As your firm continues to bring in new clients, or clients with more complex planning needs, your team of advisors and support staff are stretched thinner and thinner. Over time, the need for additional support becomes more urgent — but the process of hiring another investment professional is time-consuming, expensive, and challenging.

To continue providing a high-touch client experience without putting too much stress and responsibility on your current team members, you may find it helpful to work with an outsourced Chief Investment Officer, or OCIO.

What Does an OCIO Do?

An OCIO can handle as much or as little of your firm’s investment-related responsibilities as you need in order to regain your time and meet the ongoing demands of your firm and your clients. As a knowledgeable and unbiased third party, an OCIO can help your key leaders facilitate a smooth transition, make forward-focused decisions for the firm, and provide a professional second opinion on all investment-related matters.

Because an OCIO is experienced in managing investment tasks, they can also help you understand what responsibilities you may not be aware of now but should start doing in the future to better serve your clients.

Depending on what you’re looking for in an OCIO, they can be client-facing or work entirely behind the scenes to support your current team members. Some firms choose, for example, to forward emails with investment-related questions from clients to their OCIO, then either relay the information back to the client or schedule a call for everyone to work through it.

How an In-House CIO and OCIO Can Work Together

While an OCIO can completely replace the role of an internal CIO in a firm, they can also offer additional support for in-house advisors who wish to offload some of their investment-related responsibilities.

Internal CIOs are pulled in many directions, from managing their team to serving their clients and executing investment strategies. For many CIOs and advisors, being able to work one-on-one with clients was a big reason why they got into the business of financial services in the first place. The problem is, there are a number of ancillary tasks that have to be done during the workweek — but there are only so many hours in a day to do them.

The more a CIO or senior advisor can outsource — and feel comfortable with who they’re outsourcing to — the more they’re able to focus their time and energy on meaningful tasks that they enjoy doing. 

See an OCIO in Action

While some assume that OCIOs are meant to replace in-house CIOs, East Bay Investment Solutions has helped a number of advisory firms by supporting their internal team with expanded capabilities. 

In one particular instance, one advisory firm’s internal CIO (we’ll call him Frank) was balancing far too many responsibilities on his plate. He knew something needed to change, which is why he turned to us to discuss his options.

Frank came to the conclusion that he had two options:

Option #1: Continue managing all the work himself, which would increase his risk of burnout, as well as increase the odds that he’d make costly mistakes or important tasks would slip through the cracks. Frank recognized that this was not a viable long-term solution, especially as the firm continued to grow its AUM and add new clients.

Option #2: Frank could hire someone internally to help him out. The problem was, expanding your firm’s team is no easy feat. It’s a time-consuming process, payroll is expensive, and this decision lacks flexibility (should demand drop in the future, for example, and the help is no longer needed). Not to mention, hiring internally is risky. The candidate may be a bad culture fit or they might decide to leave soon after starting. In which case the process would start all over again.

Frank didn’t like either option #1 or #2, so we introduced him to option #3: outsourcing his additional responsibilities to an OCIO.

We explained to Frank what an OCIO does, and together we talked about what his specific needs are and whether our team would be a good fit for him — which is a critical step in hiring an OCIO. Once he saw the expansive list of services we provide and the help we can give him, he decided it would be a much better investment to work with us than hire more internal staff members.

Now, we’re available to support Frank and his firm however we can, from conducting research to taking time-consuming and repeatable tasks off his plate.

Expand Your Capabilities With an OCIO

Whether you’re looking to replace a retiring CIO or support your current leadership team with experienced outside help, you need people you can trust. When working with a knowledgeable and responsive OCIO, you have the peace of mind and freedom that comes with knowing your investment-related tasks and responsibilities are well-cared for. To learn more about East Bay Investment Solutions and our OCIO services for RIAs, contact us today.

There is no shortage of reasons why an advisor might choose to leave a broker-dealer, institution, or large firm behind and explore other options. Perhaps they’d like to provide a more white-glove experience for their clients. Or, they don’t want to be forced to push certain products. Maybe the senior members of their firm follow an investment philosophy the advisor doesn’t believe in. Even a poor culture fit can make an advisor want to leave.

The problem with simply changing employers is that you could get stuck in the same scenario, just with a different firm. Instead, advisors who want total control over how they operate, who they work with, what strategies they use, or products they implement can choose to operate independently by starting their own firm.

If you’re thinking about taking the leap into the RIA space, or you already have, you likely know that running a firm presents a whole new set of challenges. Let’s take a look at what the road to independence looks like and what you can do to set yourself up for success.

The Challenges of Leaving a Large Firm

The primary challenge for advisors who choose to go independent after working at a larger firm is the lack of operational support, manpower, and access to resources.

Advisors may be used to having an entire internal team (or even a national team at larger institutions) that can provide them guidance on compliance, take care of marketing, offer investment support, manage back-office operations, and more. It’s an entire ecosystem of support at the advisor’s fingertips, and it’s what makes it possible for them to focus their time and efforts on developing financial plans and working closely with clients.

