You know that feeling when it seems like there aren’t enough hours in the day? For advisors, it might actually be true.
According to Cerulli, 24% of RIAs listed time required to run a business as a major challenge.¹ And Kitces research shows that only half (50%) of the typical advisor’s time is actually spent on client-related activities.²
What Advisors Want to Spend Time Doing
- Client meetings
- Deepening relationships with current clients
- Prospecting for new clients
- Helping clients reach their goals
- Building their business
What Advisors Actually Spend Time Doing:
- Investment management (due diligence, rebalancing, etc.)
- Trading
- Cash movements
- Market updates
- Administrative business functions
Many advisors struggle with getting everything done and having enough time to spend with clients and build new relationships. To grow, advisors need the tools and the time to help them develop deeper client relationships, prospect for new ones, and offer a value proposition that sets them apart from competitors. As clients expect more personalization in their wealth experiences, capabilities like tax planning, banking and lending, estate planning, charitable giving, and education funding are more important than ever.
So how can advisors do it all and do it well enough to support growth? For some, the answer might be to do less. To do that, advisors need to consider the aspects of their business that are taking the most amount of their resources, that might be outsourced for growth and scale. They need an OCIO partner.
OCIO stands for Outsourced Chief Investment Officer, but the term is more broadly used to mean outsourced investment management. And it’s a critical strategy for growth.
Independent advisors, particularly RIAs, can find themselves spending a disproportionate amount of time on investment management — due diligence, manager research, portfolio construction, rebalancing, proactive tax management and other investment-related work.
But outsourcing investment management is far more than just a way for advisors to save time. Leveraging an OCIO can help advisors truly up their game when it comes to delivering bespoke wealth experiences for clients. Here are five benefits for advisors and their clients:
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1. Professional Investment Management Expertise
When it comes to helping clients invest for long-term wealth, advisors should consider the approach that delivers the best outcomes for their clients. While many advisors choose to build and manage their client portfolios themselves, leveraging an OCIO means tapping into the superior depth and breadth of resources of professional money managers.
That includes a time-tested investment approach, deep manager research and due diligence, access to specialists and CFAs, portfolio rebalancing and optimization technology, plus a host of other advantages.
OCIO providers continually maintain and review their investment policies, have clear visibility into a portfolio’s holdings at any given time. A solid, established investment approach and process helps keep the organization aligned with its investing mandates, despite market volatility.
2. Access to a Team of Experts
83% of investors agree that financial advisors should leverage external experts to help with research, strategy, investment planning and management, according to a 2021 Orion survey.³ Advisors who partner with an OCIO provider are getting access to teams of due diligence, asset allocation, and investment monitoring and rebalancing specialists to help implement client portfolios. That deep bench of expertise can provide peace of mind for clients, knowing that a professional is managing their portfolio can help alleviate the stress and tendency to make irrational decisions that may come from investing. Plus, some OCIO teams will work with advisors and their clients to understand their growth challenges and the best ways to help clients reach their goals.
3. Increased Wealth Management Capabilities
As client needs continue to trend toward the more nuanced and personal, advisors need to keep pace with customizable wealth solutions and services. OCIO providers can help advisors expand their offering with capabilities like:
- Custom indexing, tax alpha and other specialized investment strategies
- Cashiering and money management
- Tax harvesting and optimization overlays
- High-net-worth offerings
Through outsourcing different aspects of their businesses, advisors can spend more time finding ways to deliver these specialized services. Advisors can differentiate themselves and deliver superior performance by providing a broader and better menu of investment solutions.
4. More Time for Clients
One of the simplest reasons for advisors to leverage OCIO services is to free up time to focus on clients. Advisors who outsource investment management functions have more time to spend with current clients as well as prospecting for new ones.
According to Kitces, the average independent financial advisor only spends about 9 hours a week on business development.² Freeing up several additional hours a week means advisors can devote more hours doing the things that have the most impact on their business.
5. Position Your Business for Scalable Growth
For advisors who are at an inflection point for growth, OCIO can help by taking time-consuming investment functions such as trading, model management and cash management off of the advisor. And many OCIOs work to help firms overcome their biggest growth challenges, close large accounts, and create capacity within the firm for growth.
Advisors concerned about the costs associated with OCIO services should note that more than half of advisors who currently outsource their investment management report their operating costs have declined since they began outsourcing, with 40% seeing declines in costs of 5% or more.⁴
A Growing Strategy
Outsourced investment management services have become increasingly popular over the years, and for good reason. As advisors face more complex investment needs, changing regulations, and ever-increasing market volatility, many are leveraging the expertise of third-party investment managers to deliver better experiences to their clients.
According to Cerulli, OCIO assets in the US grew 27% in 2021, reaching $2 trillion, and are expected to grow 7.5% annually to reach $3 trillion by the end of 2025.⁵
Orion’s OCIO offering can help your firm grow and scale your business with a complete suite of investment and operational services, customizable to your firm’s needs. With a complete menu of high-touch services, Orion OCIO can help advisors and firms stay focused on what matters most.
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¹Source: U.S. RIAs Encounter Differentiation Challenge, Cerulli Associates, 2022
²Source: How Do Financial Advisors Actually Spend Their Time and the Limitations of Productivity, Kitces.com, March 2019
³Source: Orion Research, July 2021. Orion’s Research Initiative maintained a +/- 2.9% margin of error among consumer investors across generations and a +/- 3.8% error rate among Financial Advisors. A mixed methodology was applied that included a robust base of more than 2000 constituents in the online surveys and dozens of in-depth interviews on the topic.
⁴Source: Why More Advisors are Considering Outsourcing Investment Management, FA-Mag, June 2022
⁵Source: U.S. Outsourced Chief Investmetn Officer (OCIO) Market Outlook, Cerulli Associates, April 2022