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Many companies have a chief investment officer (CIO), someone who’s in charge of a company’s financial assets. They typically manage long-term investments, portfolios of securities, pension funds, ensure adequate liquidity and a team of financial experts. Not all companies need to hire a full-time CIO, who is sometimes a director, and some can’t afford such a full-time salaried position. Instead, some companies are better off outsourcing CIOs. Here’s what an outsourced chief investment officer (OCIO) is and when it’s a good time to hire one.

What Is an Outsourced Chief Investment Officer?

An outsourced chief investment officer (OCIO) is someone who handles a company’s financial goals and plans but isn’t a full-time employee. Instead, this person is contracted to work for the company on an as-needed basis.

Outsourcing positions isn’t a new trend. Many companies have outsourced departments like IT, communications and, in some instances, publishing. But top-tier positions, like officers, are usually kept in-house. An OCIO means a person is working for a company but isn’t collecting any benefits and might not even be full-time.

What Is an OCIO Responsible For?

If you’re considering outsourcing your chief financial officer, they might be responsible for:

  • Managing assets: An OCIO handles creating, managing and adjusting portfolios to meet your goals and needs as well as minimizing risk.
  • Hiring experts: This person will hire managers and other professionals to oversee your portfolios.
  • Acting as a fiduciary: Your needs come first for most OCIOs. They work for you, so they’ll be choosing the best investments to hit your financial goals.

An OCIO isn’t necessarily the right fit for all companies, but many companies who might not have the budget to hire someone in-house could benefit from outsourcing their CIO.

OCIO: The Pros

Outsourcing your financial officer position has its upsides, like:

  • A business financial advisor: You might have someone who fine-tunes your personal investments, but if you’re running a company, it’s good to have someone check on those as well. Advice is tailored to what’s best for you and your company.
  • Long-term relationship: While many outsourced positions are seen as temporary, an OCIO doesn’t have to end when a project finishes. Instead, they can create, implement, change and update financial for years.
  • Fiduciary responsibility: While hiring a fiduciary isn’t a requirement, it’ll work to your advantage. Having an OCIO that has your best interest in mind — and not their own financial well-being — is a major perk.
  • High-value return: An OCIO isn’t just someone who tells you what to do with your money and invoices you every month. While you’ll be able to benefit from consulting services, you’ll also have someone who is working on your company’s behalf to give you the best results possible based on your risk tolerance and requests.
  • Diversified resources: You might not have enough money to devote to a full-time, salaried CIO. In that case, you can use some funds to outsource the position while using the rest of your money to hire or build up your company in other areas. You’ll get someone to manage your portfolios and assets while having enough left over to devote to other resources.

OCIO: The Cons

While there is a lot of upside to outsourcing a chief investment officer, it’s not always the best idea for every company.

  • Shared time: Unless you’re paying your OCIO a full-time salary, there’s a chance they’re going to split their time between you and other clients. If you’re looking for someone to devote all their time to your business, you’ll need to pay them accordingly.
  • Extra cost for companies: With an in-house CIO, you’ll get someone to complete a multitude of tasks and pay a salaried position. But if you aren’t sure of all the duties of a CIO, you might get extra charges for little things you didn’t know you needed until you needed them. Some OCIOs may charge a flat fee, while others might charge a standard fee with add-ons as needed.
  • Lower cost for CIOs: OCIOs will need to price their services to match their expertise. They’ll need to determine what work they complete under a flat fee or if they feel a tiered service is worth it to clients. If they charge too little, they could be leaving money on the table. If they charge too much, they might price themselves out of certain clients.

Bottom Line

If you’re a business owner, hiring an OCIO might be a smart move if your company can’t otherwise afford a full-time CIO. You’ll get the full benefits of a CIO without bringing one in-house. Your company may need the services of a CIO, but you’d be limiting your resources if you hired a full-time, salaried position.

If you’re a CIO, you might be considering a move to working for yourself full-time, rather than someone else. You can take on the role of a CIO without being on staff. You’ll be able to work for a company or a few companies while setting your own limits on what you can handle. You might also pair up with an agency that matches OCIOs with companies, similar to how freelancers might use agencies to find new clients to work with.

Tips

  • Whether you’re a business owner or personally looking to capitalize on smart investments, there’s a chance you’ll need to enlist the help of a professional. You can use SmartAsset’s financial planner matching tool to find an expert in your community. After you answer a few questions, you’ll get matched with several financial professionals near you. The matching tool can help you find an OCIO or even someone to help you navigate your assets and portfolio. Managing your finances can get complicated, so it’s important to find the help that’s right for you.
  • Diversifying your portfolio is a major step in minimizing your investing risk. The more diverse your investments are, the less likely you’ll be hurt if one of your securities tanks. Remember that stocks are more volatile than other securities, and your risk tolerance may dictate how much money you devote to stocks. Your investment timeline also matters, like when you plan to withdraw your cash for things like retirement. The younger you are, the riskier you can afford to be. The older you are, the more likely you are to have your money in less volatile securities.

Photo credit: ©iStock.com/RBFried, ©iStock.com/RBFried, ©iStock.com/RBFried

Dori Zinn Dori Zinn has been covering personal finance for nearly a decade. Her writing has appeared in Wirecutter, Quartz, Bankrate, Credit Karma, Huffington Post and other publications. She previously worked as a staff writer at Student Loan Hero. Zinn is a past president of the Florida chapter of the Society of Professional Journalists and won the national organization's "Chapter of the Year" award two years in a row while she was head of the chapter. She graduated with a bachelor's degree from Florida Atlantic University and currently lives in South Florida.
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