Rethinking the Traditional OCIO Model: A Guide for RIAs

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An outsourced chief investment officer (OCIO) can deliver vastly expanded investment capabilities while seamlessly alleviating the burden of investment infrastructure, operations back-office, and administrative tasks, freeing up advisors’ time for vital client-facing and relationship-building activities. They can also mitigate regulatory risk, create new efficiencies and reduce overhead costs.

While this may sound ideal to a time-constrained advisor, don't blindly accept this premise. Identify the appropriate OCIO partner, one that is best equipped to meet the unique needs of your firm and its clients.

The use of an OCIO was long the domain of institutions such as pension plans, nonprofit endowments and foundations, but a shift has been underway in recent years. In the wake of the global financial crisis, a tightening of regulatory standards created an increasingly complex market environment that necessitated a more rigorous approach to investments, compliance, risk controls and governance. Intensifying competition and the demand for more sophisticated investment strategies have forced many financial advisors to take on tasks that distract from core relationship- and business-building activities.

Against this backdrop, a growing number of financial professionals are looking to outsource certain functions. Increasingly, advisors are using OCIOs to offload time-consuming administrative and back-office tasks, as well as satisfy a range of other investment initiatives, including fiduciary requirements, institutional investment disciplines, improved performance, decreased volatility and cost mitigation. Between 2016 and 2021, the total global OCIO industry expanded from $1.29 trillion in assets under administration (AUA) to $2.46 trillion. By 2026, it’s expected to reach $4.15 trillion in global AUA.