Why Are More Advisors Partnering With Outsourced Chief Investment Officers?

Why Are More Advisors Partnering With Outsourced Chief Investment Officers?

Increased investment complexity and easier hiring processes spurred significant growth last year for the global OCIO industry. From 2016 to 2021, it increased from $1.29 trillion in assets under administration (AUA) to $2.46 trillion. Chestnut report authors say that by 2026, they expect the industry segment to achieve $4.15 trillion in AUA.

In the same study: 450 investment professionals, including RIAs, institutional investors, asset managers, and investment consultants, were asked about their growth expectations for the entire Outsourced Chief Investment Officers industry. 68% said they forecast higher growth over the next two years.

A separate 2021 survey shows that institutional investors outsource investment management due to a lack of internal resources. 79% of outsourcers say this factor weighs heavily in their decision.

Outsourcing a reputable, credentialed professional to join your RIA team can have multiple benefits, especially in an erratic market:

  • It adds to the team of professionals
  • We believe it makes the firm more marketable
  • It provides all-serving critical investment services and research
  • It helps invest clients’ assets during more volatile markets
  • It saves the firm’s time and reduces its workload

As a quick note: while there is a cost to taking on a Chief Investment Officer, firms can add a Chief Investment Officer to their team without taking on the many expenses of an employee (salary, benefits, expenses, bonuses, stock options).

Keep in mind that investors will have access to information about firm professionals by visiting financial advisors’ websites. By Google searching the names found, the information is readily available.


Consider these reasons you should partner with an Outsourced Chief Investment Officer.


A high-quality OCIO can provide seven important investment services that benefit advisor and their clients:

  1. Develop the best combination of custom-tailored investment services for the RIAs’ ideal clientele:
    • Determine types of investments
    • Stocks, bonds, and ETFs
  2. Conduct investment research
  3. Active/passive/both management
  4. Make buy/sell decisions
  5. Produce market environment reports
  6. Talk to prospective and current clients

Why outsource investment management to an OCIO?

For the past decade, it was more important to be in the market than what you owned in the market. Almost every security available for investment went up in value, and some were better than others.

There are no guarantees, but we believe there is a very high probability that the next ten years will be far more volatile than the prior. Therefore, investment management may be more complicated and time-consuming to produce advisor clients’ returns.

If you are a DIY investment manager, you may have to spend more time actively investing your clients’ assets. At the same time, you may have to spend more time communicating with concerned clients.

Advisors can outsource the management of their clients’ assets, freeing up more time for client communications and interactions.

How will OCIOs help invest your clients’ assets in more volatile markets?

You have seen the frequent disclaimer used by money managers: “The future may not be like the past.” We can guarantee you this disclaimer is accurate.

The future will be better or worse, but it will not be the same.

We believe this means there will be a greater need for active money management during volatile times, and portfolios will have to be more tailored to the risk tolerances of advisor clients. A set it and forget it strategy may work during rising markets, but it can cost financial advisors’ clients during falling markets.

We believe Outsourced Chief Investment Officers are better positioned to build portfolios that are tailored to the individual needs of the firm’s clients.

Why do we think OCIOs make RIAs more marketable?

There are several reasons why we think OCIOs make Advisors more marketable.

Bigger firms represent themselves as teams of qualified professionals because investors expect combined experience. Why? Because one financial advisor cannot possibly be an expert in all disciplines that comprise financial planning, investment, and risk management.

Many investors will say that the professional who has the most significant impact on their financial well-being is the person who makes the investment decisions. Make the right decisions, and the investors will have more money. Make the wrong recommendations or decisions, and clients will have less money.

While financial planning is very important, we believe that managing client investment portfolios well is what justifies the asset-based fees that RIAs charge.

The credentials of the OCIO (years of experience, degrees, certifications) can make the RIA more marketable to more investors.

How can Advisors scale their businesses faster?

Time is money—the OCIOs free up financial advisors’ time to add new clients and meet with current clients.

It takes significant amounts of time and focus to interact with leads and convert them into active prospects and current clients. The more time spent making these conversions – the higher the growth rates of the firm can be.

Marketing to current clients can also produce new assets. For example, a job change for an existing client may create assets in an IRA Rollover.

Can an OCIO produce superior rates of return?

We believe that it stands to reason the answer is yes. The best OCIOs will have years of experience and specialized certifications (such as a CFA) that help them research investment opportunities and build portfolios that meet the needs of the advisors’ clients.

Are there any guarantees the OCIO will produce superior rates of return? No. There are very few guarantees in the financial service industry. Most types of guarantees violate industry regulations.

Should the Advisor’s minimum asset requirement impact their OCIO strategy?

We believe that the higher the advisor’s minimum, the more likely they have to compete with more prominent firms with similar minimums. In other words, there is a big difference between marketing investment services to prospects that have $100,000 or less and prospects that have $1,000,000 or more.

Our experience is that advisors will have tougher adversaries with stronger credentials when competing for larger sums of available assets. And conversely, the investors with larger sums of assets will have more higher quality choices.

Therefore, we believe the smaller firms should resemble larger firms to compete for larger asset amounts.

The compelling benefits are hard to ignore. We hope you can see why you should outsource your RIA’s need for a CIO to a qualified investment professional.

CPS eBook Reasons to Outsource

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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.