O'Reilly logo

The Stewardship of Wealth: Successful Private Wealth Management for Investors and Their Advisors, + Website by Gregory Curtis

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

The Outsourced CIO Model

Most family investors are familiar with the standard, nondiscretionary advisory model. The advisor—hopefully, an unconflicted one—makes recommendations and the family accepts or rejects them.

But over the past decade, and accelerating rapidly in the last few years, the so-called “outsourced chief investment officer” model for delivering financial advice has grown very rapidly.3 (Note that some publications refer to this model as the OCIO model.) In the experience of many advisors, client requests for discretionary advice now outnumber client requests for more traditional nondiscretionary advice. The purpose of this chapter is to define what an outsourced CIO model is, identify why it has become so popular, distinguish its advantages and disadvantages relative to nondiscretionary advisory services, and suggest how families might think about choosing between the two models.

The Evolution of the Traditional, Nondiscretionary Model

Before we examine the outsourced CIO model, let's step back and take a look at the evolution of the more familiar nondiscretionary model of providing advisory services.

When investment consulting firms—the first “open-architecture” firms—appeared on the scene in the early 1970s, their clients were the huge pension plans and endowed institutions of the time: the IBM pension plan, Harvard University, the Ford Foundation. These large organizations boasted both in-house investment talent and investment committees populated by sophisticated ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required