An Outsourced Chief Investment Officer delivers advisory firms the best of both worlds — access to best-in-class investment strategies developed by experienced industry veterans without the commitment of hiring full-time team members.

But what many firms don’t realize is that OCIOs offer a wide range of services, which can be adjusted to meet your team’s needs. Let’s take a look at what an OCIO does and the different capacities in which they help advisory firms better serve their clients while maintaining their bottom line.

How Involved is an OCIO?

That’s up to the advisory firm and the OCIO. Each relationship is customized to help fill the gaps or offer support in specific areas of need. Some OCIOs step in seamlessly to serve the same critical functions as an internal CIO. Other times, they provide more supplemental support or address especially complex concerns.

At East Bay, we’ve served firms in a number of different ways. For example, we’ve offered guidance during tough transitions, helped support overloaded internal teams during periods of growth, and enabled advisors to regain their time by taking full control of investment-related responsibilities.

But each OCIO firm operates differently, so their capabilities and involvement in your firm will depend on their size, pricing structure, resources, and industry experience.

4 Common OCIO Services

An OCIO can help you with your portfolio construction and management responsibilities from top to bottom. From reassessing your investment philosophy and approach to adapting and implementing those changes into model portfolio construction, an OCIO provides full-service support.

Some OCIO firms, like East Bay, offer additional services beyond investment-specific responsibilities. For example, we provide advisory firms with business consultation services and access to robust industry resources that our clients can use to support their growth and business goals.

The most common OCIO services fall into one of four broad categories:

1. Investment  management

An OCIO can take on the full spectrum of investment management-related tasks, or offer assistance on more specific services like:

• Portfolio construction
• Assist with best practices on topics like rebalancing parameters, cash management, etc.
• Due diligence
• Mitigating portfolio risks (primarily through diversification and asset allocation)

2. Client support

OCIOs can often help advisors address the needs of a firm’s clients on an individual basis through answering client questions or, reviewing client specific needs, as examples.

3. Firm support

OCIO firms can be a resource for the overall firm too.  Working with many different  clients, we can provide insight into topics  like  various technologies, staffing needs, or other operational issues.

4. Advanced insights

An OCIO is more than just another team member, they often serve as the connection between your advisory firm and state-of-the-art investment resources or networks. Many OCIOs offer firms and their clients access to market commentary or analysis, as well as stay on top of changing market conditions and trends.

How Are OCIO Services Priced?

At East Bay Investment Solutions, we price our services rather uniquely. We provide a flat-fee pricing model for advisory firms.

As you start researching and comparing OCIO firms that may fit your outsourced investment needs, we encourage you to reach out and schedule time to talk with our team. We’d be more than happy to walk through our offerings, pricing, and investment philosophy in more detail.

The financial services landscape has evolved greatly in recent years, thanks in large part to the widespread adoption of technology platforms and AI-enhanced tools. Today, investors have more access to financial advice and investment resources, such as roboadvisors and online courses. With greater accessibility to financial services and education, it’s no surprise that investors and clients want more from their advisors. Gone are the days when portfolio management was the sole focus for clients. Now, numerous surveys and studies indicate that clients want a financial partner who helps them achieve their financial goals and enjoy a higher quality of life.

In fact, a recent survey by the American College of Financial Services found that more clients valued their advisor’s ability to help them meet their financial goals (52.5%) than provide investment evaluations (47.5%).

Portfolio management and investment research are a big part of what your firm does — and it takes up a big chunk of your time. Yet, studies show that clients value qualitative, personalized services more.

This begs the question, how can advisory firms continue providing portfolio and investment management services while still prioritizing their clients’ primary concerns? By leveraging the expertise and guidance of other professionals, like an Outsourced Chief Investment Officer (OCIO).

What Does an OCIO Do?

In terms of investment management, the better question may be what can’t an OCIO do? An OCIO has the robust resources and capabilities to address all of the same investment-related responsibilities as an internal CIO (or possibly even more).

Many OCIOs have decades of investment experience and will leverage it to help you address your clients’ investment needs no matter the complexity. They can also help your firm run smoothly during periods of turmoil or transition, say when an owner passes the torch to the next generation or a key leader leaves the firm. An OCIO can also help facilitate discussions between leaders, especially if there are varying perspectives on investment philosophy or other investment-related decisions.

One big advantage an OCIO offers is the ability to educate advisors on things they may not have much experience with — or bring to the advisor’s attention potential concerns they weren’t aware of before.

