Whether you’ve recently gone independent or are looking to free up your time, there are a number of reasons why advisory firms choose to outsource their asset management services. While Turnkey Asset Management Programs (TAMPs) have historically been the go-to option for RIAs since the 80s, a fairly recent rise in digital adoption across the industry has brought new opportunities to light—namely, the option to work with an Outsourced Chief Investment Officer (OCIO).

The question is, which is right for you, your firm, and your clients? Let’s take a look.

The Benefit of Outsourcing

No matter where you are on your professional journey, it’s possible that you’re going to need to enlist some outside help.

Perhaps you recently left your broker-dealer, and now you’re building your own firm from the ground up. Not only do you have to navigate becoming a business owner, but you have to find a way to serve your clients without the backing and resources of a large institution. If you have significant resources, you may be able to hire an entire internal staff from the get-go. But in most cases, newly independent advisors keep staffing slim and instead rely on the expertise of outside professionals or platforms to operate efficiently.

Or, if you’ve been successfully growing your firm for a while now, you may find that your internal investment management team is stretched too thin — but hiring is a time-consuming and expensive gamble (especially if you’ve had bad experiences in the past). To free up their time, it could make sense to outsource some of their investment-related responsibilities.

Outsourcing can also help with transitions in the firm. When an owner retires, and the new owner takes over, it’s common that one may have a different investment strategy or philosophy than the other. Or, an internal CIO or senior advisor may choose to step down, and the firm needs an outsourced solution to step in quickly and keep operations running seamlessly.

What Is a TAMP?

TAMP is a rather broad term, but it generally refers to asset management programs that advisory firms can use to oversee and manage their clients’ portfolios. TAMPs are designed to save advisors time by addressing the asset management and research responsibilities that the advisor wants to delegate to a third party.

TAMPs not only save advisors time for other client-facing or business-oriented tasks, but they also eliminate the need for advisors to develop their asset management system from scratch. Because TAMPs can manage back-end administrative tasks like billing and reporting, they can help advisory firms address their compliance obligations and meet reporting requirements. TAMPs can also take on some of the risk and responsibility in the event the firm is sued for poor performance.

What Is an OCIO?

While a TAMP is typically a platform offered by a large institution, an OCIO is a strategic partner that provides comprehensive investment services. 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.

Because an OCIO is a knowledgeable and unbiased third-party provider, they can help you and your key leaders make forward-focused decisions for the firm — as well as offer a professional second opinion on all investment-related matters.

An OCIO is meant to be a true partner to your firm, meaning they’re typically more involved in the inner workings of your asset management responsibilities and tasks than a TAMP ever would be. They can help you, for example, understand what responsibilities you may not be aware of now but should start doing in the future to better serve your clients.

Your OCIO can even be client-facing if you’d like, which can help increase your credibility with clients while saving you valuable time. Some firms choose, for example, to forward emails with investment-related questions from clients to their OCIO — which ensures a timely, accurate response and saves the initial advisor the time and hassle of responding to the email themselves.

Which Is Right for Me?

A TAMP can be a wonderful solution for advisors with very specific investment management needs who don’t require customized strategies, second-opinion guidance, or collaboration.

The problem with TAMPs is that they’re designed to be “turnkey” (that’s why it’s in the name!). What this means for advisors and their clients is that they don’t have much say in the strategies or options provided. TAMPs tend to be fairly “take it or leave it” options. In most cases, you may not be able to tweak or change what the TAMP offers.

TAMPs also don’t offer individualized investment support like an OCIO does. In most cases, with a TAMP, you won’t have a dedicated investment professional who can meet with you and your clients on a regular basis.

An OCIO can provide you with customized investment solutions so you (and your clients) get exactly what you’re looking for. They provide a much higher level of collaboration, flexibility, and overall customization. An OCIO is designed to fit in with your firm and offer their expertise wherever need be.

If you want an OCIO to attend client appreciation events or assist with a prospecting webinar, they can do that in addition to their portfolio management responsibilities. In most cases, a TAMP will not provide that level of interaction and support to your RIA firm.

Looking for an Outsource Partner?

While both a TAMP and an OCIO can help free up your time by handling portfolio-related tasks, only an OCIO can offer full, customizable support to you, your team, and your clients. At East Bay Investment Solutions, we serve as a trusted, go-to partner for managing our clients’ investment-related tasks and responsibilities — giving advisors hours back in their week to pursue more fulfilling work for their firm and their clients. To learn more about East Bay Investment Solutions and our OCIO services for RIAs, contact us today.

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.

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

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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.” 

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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