1

JOIN THE TEAM

What is an OCIO, and does my firm need one?

Outsourced Chief Investment Officers or OCIOs are investment management firms or professionals that offer comprehensive investment services to institutional investors such as pension funds, endowments, foundations, and high-net-worth individuals.

The primary objective of an OCIO is to manage the investment portfolio on behalf of the investor, taking into account the investor’s specific goals, risk tolerance, and investment preferences.

This article seeks to demystify OCIOs and their services, as well as illuminate a powerful potential resource now available to most RIAs and Financial Advisors.  

Is an OCIO Right for an RIA or a Financial Advisor?

Given today’s complex and challenging investment landscape, coupled with potentially higher risk and lower than expected historical market returns, advisors are increasingly uncertain about how best to meet investor objectives. The need for help in creating tailored portfolios based on unique goals and constraints has never been greater.

Recent advents in technology and regulation have swung open the doors for RIAs and financial advisors, regardless of asset size, to access investment prowess formerly unavailable to all but the most prestigious institutional investors.

For an RIA or advisor, an OCIO can help to defend the advisor’s brand and client relationship by leveraging investment expertise, managing risk, ensuring compliance, aligning with brand values, providing transparent reporting, and allowing advisors to concentrate on the client relationship.

By partnering with an OCIO, advisors can strengthen their brand’s financial stability, reputation, and long-term growth potential. Which is why many RIAs and advisors have turned to outsourcing investment management with an OCIO.

What Does an OCIO Actually Do?

OCIOs are investment experts who have the knowledge and the experience to manage complex portfolios. An OCIO can provide access to a team of experienced investment professionals with specialized expertise in a wide range of asset classes and investment strategies. They can help advisors create customized investment solutions that align with their clients’ goals and risk tolerance.

The relationship between an OCIO and an advisor is typically built on collaboration, trust, and shared commitment to achieving long-term investment goals for the advisor’s investors. Here’s a general overview of how OCIOs typically work with investors on behalf of advisors:

  • Understanding Investor Objectives
  • Developing an Investment Policy
  • Strategic Asset Allocation
  • Manager Selection and Due Diligence
  • Portfolio Construction and Monitoring
  • Performance Reporting and Communication
  • Risk Management and Compliance

A high quality OCIO will align the investment strategy with the advisor’s identity, ensuring that the portfolio reflects the advisor’s values and preferences. This alignment helps defend the advisor’s brand by ensuring that the investments are consistent with the brand’s image and reputation, avoiding any potential conflicts or controversies.

What are the Benefits of Employing an OCIO?

OCIOs empower RIAs and advisors to save time and resources that can be allocated to other essential activities such as client acquisition, relationship management, financial planning, or core business activities.

An OCIO does not “take over” the client or investor relationship. In fact, a reputable OCIO will work closely with an advisor to understand their brand values, mission, and long-term objectives. Here’s a general overview of the advisor benefits of working with an OCIO:

  • Cost Savings
  • Risk Management
  • Time Savings
  • Specialized Expertise
  • Fiduciary Protection

By outsourcing investment management to an OCIO, RIAs and advisors can leverage the expertise and resources of seasoned professionals. This allows advisors to focus on their core competencies while benefiting from specialized investment knowledge, active portfolio management, and ongoing monitoring and reporting.

Can Paying for an OCIO Actually Provide Cost Savings?

The cost of hiring and maintaining an internal employee, or multiple employees, can add up quickly. The cost of hiring a qualified Chief Investment Officer can add up to several hundred thousand dollars per year … and that is only the personnel expense. A CIO needs resources, tools and technology as well.

Outsourcing investment management through an OCIO can be more cost-effective than hiring, training, managing, and monitoring an in-house investment team. When an RIA or advisor hires an OCIO they also do not have to pay employee benefits like health insurance, 401k or vacation time. While the cost savings on hard costs may be more tangible, however there are also “savings” available in the form of spending less time and having less headaches associated with training and employing an in-house team.

Additionally, the OCIO provider may have more ability leverage their scale and expertise to help reduce fees and investment costs.

How Does an OCIO Help with Risk Management?

An OCIO can help RIAs and advisors manage risk more effectively by developing and implementing a comprehensive approach to risk management, including identifying and monitoring investment risks, as well as managing and mitigating those risks through portfolio construction, asset allocation, and portfolio rebalancing … helping to better manage investment risk and reduce exposure to market volatility.

An OCIO can assume fiduciary responsibility for an advisor’s investment program, which can help mitigate the risk of potential liability for the advisor. Further, engaging an OCIO to implement an investment program expands the resources available to the Investment Committee and staff to fulfill their important fiduciary responsibilities.

Will an OCIO Jeopardize My Relationship with My Clients?

An OCIO is a value added partner, who can assist RIAs and advisors with their professional appearance, as well as extend the depth of talent and resources available to the advisor and their investor-clients.

Using a sports analogy, the investor is the team owner, and the advisor is their trusted General Manager. The GM hires the coach, or OCIO, and the coach manages the players, or investments in this example.

Like the trusted GM, an advisor has more on their plate then just managing the coaches and players, they must juggle other responsibilities for the investor, like possibly assisting with tax planning, estate planning, retirement planning, debt management, education planning, cash flow management, risk management, insurance, behavioral coaching or specialized services like charitable giving, succession planning or socially responsible investing. Working with an OCIO can help an advisor balance more services without burying them in extra work.