Most OCIOs can operate in either a client-facing capacity or stay entirely behind the scenes, depending on your preferences. If you’d rather save time and streamline the client experience, you may encourage clients to reach out directly to the OCIO for questions regarding their portfolios. Or, perhaps you like to host educational client events (like webinars) and invite your OCIO to assist in answering investment-related questions live.

Hiring an OCIO vs. Growing Your Team Internally

When you find that the firm’s investment-related workload exceeds your current team’s capabilities, you have two options in front of you: grow your team internally or hire an OCIO.

The first factor to consider is the hiring process (and the possibility that you’ll need to do it all over again in the not-so-distant future). Hiring is an arduous process, and it always results in a gamble. Will the person you select live up to the standards you’ve set before them? Are they going to be a good culture fit? Will they stay with the firm long-term, or leave for other opportunities elsewhere? If so, are you prepared to start the hiring process from scratch?

The hiring process aside, expanding your team of portfolio managers is expensive when you consider base salary, benefits, bonuses, yearly raises, insurance, etc. It’s also inflexible — meaning if your current growth trajectory stalls out or changes course, you may find yourself with too many internal hires to support the work coming in. This can impact your bottom line, or force you to make tough decisions, like laying off excess employees.

Because an OCIO is not an internal hire, there’s a greater level of flexibility. They’re able to fill in the cracks when your team feels overloaded, without straining resources at times when demand lessens.

Plus, an OCIO tends to have greater access to resources and tools that an individual may not. As an unbiased, third-party professional, their opinions, guidance, and strategies are based on extensive, proven experience.

Of course, there will be times when you find it more prudent to hire internally. But it’s certainly worth considering the benefits of bringing on a more flexible outside hire to address your firm’s needs.

How to Find the Right OCIO Partner for Your Firm

The vetting process for finding an OCIO for your firm is incredibly important, especially if the purpose of hiring one is to offload investment-related tasks so you can focus your time on delivering more value to your clients. You need someone you trust implicitly, and who you feel comfortable enough to put in front of your team and (in some cases) your clients. As you start researching options, be sure to ask OCIO firms about their investment philosophy, experience, and pricing.

To learn more about East Bay Investment Solutions and our OCIO services for RIAs, contact us today.

Whether you currently have a CIO who’s overloaded with responsibilities or you’re looking to entirely outsource your firms’ investment-related responsibilities, an Outsourced Chief Investment Officer (OCIO) can help.

But what, exactly, does an OCIO do? They 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. 

OCIOs are often home to investment professionals with decades of deep industry experience, which they use to provide you with unbiased, data-driven investment support. OCIOs can help your key leaders facilitate a smooth transition to the next generation, make forward-focused decisions for the firm, and provide a professional second opinion on all investment-related matters.

The question is, how do you find the right OCIO for you and your firm? Let’s take a look at what every RIA should look out for when vetting and hiring an OCIO.

First, Think About Why You Need an OCIO

Over the years, our team at East Bay Investment Solutions has found that the reason why RIAs engage with OCIOs varies greatly. Before beginning your search, do some internal reflection first to determine why, exactly, you’re looking to hire. This will give you a clear objective, which you can then communicate more clearly with any OCIO firm you end up engaging with.

Here are a few of the most common reasons why RIAs tend to hire OCIOs:

Transition

Whether they’re pursuing another opportunity or looking to retire, CIOs leave for many reasons. The transition process can be difficult for the firm, especially if the move is sudden and unexpected. An OCIO can help fill in the gaps and facilitate a smoother transition in this scenario.

Lack of Time

Time is a finite resource because you only have so many hours in a day — and only so many hours you want to spend in a workweek. The more you’re able to outsource (and feel comfortable doing so), the more time you have to focus on delivering a better experience for your clients and prioritizing other important tasks. 

By outsourcing your investment-related responsibilities to a knowledgeable OCIO, you’re able to take back your time without sacrificing your investment philosophy or standards.

Additional Support

Your CIO is likely feeling overwhelmed with responsibilities and pulled in too many directions. Not only do they need to manage an entire team, but they’re expected to serve clients and research and execute complex investment strategies as well.

In reality, most CIOs and advisors didn’t get into the financial services business to get bogged down in portfolio management tasks. Most RIAs want to be able to work one-on-one with clients to help them achieve their goals. The problem is, there are many 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 to a trusted OCIO, the more they’re able to focus their time and energy on meaningful tasks that they enjoy doing.