But when you go independent, not only are you now a business owner (which may be a new challenge altogether), but you’re responsible for finding a way to rebuild your ecosystem.

Depending on your available capital or resources, perhaps you have the means to hire a whole new internal staff who can handle the additional responsibilities. But in most cases, you’re going to need to curate a team of outside experts who can address your challenges in a more cost-effective and timely manner.

Even if you have the knowledge and capabilities to handle all aspects of running a business yourself, there are only so many hours in the day — and your time is likely better spent on high-priority tasks. Building your own firm with outsourced capabilities means you don’t have to do it all yourself, and you can rely on the expertise of others who understand your needs and can help you create your new ecosystem effectively.

What Does an Outsourced Chief Investment Officer (OCIO) Do?

One of the primary roles you can consider outsourcing is a Chief Investment Officer. An OCIO is designed to take the time-consuming task of overseeing all investment-related responsibilities off your plate as a business owner and advisor.

Because they’re a knowledgeable and unbiased third party, an OCIO can help you make forward-focused decisions for the firm and provide a professional second opinion on all investment-related matters. As a newly independent advisor, an OCIO can also help you identify potential pitfalls or missed opportunities and help you address them.

You have the ability to customize your relationship with your OCIO to what you’re most comfortable offboarding. If you’d like them to take a client-facing role, for example, they can do that. Or, your OCIO can provide back-office support (like research) if you’d prefer.

When selecting an OCIO, it’s important to determine if their approach and strategies align with your own investment philosophy. Because they’ll be playing such an integral role in your firm, you want to be sure you’re partnering with an OCIO you feel comfortable working with and trust to help you address your clients’ needs.

The Benefits of Working With an OCIO As an Independent Advisor

When you work with a consultant, like an OCIO, you still maintain ownership of your own business. You are the primary decision-maker, and you have control over all business decisions. While an OCIO can make suggestions based on their expertise or experience, it’s ultimately up to the advisor to have final say.

This can give newly independent advisors peace of mind in knowing they’re maintaining control of the firm and able to operate it the best way they see fit — while still benefiting from the expanded capabilities and support of an OCIO.

Looking to Build Your Own Advisory Ecosystem?

An OCIO can play an integral role in building up your new firm by offering ongoing support and guidance. To learn more about how East Bay Investment Solutions can help you build out your own ecosystem, feel free to reach out to our team today and schedule time to talk.

Every advisor needs to look out for the future well-being of their clients and their firm. Whether it’s preparing for an unexpected scenario or thinking long-term toward retirement, there are decisions you need to make now in order to facilitate a smooth transition for your future successor. Let’s take a look at the decisions involved in succession planning, and how an OCIO can help you prepare for a successful transition that appeases all parties involved.

Why Succession Planning Is Challenging

Until technology advances and advisors are able to clone themselves, you’ll never have two people with the exact same values, philosophies, beliefs, or workflows and systems. Even two advisors who work in the same firm, or may even be related to one another, will still work differently.

So when it’s time for a senior advisor or owner to step down, it can be challenging to build a succession plan that reflects both the retiring advisor’s wishes as well as those of the next-gen advisor.

For this reason, it’s important for advisors to start preparing a succession plan well in advance of any plans to retire or leave the firm. You need to not only think about the reputation and long-term success of your firm, but of the immediate needs of your clients as well. It can be a jarring experience to learn that the advisor you’ve been working with for 30 years is retiring. But the more preparation you can put into facilitating a seamless transition for your clients, the less anxious they’ll be (and hopefully, the less likely they’ll be to leave your firm altogether).

The Role an OCIO Plays During Transitions

An outsourced Chief Investment Officer (OCIO) can be a critical partner to bring in during or before any major transitions happening in your firm. They can work with both you and your successor to understand each of your investment philosophies, what your current responsibilities are, and what needs to happen in order to offer an uninterrupted client experience.

As an unbiased third party, an OCIO’s priority is setting your firm up for success by helping you address all aspects of your investment services and responsibilities within the succession plan. They can provide a second opinion in any areas of concern and identify opportunities to appease both the retiring advisor and next-gen leader.

See an OCIO in Action

East Bay Investment Solutions often works with firms preparing for transition. Let’s take a look at a recent example of how East Bay helped an RIA develop and execute a successful succession plan.

In this case, the founder, we’ll call him Steve, was preparing to retire and transition the firm to the next-gen advisor, Brad. Brad was a very planning-focused advisor, whereas Steve was more interested in the investment side of things. He spent the majority of his time looking at individual mutual funds and researching active managers, which he would change frequently. This was a practice Brad was not comfortable continuing with, which meant the founder and next-gen advisor were at odds about their investment approach.

When Brad and Steve first engaged with our firm, we spent a lot of time talking with both of them to learn more about their individual approaches to investment management. Then, we dove into how we could help them move forward in a mutually agreeable way. We explained what our approach would be from an investment perspective, and how we would think about the client transition from one philosophy to another. We knew that this was something that would take time, and trying to rush it — or force the next-gen advisor to adopt a philosophy he wasn’t happy with — would be ineffectual.

