If you are reading this, it is very likely that you are a financial planner who cares deeply about the well-being of your clients and who covers a diverse and comprehensive array of personal finance-related disciplines. It’s also likely that you have a lot going on in your life, like everything it takes to grow and run your practice. Those two categories of to-dos alone are likely to keep you VERY busy. This post is meant to give you an overview of the role of Chief Investment Officer and all of the responsibilities that come along with the title. Having a realistic understanding of the role will help you think about how you approach investments in your practice and when it might make sense to get some of it off your plate.
A Chief Investment Officer (CIO) is the person responsible for overseeing an organization’s investments and investment policies. For small organizations, the CIO might also be the person actually managing the investments, trading and rebalancing portfolios, etc.
According to Schwab’s 2021 compensation study, which included responses from 1,036 independent RIAs, 73% of firms’ lead investment/portfolio managers had ten years or more of investment experience; 39% had 20 years or more. 41% of them were CFA Charterholders, and their median compensation was $177k/yr (plus equity at 33% of the firms). While the firms in this survey may not sound like your practice, it’s worth considering that they may be your competition. Compensation for CIOs is even higher.
Generally speaking, the prototypical CIO has a degree in finance or economics (maybe an MBA), is details and numbers-driven, has a strong analytical background, is adept at designing efficient systems, and is typically direct and thorough in communications (according to a sample job description found on TD Ameritrade Institutional). Contrast the above characteristics with some of the important characteristics of a great planner: listening skills, empathy, people and relationship skills. Obviously, many planners can exhibit all of those characteristics, but most of those we know who love the relationship aspects of their profession aren’t interested in the analytical systems-building part of the business.
CFA vs. CFP
If you aren’t familiar with the CFA (Chartered Financial Analyst) designation, its roots date back to 1947, with the purpose of formalizing and advocating for financial analysis as a profession, and maintaining a strict code of conduct, effectively a fiduciary oath. To receive the designation, the candidate must successfully pass three six-hour exams covering topics like ethics, economics and capital markets, corporate finance, statistics, securities analysis, and others. They must also have four years of investment decision-making experience and at least two reference letters. For those of you familiar with the CFP (Certified Financial Planner) designation, you will easily recognize that they are very different bodies of study. We know many planners who are solid investors, it’s just more of a question of how many different disciplines a person can cover in-depth.
In larger firms, the CIO might oversee a team that handles the following subset of responsibilities, but in smaller firms, they are likely doing these things themselves:
Some of the considerations for investment philosophy and product selection for the firm:
Regarding portfolio construction, product selection, and which tools to use:
Considerations around commentary, position papers, and other outbound investment-related communications:
If you are doing portfolio management:
Financial planners are likely qualified to make most or all of these decisions and implement them, but should they be spending time on this? We would argue that it would be a more effective use of their time to spend it with new and prospective clients, or studying how changing tax or estate-planning laws can impact their clients, or working on growing their business, among other tasks that can’t really be outsourced.
TAMPs (Turnkey Asset Management Platforms) like XY Investment Solutions exist and continue to gain popularity because they are a great solution for advisors who don’t want to do some or all of what we’ve laid out above. Imagine being able to outsource the majority of it and never having to wake up in a cold sweat worried that you haven’t reviewed a holding or account in a while or that maybe you traded the wrong ticker. Here are some of the features of a TAMP that advisors appreciate not having to think about:
In this post, we laid out a number of things for advisors to think about if they want to keep being their firm’s Chief Investment Officer. This is by no means a complete job description, but hopefully, it gave you some things to think about or consider doing if you weren’t already. Chances are, though, you were thinking about all the other things on your to-do list that aren’t investment-related. If that’s the case, the takeaway from this blog is “there’s a TAMP for that.”
About the Author
Mario Nardone, CFA
Partner, East Bay Investment Solutions
Mario began his investment career in 1999 with Vanguard mutual funds in Valley Forge, PA, where he consulted institutions and financial advisors on investment policy, portfolio construction, and Exchange-Traded Funds (ETFs). He also held roles as a research analyst, a municipal bond fund specialist, among others during his tenure. In 2003 he earned the Chartered Financial Analyst designation, and he continues to mentor aspiring Charter candidates and young investment professionals.
Mario relocated to Charleston in 2010 to serve as Chief Investment Officer for a financial planning firm before establishing East Bay, the collaborative partner firm of (insert firm name), in 2014. As a Partner at East Bay, Mario serves a select group of Registered Investment Advisor firms as their outsourced Chief Investment Strategist. Responsibilities of this role include continuous oversight of advisor clients’ investments, bespoke strategies for unique situations, client communications, and more.
Mario is Past President of CFA Society South Carolina and Former Chairman of the College of Charleston Finance Department Advisory Board. His approach to investments and the industry has been featured in Investment News, NAPFA Advisor Magazine, South Carolina Public Radio, and other publications and media outlets.
Mario enjoys early morning basketball games, the Charleston beaches and restaurant scene, and spending summers in coastal Maine. He is an avid world traveler and SCUBA diver, but also enjoys the simpler joys of life with his wife Piper, their daughter Pepper, and son Santino.
Learn more and connect with Mario on LinkedIn