Questions to Ask OCIOs During the Vetting Process

The process for hiring an OCIO firm should include the same level of due diligence as hiring an internal candidate. Just as you’d interview an individual, consider their credentials, and keep an eye out for red flags — the same should be done during the vetting process for any third-party firm.

Here are a few questions you should ask any OCIO you’re considering working with, as well as what to look for in their answers:

“What is your investment philosophy?”

 Your OCIO will serve as an extension of your firm, so it makes sense that you work with someone who shares a similar philosophy and values as you do. This is incredibly important, as it will likely impact your client portfolios and overall investment strategies.

If you and your OCIO clash with your philosophies, this can create ongoing turmoil and frustration for everyone involved. Not to mention, the collateral your OCIO is spending time and resources to create may go unused because the RIA doesn’t agree with the philosophy it’s based on.

“Will you take on a client-facing role?” or “Do you have experience operating as an OCIO in a client-facing role?”

In many cases, RIAs will want their OCIO to work directly with clients in order to save time and streamline processes. Otherwise, it can be a hassle to serve as the middleman who must field communications between clients and the OCIO.

But putting a third party in front of your valued clients is no small decision, meaning you need to hire a firm that you trust to represent you positively in a client-facing role. At East Bay, for example, we regularly are asked to respond to investment-related questions from clients or attend webinars where we can answer questions and interact with investors. However, we are not conversing with clients directly via email or phone but will participate in conversations as long as the advisor is present.

“How do you price your services?”

The industry standard for OCIOs is to use an asset-based pricing service model. This means that as your firm grows (as you likely intend it to), so do the fees of your OCIO. Other firms, like East Bay Investment Solutions, offer a flat-free pricing model. No matter how large your firm grows over time, a flat-fee model ensures you don’t pay more because of it. 

Finding the Right OCIO for Your RIA

The vetting process for finding an OCIO for your firm is incredibly important, especially if you’re looking for someone to provide support for years to come. 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.

No matter the size of your firm, your C-level leaders play a critical role in its overall functionality and success. Teamwide cohesion and progress trickle down from the top — which means your Chief Investment Officer (CIO) and other senior leaders must be high-functioning, motivated, and aligned with the firm’s greater growth initiatives.

Sometimes, employees (even C-level employees) turn out not to be a good fit for your firm. Or, just when the pace is quickening, they move on to new opportunities — leaving you struggling to find a suitable replacement fast.

This leaves you with a dilemma… Is it better to roll the dice and hire internally again or outsource responsibilities to a third party? Let’s explore this important decision, specifically as it applies to a CIO.  

Should You Hire Internally to Replace Your CIO?

Adding a new internal hire to your team is no easy feat, especially when you’re replacing someone at the C-suite level. The process is time-consuming, payroll and benefits are expensive, and the decision is fairly inflexible. Should the person you end up bringing on not be a good fit, or should their investment philosophy evolve away from yours over time, it creates a stressful work environment that may not ease up for years.

As we mentioned earlier, your entire team’s success relies on the leadership they receive from the highest team members (which certainly includes your CIO). For that reason, who you put in these positions of power are the most important hiring decisions you’ll ever make — which puts an immense amount of pressure on both you and the people you’re hiring. 

Even if you do hire an incredibly capable CIO who embodies every trait you’ve been looking for in a leader, there’s always the underlying risk that they’ll leave or retire. When that happens, you must start the process all over again — which can be a daunting journey that takes valuable time away from important client work.

While there are many instances in which hiring a new CIO internally works out well, it’s certainly worth considering the alternative — hiring an outsourced CIO (OCIO) instead. Or, in many cases, hiring an OCIO to support your newly hired CIO during the transition (or even on an ongoing basis).

What Is an OCIO?

An OCIO can manage all of the same investment-related responsibilities of an internal hire, without the added risk of leaving suddenly or being a poor team culture fit. They can still help you make forward-focused decisions about your firm, and even provide a professional, unbiased second opinion on any investment-related matters. 

Depending on what you’re looking for in an OCIO, they can be client-facing or work entirely behind the scenes to support your other advisors and staff. 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.

If you are weighing your options and considering an OCIO, they should be vetted carefully — just as you would with an internal hire. You’ll want to determine if their approach, investment philosophy, and strategies align with your firm’s positioning. Just like an internal CIO, an OCIO plays an integral role in your firm, so you’ll certainly want to be sure you’re partnering with one you can trust and feel comfortable leaning on as needed to address your clients’ concerns.

