of investment experience to your current staff. Your firm can be instantly more marketable.

This is particularly important in the age of digital and virtual marketing. Potential clients will visit your website to learn more about your firm. The most visited page is the Our Team page. What they see on this page definitely impacts who they contact for interviews.

The deeper your team, the higher the probability they will contact you.

Accelerate the Growth of Your Firm

If you are an independent Registered Investment Advisor (RIA), you may be questioning how much of your time should be dedicated to building your firm and how much time you spend managing existing relationships. The more successful you are the less time you have to do both. 

One solution is to outsource your need for portfolio management to a dedicated Chief Investment Officer who has the time and expertise to deliver competitive rates of return. 

This one decision will give you more time to add new clients and build stronger relationships with current clients (which can lead to higher retention rates).

Knowledge and Time

Knowledge is your principal asset. And, the more you know, the more valuable you are to your clients. So, committing time to acquire more knowledge is a commitment to the future success of your business. 

In particular, when your knowledge helps your clients achieve their financial goals.

Time is your second major asset. How you allocate it impacts revenue, income, and personal time. So, how much is your professional time worth? 

You are probably paid with an asset-based fee, but if you are like most financial advisors, the answer is a lotperhaps hundreds of dollars per hour or more.

If you are a typical Registered Investment Advisor, the highest and best use of your time may be the reason you make this outsourcing portfolio decision. 

When you are not tied down conducting research and making investment decisions you can commit more of your time to activities that increase revenue and profitability.

Let’s not forget a time commitment to expanding your knowledge so you can generate more revenue streams per client. 

There is also your personal life. As we age, we find the quality of life is its own reward. There are a limited number of years that you get to spend as quality time with your family. Your clients’ success is your success. 

Your Credibility

No financial advisor can be an expert in all of the financial disciplines: Planning, investment, tax, risk, and legal. It may be counterproductive to try to convince prospects you have that amount of all-encompassing expertise. 

A more marketable solution is to outsource work to specialists: Tax to a local CPA, legal to a local estate planning attorney, and risk management to a local insurance expert. You should outsource all of the work that you do not want to do yourself.

A logical extension to this strategy, that we believe adds credibility to your firm and makes it more marketable is to add an outsourced CIO to your team. This will narrow your role and can make your firm more marketable at the same time. 

This team approach also facilitates succession planning if one professional is incapacitated another professional is there to step into his or her shoes. This may be a major concern for some clients.

Credibility is critical because it builds trust.

Your Best Choice for Turbulent Times

The demands that are placed on financial advisors are intense. You are responsible for managing millions or hundreds of millions of dollars on a daily basis. 

After more than a decade of positive returns it stands to reason there are a lot of ominous clouds on the horizon: Inflation, expanding government debt ($30 trillion), government mandates, supply chain disruptions, and rising interest rates, just to name a few. 

We do not believe this does bode well for 60/40 and 70/30 portfolios that are exposed to excessive amounts of risk. 

It is going to take increasing amounts of your time to monitor all of these economic conditions and minimize their impact on the performance of your client’s portfolios. 

And, when the bubble finally bursts there is a good chance the decline in prices will be severe, fast, and last for a prolonged period of time. 

What is the consequence? Servicing nervous clients will take even more of your time because retaining client relationships will rise to the top of your list. Hopefully, you are already preparing for this inevitable eventuality.

At the same time, Bear Markets can create major marketing opportunities. The number of investors seeking replacement advisors may triple during down markets. 

Right or wrong, many investors will blame their advisors for their losses just like they give them credit for performance during Bull Markets. 

Advisors will spend more time servicing current clients and marketing their firms to new clients.

The Outsource Solution

Some financial advisors are satisfied with passive growth: Market appreciation, reinvested income, and cash flow from current clients. 

Other financial advisors want organic growth and that means they have to dedicate more time to bringing on new clients. This is easier said than done in today’s competitive environment.

Where will the time come from? There is a win-win when you outsource investment management to a qualified CIO. 

Current clients are better off when they receive better results. Advisors are better off when they have more time for marketing, servicing, and family. Firms are better off when they are more credible and marketable.


Ready to review an OCIO’s advantages during market volatility firsthand? Reach out to us and we’ll show you.


We have a free eBook for you that dives deeper. However, if you contact us, we can tell you more.

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.