What’s Your Succession Strategy for Managing Your DB Plan?

Executive summary:

  • While the retirement of several high-profile CIOs has generated ample news, and headlines, there’s been very little press coverage about OCIO as a potential solution. We find this perplexing.
  • We believe that for most organizations, OCIO is a scalable and cost-effective solution that warrants serious consideration.
  • Managing a DB plan is very different from managing a DC plan, as it requires a specific skill set. This is where we believe investment outsourcing can help.

June 2023 update

Since this article was published last August, we’ve received remarkable engagement from clients and prospects alike. And in the months that have passed, headlines about the retirements of several high-profile chief investment officers (CIOs) have generated waves across the DB space, sounding the alarm on what we see as a growing problem: the aging—and therefore shrinking—talent pool of CIOs.

But here’s the rub: Despite the alarm bells going off in the industry, there continues to be very little mention in the press of OCIO as a potential option for corporations. In other words, while there’s a profound awareness among plan sponsors that CIOs are exiting the business, there’s a surprising lack of press coverage about investment outsourcing as a solution. To be frank, this is perplexing, especially since OCIO is now a fully mature solution. In this day and age, shouldn’t a comprehensive talent management process consider OCIO as an option?

And that’s ultimately why we’re publishing this article again, and why we’ll continue beating the drum on this topic for as long as it takes—because we firmly believe that for most organizations, OCIO is a scalable and cost-effective solution that deserves serious consideration. To those reading, my only ask is this: After finishing this article, might it be prudent to finally explore what OCIO could do for your organization's investment program?

Let's be blunt: Defined benefit—or DB—plans are fast becoming legacy functions for many corporate plan sponsors. Because of the specialized knowledge required that is frequently far from the organization's core mission, creating an ongoing staffing plan can be a challenge. This is especially true in a world where there aren't a ton of recent college grads targeting a career in the DB management space. With all that in mind, how do you manage succession risk for your DB plan?

I know this issue intimately because I used to manage the small team at Pacific Gas and Electric (one of the largest DB plans in the U.S. at the time) that was responsible for trust investments. When I was there, the treasurer would come to me once a year and ask me to line out my succession plan. What he was really asking was, "Who's going to manage this thing if you get hit by the red truck?"