Multi-generational wealth management is a long-term process of preserving, growing, and transferring family wealth across generations based on financial forecasting and proven wealth management strategies. Successful generational wealth management involves the collaboration of financial advisors, investment committees, family input, legal entities, and estate planners.

Multi generational wealth transfer always faces certain challenges due to a lack of proper planning, family feuds, and the stratification of wealth assets. That is why wealthy families rely on family offices, or private wealth management firms, to coordinate their unique financial needs.

Although comprehensive long-term investment planning is an essential part of multi-generational wealth planning, one of the most important factors for making or breaking generational wealth preservation and growth is internal and external family dynamics. Without proper communication with its family office, common financial objectives, and financial literacy, wealth planning can prove difficult. 

Indeed, family harmony and alliance toward a common financial goal is of foundational importance to building a comprehensive and long-lasting wealth growth strategy. That is why individuals turn to outsourced investors who, as third parties, have better leverage at handling wealth decisions than a designated family member who can be vetoed by relatives.

OCIO, or an outsourced Chief Investment Officer, is an independent financial advisor that collaborates with and assists wealth management firms with their specialized expertise. When family offices require assistance with complex portfolios, they turn to OCIOs to help them optimize complex investment strategies and navigate volatile financial markets. 

OCIOs are akin to specialized contractors or strategic partners who have deep knowledge in a specific financial management area and who are indispensable in terms of resourcefulness and their ability to tailor investment strategies according to clients’ needs. 

The advantage of outsourced investment officers is that they provide a larger array of investment opportunities that can diversify the family office’s portfolio and risk.

OCIOs are needed because of their diverse specializations, their “outsider” perspective, and their knowledge of financial compliance and regulations. By using OCIOs for financial management, family offices can accommodate a unique perspective and approach to their multi-generational wealth planning, ensuring that their strategy aligns with the current financial climate and regulations. OCIOs can likewise free up in-house investor time to tend to other aspects of wealth management. 

Overall, outsourced investors provide a cost-effective and flexible option for family offices that may otherwise need to hire, train, and compensate an entire team of in-house financial advisors.

OCIOs add tremendous value to family offices due to their specialized knowledge, outsider perspective, and resourcefulness. They use their diverse experience in the financial field to contribute to the office’s direct investment strategy. 

The following are the most important fiduciary responsibilities and financial services that OCIOs undertake in collaboration with family offices:

OCIOs hold expertise and diversified knowledge of asset allocation and portfolio management. These investment specializations help them analyze market trends and economic indicators to the specific financial goals of the family. According to US Bank, one of the main benefits of working with OCIOs is that they can decrease the time it takes from forming an investment idea to its implementation.

By assessing and managing investment risk on behalf of the family, OCIOs can make sound investments by identifying potential risks and closely monitoring the portfolio’s performance. 

On behalf of family offices, OCIOs manage portfolio performance through regular reporting of risk metrics, returns, and overall industry standards. This creates more open and clear communication regarding multi-generational wealth management. 

By collaborating with family offices, OCIOs advise on asset allocation, including philanthropic giving and estate legacies, and long-term financial planning to meet the family’s wealth management objectives. 

Due to their extensive network and collaborations, OCIOs can access a wide range of resources and market insights to help family offices that cannot manage all aspects of wealth management in-house.

Specialization and cost-effectiveness are not the only perks that contribute to the growing OCIO hiring trend. Private banks like JPMorgan report 74 billion USD in assets under OCIO supervision, meaning the value of OCIOs far exceeds the ease of adaptation.

Currently, the trends are looking up for the increased demand for OCIO services, particularly among institutional investors. Indeed, the increase in OCIO usage correlates with overall outsourcing growth trends. A report by Cerulli Associates showed that in 2020, U.S. OCIO assets totaled $2.0 trillion, which was expected to grow to $3.0 trillion by 2025.

Today, more than any other financial industry, family offices and RIAs are turning to OCIOs to help grow their businesses. According to the Institutional Investor, OCIOs help family offices grow by bridging the gap of expertise and saving them the time and resources it takes to hire in-house managers. 

In a recent poll of financial advisors, a significant portion of firms already using external managers either increased their outsourcing activities (50%) or maintained their levels (49%). (95%) of these firms reported being ‘satisfied’ or ‘very satisfied’ with outsourced wealth management solutions.

Undoubtedly, OCIOs are here to stay, especially in the multi-generational wealth management industry.

As a family office, your time and capacity are limited when it comes to handling all the complexities of multi-generational wealth management. Given the many benefits you can reap from outsourcing, let our expert team of OCIOs do the heavy lifting for you. 

With our expertise in generational wealth management, we first get to know your unique mission and then work diligently to provide full oversight of your fiduciary strategy, due diligence, asset allocation, and regulatory needs. Contact us today to see how we can help.