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How OCIOs Help Financial Advisors Strike the Perfect Balance

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.

East Bay Investment Solutions, a Registered Investment Advisory firm, supplies investment research services under contract.

This document contains general information, may be based on authorities that are subject to change, and is not a substitute for professional advice or services. This document does not constitute tax, consulting, business, financial, investment, legal or other professional advice, and you should consult a qualified professional advisor before taking any action based on the information herein. This document is intended for the exclusive use of East Bay clients, and/or clients or prospective clients of the advisory firm for whom this analysis was prepared in conjunction with the EAST BAY TERMS OF USE, supplied under separate cover. Content is privileged and confidential. Information has been obtained by a variety of sources believed to be reliable though not independently verified. To the extent capital markets assumptions or projections are used, actual returns, volatility measures, correlation, and other statistics used will differ from assumptions. Historical and forecasted information does not include advisory fees, transaction fees, custody fees, taxes or any other expenses associated with investable products unless otherwise noted. Actual expenses will detract from performance. Past performance does not indicate future performance.

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