What’s an OCIO?

Chatter about Outside Chief Investment Officer (OCIO) services is growing, and there’s a lot of ambiguity around what an OCIO service entails.

Riskalyze has the luxury of working with a wide swath of the financial service industry including but not limited to advisors, broker dealer home offices, and asset managers. We’ve learned that the term OCIO is used very informally in some instances and very formally in others.

Home offices and compliance analysts largely prefer that asset allocation and trading decisions be outsourced by the investment advisors under their supervision. Home offices believe that the average advisor isn’t elite at managing investment decisions which they ultimately deem a liability to the advisor and home office. In addition, many broker dealers earn more revenue when an internal or external investment management outsourcing solution is used (e.g., TAMP).

Asset managers are happy to provide outsourced solutions because they can better ensure that their investments earn an allocation. Asset manager OCIO services tend to provide value at the advisor firm level (practice management and proposal generation), versus at the end client level.

Advisors choose traditional outsourcing via TAMP services to leverage the intellectual property of strategists and offload the ongoing trading responsibilities.

Still, the more expansive OCIO services purport to offer far more than just outsourced investment management. In fact, technology is driving a revolutionary trend whereby strategists typically beholden to TAMP platforms for distribution are choosing to offer services direct to investment advisors, via Riskalyze. Perhaps most importantly, these OCIO services are able to deliver results for advisors without taxing performance with fees.

For example, Riskalyze recently partnered with Aptus Capital Advisors. Their offering is more akin to white glove concierge services serving investment advisors directly or through the home offices. Think hands on practice management consulting and individualized portfolio management without the TAMP fees. Operating as a consultant or sub-advisor, Aptus’ OCIO model seeks to take over or support the day to day demands of advisors. They provide on-demand access to a team of CFAs, tailored client communicators, and mitigate risks through hands-on management of investments with an eye for risk adjusted and tax efficient returns. All this, without the excessive fees of traditional outsourcing via a traditional TAMP service.