We worked together to develop a transition plan that made sense for both parties involved, and got Brad and his clients to a point where they were all satisfied with the plan moving forward.

This whole process took many candid conversations and full transparency from all parties involved. Both Steve and Brad needed to trust one another, and our East Bay team, in order to execute a seamless transition for their firm and clients.

Managing Family Dynamics

It’s not uncommon for small advisory firms to be run by multigenerational families — mothers and fathers looking to leave the practice to their kids or grandkids. Succession planning for family-owned firms can create an added layer of complexity, as sensitive family dynamics often need to be considered.

Having a neutral, unbiased third-party OCIO can be a big help during the planning process. They can serve as a much-needed sounding board by listening to both sides and sharing their own professional opinion based on what they believe will set the business up for long-term success.

An OCIO can be an incredible asset because they’re invested in the outcome of your firm, but don’t feel any biases or familial ties that may cloud their judgment or decision-making process.

Preparing Your Firm for Transition?

An OCIO can play an integral role in your succession planning by offering sound, unbiased guidance during the transition process. To learn more about how East Bay Investment Solutions can help your firm prepare, feel free to reach out to our team today and schedule time to talk.

Whether you’re a one-person operation or working with a team of talented advisors, your RIA has goals for growth. The challenge is, what can you do to help your firm scale more efficiently?

Note: This is only a preview; East Bay clients have full access to the piece.

When was  the last time you did something for yourself? Or spent quality time with family? It may be time to have a tough conversation if the answer is “not recently.” 

In this guide, we’ll delve into the pros and cons of tactical vs strategic asset allocation approaches. With this information, you’ll be better prepared to anticipate client mindsets and educate them about differences between each approach. 

In recent months, the stock market has had to contend with two major economic concerns—the drama over the lifting of the debt ceiling, and speculation over future rate hikes by the Fed. Much to the relief of investors, the debt ceiling spectacle was solved, at least temporarily. But the market has continued to churn over concerns of how much further the Fed plans to go to win the battle over inflation.

Inflation News Improving, but the Fed is Still on the Move

The June inflation report, indicating a marked cooling in price increases, was a shot in the arm for a market desperately looking for a respite from further rate hikes. While the 3% year-over-year increase in June, the smallest since March 2021[i], marks a significant reduction of the inflation rate that peaked at 9.1% in June of 2022[ii], it remains above the Fed target of 2%, and consumers are still reeling from higher prices.

After a pause in June, most experts expected at least one more rate hike in 2023. And then, in late July, the Federal Reserve approved a much-anticipated interest rate hike that took benchmark borrowing costs to their highest level in more than 22 years. The quarter percentage point increase brought the fed funds rate to a target range of 5.25%-5.5%. Will this be the end of rate hikes? What will be the impacts from these hikes?  Will the economy fall into a recession?

One thing for sure is that short of the economy falling into a full-blown recession (which appears less likely this year), the Fed is not expected to cut rates anytime soon. That should keep upward pressure on loan rates and bond yields well into 2024. How does that bode for investor portfolios going forward?

Implications of Current Rate Environment on Portfolio Decisions

While a considerable chunk of past, present, and future rate hikes has already been baked into the market, the prospect of rates remaining elevated for longer may keep a lid on stock prices and the market churning. Historically, stock market performance tends to be mixed during periods of rising or elevated rates. It can also vary among specific industries or sectors, which is why diversification is critical in any interest rate environment.

Bonds More Attractive

For several years, as interest rates plummeted, bonds had been dragging down total returns with their low yields. Then, increasing rates over the last few years forced bond yields up while driving prices down, resulting in the worst bond market returns on record in 2022.

The silver lining in rising bond yields is that they have become more attractive for fixed-income investors or as a counterweight to stock market volatility. With the 10 and 30-year Treasury yield both hovering around 4% as of this writing, they are now exceeding the inflation rate of 3%.

Perhaps the biggest beneficiaries of higher rates are savings, CDs, and money market accounts. After languishing at near-zero rates for several years, rates with some accounts have soared to the 4% to 5% range, making them a more attractive haven for investors.

Preparing Clients for Rate Uncertainty

No one can consistently predict what the Fed will do in its fight against persistent inflation. Continued pricing pressure and a strong labor market could force more aggressive actions, but, at the very least, we aren’t likely to see rates coming down soon.

Any specific actions your clients take regarding their portfolios will depend on the assets they hold, their investment objectives, and risk tolerance. Diversifying among assets with low correlations with one another is still the best way to minimize portfolio volatility until inflation and fed rate policy normalize. As always, we suggest focusing on the long-term objectives of your portfolio and the things you can control.

[i] https://nypost.com/2023/07/12/us-inflation-rose-3-in-june-smallest-increase-since-2021/

[ii] https://www.bls.gov/opub/ted/2022/consumer-prices-up-9-1-percent-over-the-year-ended-june-2022-largest-increase-in-40-years.htm

4 Benefits of Hiring an OCIO