The OCIO’s Role in Supporting RIA Portfolio Protection Strategies

The OCIO’s Role in Supporting RIA Portfolio Protection Strategies

In recent years, market volatility has surged due to geopolitical uncertainties, economic policy shifts, and the rapid spread of information through 24-hour news applications.

Volatile markets and uncertain times can make your clients anxious, which may lead to ad-hoc portfolio adjustments to appease them. Additionally, RIAs must meet their client’s expectations, which means you need effective strategies to identify, assess, and manage potential risks in client portfolios.

Partnering with an Outsourced Chief Investment Officer (OCIO) firm like Cornerstone Portfolio Research can provide your RIA/IAR with access to specialized expertise and strengthen your risk management practices. With 70+ years of combined experience in the financial services industry, we help advisors research investments and manage portfolios in a broad range of market conditions.

In this blog, we explore the challenges of the current investment environment and demonstrate how an OCIO partnership can improve risk management practices for client portfolios. We also discuss the benefits of Cornerstone’s proactive approach and the ways we stay in contact with the RIAs and IARs that we work are proud to work for.

The Evolving Landscape of Investment Risk

The investment landscape is complex and constantly changing, presenting both growth opportunities and the need to manage various risks that can negatively impact investment results. 

Sudden downturns: It’s well known that financial markets don’t move in a straight line, and even rising markets can be interrupted by short-term corrections. It’s crucial to be prepared for these downturns and have strategies in place to minimize their impact on client portfolios.

Geopolitical and economic uncertainties: Global events, political instability, and economic fluctuations can have a significant impact on investment returns, especially in the short term. RIAs need to be aware of these potential risks and develop investment strategies that can withstand different periods of uncertainty.

Emerging asset classes and associated risks: New asset classes, such as cryptocurrencies, can offer attractive returns. However, they also come with unique risk profiles that require thorough understanding before incorporating them into client portfolios. There is an old investment rule – don’t invest in something you don’t understand.

Regulatory changes and compliance challenges: The regulatory environment constantly evolves, so staying in compliance can be a significant burden in both time and money. Failure to comply can result in fines and considerable time spent addressing compliance issues, which detracts from your primary business activities.

These are just a few of the evolving risk factors. Partnering with an OCIO firm like Cornerstone enables you to leverage their expertise and resources to produce a better result for your clients.

Cornerstone’s Risk Management Expertise

At Cornerstone Portfolio Research, we understand your challenges when managing large numbers of client portfolios. Our OCIO services are designed to help RIAs navigate the complex world of investment analytics and risk so they can make more informed decisions. Here are some of our key strengths for managing the inherent risks associated with active portfolio management:

  • Risk assessment and monitoring: We start our risk management process by thoroughly evaluating each client’s portfolio. This assessment considers a client’s risk tolerance, investment objectives, and financial situation. Then we continuously monitor portfolios to identify any additional risks that are associated with evolving market conditions.
  • Investment diversification strategies: Diversification is a fundamental strategy of effective risk management. Constructing diversified portfolios that minimize the risk of large losses is a fundamental strategy concentrations: One asset class, one security, one industry, or one geography.  exposed to any single asset class, sector, or geographic region can help reduce the impact of market downturns and unexpected events. Our investment team utilizes a variety of diversification strategies to create portfolios that are positioned to weather the storms that are created by the securities markets.
  • Compliance expertise: Regulatory compliance is a vital part of the investment process. Our team understands the complex regulations governing the investment industry. We keep up-to-date with the latest rules, which helps reduce legal risks and builds client trust and confidence.
  • Stress testing and scenario planning: We don’t just hope for the best; we plan for the worst. Cornerstone utilizes stress testing and scenario planning to assess how client portfolios would perform under various market conditions, including economic downturns, rising interest rates, and geopolitical crises. This allows us to identify potential vulnerabilities and adjust client portfolios accordingly.

These are just some ways Cornerstone can strengthen RIA’s risk management practices.

A Proactive Approach to Risk Management

The key to effective risk management lies in taking a proactive rather than a reactive approach.

A reactive approach waits for problems to occur before addressing them, which by definition is too late. Sudden market downturns or unexpected events can have a devastating impact on client portfolios.

Cornerstone’s research and risk management strategies are firmly rooted in a proactive approach. We believe in anticipating potential threats and taking steps to reduce their impact. By considering potential risks upfront, we can choose investment strategies better aligned with each client’s risk tolerance and financial goals. Clients appreciate knowing that their advisor is taking steps to manage portfolio risk on a proactive basis.

Managing investment risk can be a time-consuming and resource-intensive process. However, partnering with an OCIO firm like Cornerstone enables you to free up valuable time and resources that can be spent on core business activities such as marketing and client service.

Beyond Risk Reduction: Enhanced Client Communications

In today’s competitive environment, clear and transparent communication is essential for building long-term client relationships. Our proactive approach empowers you to have more informed conversations with clients about portfolio risks and potential outcomes. By clearly communicating these risks and the steps being taken to reduce them, you can build stronger relationships based on credibility, trust, and transparency.

Cornerstone’s risk management expertise goes far beyond research and portfolio management. We can conduct virtual meetings with you and your clients as needed. During normal business hours, you will have access to a full-service CIO and be partnered with a CFA Charterholder, a best-in-class industry designation.

Get To Know Cornerstone Portfolio Research

In today’s crowded RIA marketplace, demonstrating a commitment to risk management sets you apart and enhances your firm’s credibility and resilience against unexpected challenges.

Partnering with Cornerstone allows you to showcase your dedication to research and professional portfolio management. Our team will help you organize your client portfolios and answer your market questions from an experienced CIO’s’s perspective.

Knowing that Cornerstone’s risk management expertise proactively manages clients’ investment risk, you can focus more time on client relationships and growth initiatives. We can assist in establishing systems that enable your firm to grow and save time without requiring a complete overhaul of your existing processes.

Contact us today to schedule an introductory call. We’ll discuss your specific risk management needs and explore how our OCIO services can help you strengthen your client portfolio protection processes.

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.