Most importantly, a trusted advisor can provide an objective, rational perspective and help an investor stay disciplined during turbulent times.

One of the biggest challenges that today’s investors face is emotional decision-making, especially during market volatility. Advisors can guide an investor through market ups and downs, encouraging a long-term investment approach that aims to ride out market fluctuations and capture growth over time. This emotional discipline can prevent impulsive decisions that might negatively impact an investor’s portfolio’s performance.

Can an OCIO Help Me Build My Business?

While advisors still retain responsibility and authority on the overall financial strategy and risk tolerance for investor-clients, an OCIO allows advisors to outsource some of the day-to-day investment tasks like reporting, investment strategy implementation, rebalancing the portfolio and coordination between services providers, and it frees up advisors to focus on growing their business and providing a great customer service experience to clients.

An OCIO can provide an RIA or advisor with the tools, strategies, and support to better service clients, allowing advisors the opportunity to spend more time “on their business” rather than “in their business.”

The right OCIO partner should help advisors stay compliant, grow their business, provide better service and results to their clients … and save money compared to traditional investment management. To learn more about Sowell’s outsourced chief investment officer services, contact us today!

Who Is Sowell Management?

Sowell Management is a multi-billion-dollar[1] SEC-Registered Investment Advisor built by advisors, for advisors.  Headquartered in North Little Rock, Arkansas, Sowell currently supports more than 50 independent advisory practices in 38 states – from sole practitioners to large advisory groups.

Sowell has been nationally recognized multiple times as a Top RIA by Financial Times Magazine and Barron’s Magazine.  In 2022, Forbes/Shook ranked Sowell as one of the Top 100 RIAs in the country[2].

Expertise and Experience

Sowell’s 20+ years of experience as a fiduciary and a risk management leader make us well-positioned to manage the total investment and governance needs of select OCIO clients. Sowell Affinity’s OCIO team partners with advisors to build “bespoke” investment solutions.  The seven-person team averages over 25 years of investment and portfolio management experience and is deeply rooted in academia with decades of practical investment experience. The team members combine to hold 2 CFA charters, 2 MBAs and one MFE.  The team has earned degrees in multiple disciplines, such as Finance, Economics, Chemistry, Mathematics and Business Economics, as well as degrees and advanced degrees from prestigious universities like UCLA, University of Chicago, UC Irvine, University of Texas, and Texas Christian University. 

An OCIO That Becomes a Core Part of Your Team

When you hire Sowell as your OCIO, we take the time to get to know your specific needs and create customized solutions that are tailored to you. Our team of investment professionals will become a part of your team. While you maintain the overall strategy and relationship with your clients, we integrate into the back end of your business seamlessly to provide the support, resources, and technology that you need to be successful.

Sowell’s team and capabilities act more like an “in-sourced” CIO. Quite simply, the Sowell team is your team, taking you from “me” to “we.” We handle the day-to-day tasks for you, so you can focus on building relationships with your clients and expanding your business. We align our extensive investment expertise, robust research and analytics platform, and advanced technology in support of a single goal:  helping clients achieve their investment objectives.

At Sowell Management, we meet advisors where they are and take them where they want to go.

Advisory Services offered through Sowell Management, a Registered Investment Advisor. Trek Wealth Solutions is a division of Sowell Management. The views expressed represent the opinion of Trek Wealth Solutions. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. Information provided on this website is not intended to be, nor should it be construed or used as investment, tax or legal advice, a recommendation, or an offer to sell, or a solicitation of an offer to buy, an interest in any security or cryptocurrency. Past performance is not indicative of future results, and investing in securities involves risks, including the potential loss of principal. Be sure to consult with a tax, legal, or financial professional before implementing any investment strategy. While Trek Wealth Solutions and Sowell Management believe the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Trek Wealth Solutions and Sowell Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties.

[1]   Regulatory assets under management (AUM) are assets where Sowell provides continuous and regular supervisory or management services to client portfolios. Assets under administration (AUA) is a measure of the total assets for which Sowell provides administrative services.

[2] Third-party rankings and recognition from rating services or publications are no guarantee of future investment success. Working with a highly rated advisor does not ensure that a client or prospective client will experience a higher level of performance or results. These ratings should not be construed as an endorsement of the advisor or by any client, nor are they representative of any one client’s evaluation. Generally, ratings, rankings and recognition are based on information prepared and submitted by the advisor. Unless otherwise noted, no fee was paid for consideration of any ranking or award.

BLOG DISCLOSURE: This website blog is published and provided for informational and entertainment purposes only.  The information in the blog constitutes the content creator or guest blogger’s own and it should not be regarded as a description of services provided by Sowell Management. The opinions expressed in the blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. It is only intended to provide education about the financial industry.  The views reflected in the commentary are subject to change at any time without notice.

Sign up for the Week Ahead Market Commentary

Download the Journey Roadmap

Download the Journey Roadmap

Sign up for the
Sowell Summit Event

(Please be sure to click the link on the web page to book your room)

Thank you for registering!

You should receive a confirmation email shortly. Don’t forget to reserve your room through the unique Sowell hotel reservation page. You can extend your stay at the Sowell Summit reduced room rate.