How OCIOs Help Wealth Advisors Navigate Complexity
Financial advisors have a difficult job. They must balance cultivating client relationships with meeting the time-consuming demands of investing.
For many industry professionals, maintaining this equilibrium feels like a Sisyphean task – an increasingly complex business and investment environment, too much of each day’s limited bandwidth consumed with portfolio management, and too little time spent where most advisors want to be focused: on client-related activities.
Many advisors need support so they can allocate more time to high value activities like cultivating client relationships and growing assets. Advisors who want to reduce their workload, need support so they can spend less time tied to a desk monitoring markets and trading client accounts five days a week.
But where can each of these advisors find this much-needed support?
Enter the Outsourced Chief Investment Officer (OCIO), wealth advisors and financial planners.
Two Major Challenges Faced By Wealth Advisors
Why use an OCIO? While there are myriad challenges that wealth advisors encounter in the line of duty, two, in particular, stand out that OCIOs can assist with.
#1 Lack of Time
Being a wealth advisor is all about relationship management. Advisors need face-to-face time with clients to establish and continue building trust. The more time an advisor can spend on setting client meetings, deepening relationships with existing clients, and prospecting for new clients, the better off the business will be financially.
But today's financial landscape has shifted, requiring advisors to dedicate increasingly more of their time to tasks like investment management, trading, moving cash, and administration.
The result?
Less time for nurturing relationships and growing the business. According to a study from Kitces Research: [1]
“the typical financial advisor spends no more than about 50% on direct client activity-related tasks, and barely 20% of their time actually meeting with clients.”
How OCIO Services Can Help
By taking the reins of investment management, trading, and admin, OCIOs free up time to refocus on what truly matters: people.
With an OCIO's support, advisors can spend more time with clients—deepening relationships, finding new opportunities, and providing continuous value—without the added burden of portfolio management and administrative tasks. In that capacity, an OCIO can be an invaluable ally in navigating the demanding financial landscape, letting advisors get back to what they do best: fostering relationships.
Put simply, it's a recalibration of time, a shift back to the human element of the business.
#2 Market Complexity
In the ever-evolving investment landscape, wealth advisors are constantly bombarded with new complexities. Whether it's deciphering the maze of crypto regulations, adapting to tax code changes, navigating new securities, incorporating ESG factors, or adhering to constantly shifting regulatory guidelines, the financial world is far from static. [2]
These complexities not only demand the wealth advisors' time, but also a specialized understanding that may lie far outside their purview or core expertise. Staying up-to-date and compliant with these changes while providing actionable strategic investment advice becomes a never-ending task.
How OCIO Services Can Help
OCIOs are experts in managing these market intricacies. As investment experts, they have access to advanced investment systems, data, and specialized people with know-how. They have the knowledge and experience to tackle investment complexities. By leveraging an OCIO's knowledge, wealth advisors can provide more informed advice without getting lost in the labyrinth of day-to-day investing.
In essence, OCIOs act as experienced, data-driven investment guides, helping wealth advisors stay informed via:
Transacting in markets daily
Analysis
Research
White papers
One-on-one access
This enables wealth advisors to confidently advise their clients as markets and client needs evolve. It's about turning complexity into opportunity for RIAs and planners, allowing advisors to adapt, innovate, and thrive in a rapidly changing world.
Identifying Unique Opportunities With Help From An OCIO
The portfolio management landscape is a tale of two approaches: the traditional, hands-on method and the innovative, outsourced method.
Traditional vs. Outsourced Portfolio Management
Traditional portfolio management was typically done in-house by the wealth advisory firm’s internal investment team. This team would take full responsibility for all facets of portfolio management, including investment policy development, asset allocation, manager selection, portfolio construction, and ongoing trading, administration, monitoring and reporting.
However, this approach can have its downsides.
The investment team might face constraints in resources and expertise, potentially limiting the organization's ability to access best-in-class investment managers or implement sophisticated investment strategies. In some cases, the investment team may be subject to conflicts of interest, such as earning additional fees from ancillary business lines.
Leveraging Technology With an OCIO Partner
By outsourcing portfolio management to an OCIO, wealth advisors gain a strategic partner, often at no incremental cost to the advisor or clients. This partner alleviates the burden of day-to-day portfolio tasks, offers specialized insights, and brings a diverse and insightful perspective on market trends.
Additionally, an OCIO can also bring a technological edge to portfolio management. Many OCIOs utilize cutting-edge quantitative tools that enable enhanced analysis, real-time tracking, and dynamic portfolio adjustments. They can translate complex data into actionable insights that identify opportunities and risks in the market.
Understanding the Role of the OCIO and How It Differs From a Traditional Investment Advisor
The OCIO role offers a comprehensive, client-focused alternative to traditional investment management that differs significantly from a traditional investment advisor.
Unlike traditional advisors (who typically manage portfolios in-house), an OCIO can provide a broader scope of services and access to a wider array of investment options. They’re often skilled chief investment officers with decades of experience leading firms or managing large portfolios.
As outsourced CIOs, they often engage with external expertise and leverage technology, enabling them to implement sophisticated investment strategies for wealth advisory and financial planning firms.
This outside approach helps prevent potential conflicts of interest or bias while allowing for greater flexibility and customization to meet individual client needs.
What to Look for in an OCIO Provider
When selecting an OCIO provider, it's essential to first evaluate their experience, expertise, and performance history, paying special attention to their investment specialization, risk management strategies, operational capabilities, assets under management, and your fit with the OCIO investment team.
From there, look for a partner who offers comprehensive services including asset allocation, risk management, tax efficiency monitoring, and tailored client support. Also, consider their investment philosophy and approach—how they navigate markets and allocate for risk.
At Markin Asset Management, we offer a complete suite of OCIO services to RIAs and financial planners. Our comprehensive OCIO services can potentially help you free up valuable time and resources, improve your investment service offering, and reduce your costs.
Schedule a meeting to learn more today.
Sources:
[1] Kitces. How Do Financial Advisors Actually Spend Their Time And The Limitations Of Productivity? https://www.kitces.com/blog/how-do-financial-advisors-spend-time-research-study-productivity-capacity-efficiency/
[2] Deloitte. 10 Disruptive Trends in Wealth Management. https://www2.deloitte.com/content/dam/Deloitte/us/Documents/strategy/us-cons-disruptors-in-wealth-mgmt-final.pdf