See an OCIO In Action

East Bay Investment Solutions has helped a number of advisory firms by stepping in to replace internal CIOs who, for various reasons, leave their firms.

Let’s take a look at one recent incident in which East Bay helped one firm address the missing gap in their C-suite level team.

Firm owner, we’ll call him Josh, approached us because his CIO left quickly and unexpectedly, which left him in a lurch. Josh was, understandably, frustrated by the situation and torn on what his next move should be.

Looking at his options, he considered at first hiring another individual to become the firm’s new CIO. But, he was worried that he’d be stuck in the same position a few years from now if that person decided to leave too.

Then, he heard about East Bay and scheduled a meeting with our team. He found that our investment philosophy was a good fit for his firm, and he saw that the scope of services we offered suited his firm well. He felt much more comfortable knowing that years from now, we weren’t just going to leave him and shut our doors. As OCIOs, we provided him with more long-term stability than an internal hire would.

He also liked the idea that if someone on the East Bay team were to go on vacation, there’d be another person there to still provide ongoing, uninterrupted support.

Should Your Next Hire Be an OCIO?

When it comes time to replace your CIO, you need an option that provides stability and ongoing support. Having a knowledgeable and responsive OCIO can bring you 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.

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

When creating a diversified portfolio, it’s common to include U.S.-based stocks as well as stocks from developed and emerging market nations. What’s not so common is to see that same globally diversified approach on the fixed-income side of the equation, or more specifically, having a dedicated allocation to emerging markets debt (EMD). This piece will highlight the various types of EMD that exist, some of their potential benefits as well as risks, and whether a place for EMD exists in a portfolio.

The Three Main Types of EMD Investing

There are three primary ways to invest in EMD including sovereign local currency debt, sovereign hard currency debt, and EMD corporate debt. As we review these options below, keep in mind that some asset managers will blend the various approaches, which creates further opportunities for investment.

Sovereign Local Currency Debt: Countries that have some currency stability and obtained a degree of market size and maturity can issue sovereign bonds in their own currency. Only higher-quality countries are typically able to issue their own debt, so the average credit quality of the index is currently investment grade, though near the lowest rung of the investment grade ladder. Because the bonds are issued in local currency, however, their returns are subject to currency risk and currency volatility.

Sovereign Hard Currency Debt: For countries that do not have stable currencies and/or do not have sizeable or mature markets, their sovereign debt is issued in US dollars. Because of this, investors don’t have the same currency concerns as they would with local currency debt. However, because the emerging countries issuing this type of debt are less economically sound, their average credit quality may be below that of local currency EMD (two of the three rating agencies consider this index below investment grade, one considers it investment grade).

EMD Corporate Debt: Rather than consisting of sovereign bonds like the two other types of EMD indexes, this index represents bonds issued in US dollars by companies based within these emerging market countries. Similar to hard currency, investors don’t have to worry about currency concerns with local debt. Unlike hard currency bonds, however, all three rating agencies categorize this index overall as being investment grade on average, though towards the lowest rung of the investment grade ladder.

How Large Is the EMD Opportunity Set?

As Exhibit 1 shows, EMD has been a growing part of the global bond market, representing almost 27% at year-end 2022 vs. just over 1% in 1989. Similarly, Exhibit 2 shows that the growth in EMD has come from the number of countries issuing bonds plus the number of instruments being issued.

Exhibit 1

^{Source: J.P. Morgan Asset Management; BIS. Global bond market regional breakdown may not sum to 100% due to rounding. As of June 30, 2023}

Exhibit 2

^{Source: PIMCO, JP Morgan, data as of March 31, 2023. Number of countries refers to the JPM EMBI Global Diversified Index; Number of instruments is an aggregate of the 3 flagship JPMindices: JPM EMBI Global Diversified, JPM CEMBI Broad Diversified, and GBI-EM Global Diversified.}

What Makes EMD Attractive to Investors?

Based on historical performance, there is evidence to suggest that adding EMD to a fixed income allocation may provide added return, as long as investors are willing to accept higher levels of risk. EMD has some characteristics of high-quality bonds (e.g. they are on the lower end of the investment grade spectrum), but they also come with their unique risks including country risk, political risk, currency risk (local EMD), and other risks associated with investing in emerging market countries.

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

For busy financial planners interested in spending more time with clients, we provide quarterly market updates of this nature which you may white-label and distribute. You get to spend more time doing what you enjoy while your clients stay up to date with high-quality investment analysis.

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.