WEALTHTECH INSIDER: How OCIO Helps Grow and Scale Your Business


Advisors are spread too thin, but powerful investing technology and services are freeing them up to do more with their time.

Some of these services have been available to advisors for a while, said Kurt Brown, President of OCIO at Orion Advisor Solutions, on “Change the OCIO Game with Orion’s Custom Indexing,” a recent webcast from Orion.

“There’s always been this drag on advisors’ ability to be effective based on being spread too thin,” said Brown. “…As an advisor, you’re spending a lot of time doing your own trading, clicking inside of a trading portal and running accounts all day long when what you should have been doing was sitting with prospects or sitting with clients.”


Outsourced chief investment officer solutions, or OCIO, have been available for a while, but were often viewed as higher touch versions of turnkey-asset management platforms, said Brown.  OCIOs offer many of the same services, but add in full-service trading and optimization, betting of one-off investing opportunities, outsourced trading of models, while-label market calls to clients and prospects, and practice-development consulting.

“We do a lot of direct, point-of-sale client engagement where we actually help you develop, curate and win that business right from the point of coming in contact with that prospect,” said Brown.

Instead of a group of execution services, the OCIO’s trading desk becomes the advisor’s trading desk, said Brown, down to becoming the cashier. What’s more, all the work is done within Orion’s portfolio accounting system.

Other advisors balked at the idea of outsourcing investing to begin with. One point of view among financial advisors is that an OCIO diminishes their standing in front of clients and prospects, said Brown.

“The reality is that it’s actually the opposite,” he said. “It elevates the clients’ view. Many of those clients are comparing you to big wirehouse banks.”

That places advisors in a position of competing against firms with very deep resources and large Wall Street investment teams, said Brown, but an OCIO solution can help level the playing field.

Brown joined Orion after the OCIO provider he founded, TownSquare Capital, was acquired in a deal closing earlier this year. His team brought over a subset of 50 client advisory firms, from different locations, in a range of sizes and with diverse backgrounds with three or more years of experience working with an OCIO provider. Already, he has overseen research into investor and advisor views of outsourcing CIO solutions.

“Of those 50 teams that we’ve backed for three years or more, their average AUM growth per year has been in the 60% range, and every single team that we support has grown significantly faster than the industry as a whole,” he said.

In Orion’s case, the OCIO solution can work hand-in-glove with the firm’s TAMP, or with its custom-indexing solution.

Custom Indexing

Custom indexing uses similar technology to its precursor direct indexing but takes the capabilities a step further. With direct indexing, high-net-worth clients were able to own the S&P 500 position-by-position rather than owning it through a mutual fund or an ETF. Custom indexing allows clients to own any basket of securities and customize those holdings efficiently on a position-by-position basis.

“From the advisor’s perspective, it really is no more difficult than simply saying it’s a technology that can sit on top of a portfolio which allows you to customize the portfolio,” said Andrew Rosenberger, Head of Custom Indexing at Orion Advisor Solutions. “Now that can mean a lot of different things to different people, but the truth is that it’s just a technology that is helping you scale your business in a customizable way.”

From the client’s perspective, the process of creating and maintaining a custom index can be explained in four steps, said Brown. First, an index is selected—it really doesn’t have to be an index that already exists, but an allocation to a basket of securities. Rosenberger used the Russell 1000 index as an example.

“Now we’re going to unwrap that exposure,” he said. “That means that where a client might access a Russell 1000 position through an ETF or a mutual fund we’re going to unwrap it and own the underlying and individual components, or at least a sample of them.”

By owning the individual underlying positions, the advisor can then customize the index to suit the client’s needs—step three.

Finally, an advisor needs to manage the custom index over time, including any tax management or rebalancing needed.

Rosenberger introduced three uses for custom indexing: tax transitioning, tax management and portfolio customizations.

Tax Transitioning

Custom indexing allows advisors to more easily incorporate and invest around large legacy positions, or to move those legacy positions over time and in a tax-efficient manager towards a more diversified portfolio.

Tax Management

Custom indexing helps with tax management in two ways—the first being the ability to set a capital gains budget for certain positions or portions of a portfolio, or for an entire portfolio. This allows advisors to build in more certainty around tax exposure of clients’ investment portfolios.

But the technology also aids tax management in the form of tax harvesting, allowing advisors and clients to harvest losses and gains from individual underlying positions rather than from an ETF or mutual fund.

Portfolio Customizations

“This is a very broad category that only scratches the surface of what we can do, but it includes forms of customization like ESG screening or faith-based screening,” said Rosenberger. “It could also be diversifying around a concentrated position or limiting the number of names in their portfolio.”

So, for risk-averse clients who are worried that passive indexes are over-concentrated in technology stocks, custom indexing provides a way to cap the amount allocated to mega-cap technology stocks and boost exposure to other sectors, like energy or utilities, without needing to bring additional products and fees into the portfolio.

Accessing custom indexing or OCIO services via Orion gives advisors the added bonus of Orion’s robust portfolio reporting capabilities, said Rosenberger.

“I really do have conviction that we here at Orion are doing it the best,” he said. “It’s not just because of our offering and what we can do, it’s also because we have throughout the Orion technology stack and through our core competency a lot of things that we can do that others just can’t.”