How an OCIO Can Help You Prepare for a Successful Transition or Takeover

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.