Don’t Overlook the Human Element of OCIO

Key takeaways

Trust is critical in an OCIO relationship
Success means different things to different organizations. The right OCIO provider will understand this.
The best OCIO providers are proactive, not reactive

“No one cares how much you know, until they know how much you care” – Teddy Roosevelt

Whenever people ask why the relationship between an OCIO (outsourced chief investment officer) provider and a client is so critical, I echo the words of the 26th United States president. Why? Because OCIO is all about trust. By definition, it’s the delegation of investment services to a third party—a decision centered on trust. And trust comes from showing you care. It comes from listening, empathizing, and working together to solve problems. These are the building blocks of a strong client relationship. And the stronger the relationship, the higher the likelihood of success.

Getting to know you

Best-in-class OCIO providers understand the importance of a deep relationship and will invest considerable time cultivating one. They’ll begin by taking the time to thoroughly get to know your business inside and out. The conversations will be meaningful and consultative. Throughout the process, they’ll ask you about everything and the kitchen sink. What’s going on in your organization’s world, within and beyond the investment program? What’s your financial situation? What keeps you up at night? Where does your asset pool fit into the bigger picture?

The right provider will dig deep into the opportunities and challenges facing your organization. They’ll communicate with you frequently and make an effort to visit in-person. They’ll get to know you and other stakeholders beyond the boardroom. And the more they get to know your organization, the better they’ll be able to identify the right way to build your portfolio and support your fiduciaries most effectively.

In short, the right provider will take the time to find genuine connections. And those connections won’t come from just one person. A best-in-class provider will provide your organization with multiple points of contact so you can leverage their entire suite of capabilities—in both good and bad times.

No two organizations are the same

Central to achieving this is understanding every organization is unique. This may seem obvious to anyone running a business, but in my 27 years in this industry, the biggest mistake I’ve seen OCIO firms make is assuming what worked for one client will work for the next. A classic example is thinking because one health system solved its funding challenges by adding more risk, another health system should do the same.

But guess what? If you know one health system, you know … one health system. If you know one plan sponsor, you know … one plan sponsor. No two organizations are the same, regardless of their line of work. An organization’s goals, circumstances, and preferences will always differ, and so will the attitudes of their principal decision-makers. For instance, in the example above, the second health system might have a drastically different risk tolerance level than the first.

The truth is that not all OCIO providers get this. As a result, they might try to slot you into a cookie-cutter solution that doesn’t work for your organization’s needs. Think round peg in a square hole.

The right OCIO provider, though, gets it. They understand each organization has its own specific needs, and customization—not standardization—is the way to deliver investment solutions that truly move the needle. If every investment program is unique, then every solution set should be unique as well.

Focusing on your needs

Another critical component to a healthy relationship is understanding your organization’s needs—and what your measure of success is. Again, just like no two organizations’ investment preferences are the same, no two organizations will have the same definition of success.

Skilled OCIO providers will understand success means different things to different clients. For some, it might mean maximizing investment returns. For others, it might mean a stable funded status. Others might take an even different view. A university, for example, might define success as providing more scholarships, while a non-profit might consider serving more families in need as the ultimate accomplishment. Others might see succession planning for their staff as the top priority. Or maybe an organization wants every employee to retire with financial security, bar none.

Whatever your ultimate measure of success is, the best OCIO providers will make sure they know it and use it as their north star. But that requires taking the time to learn how you define it.

Proactive not reactive

I know it sounds a little cliché, but in the OCIO business, caring means sharing. Best-in-breed OCIO providers have an abundance of information at their fingertips—from manager research and insights to in-depth asset-class outlooks. The best providers will proactively share these insights with your organization. They’ll know what the key risks to your line of business are, and they’ll communicate the specific challenges they see coming down the pike. They’ll also know the common questions your board or stakeholders might ask—for instance, how tariffs on semi-conductors could potentially impact your exposure—and they’ll be equipped with the answers. They’ll help you think about these challenges and make sure they’re addressed in your portfolio. They’ll be proactive, not reactive.

Extension of staff

How do you know if your relationship with an OCIO provider is working out? If the provider is doing it right—if they’re seamlessly integrating with the team, handling the right assignments, and helping move the dial toward your organization’s goals—they’ll feel like a part of your team. Their knowledge of your organization and understanding of the headwinds you face—and the role assets play in all of this—will make them feel like an extension of staff.

The right providers will handle the investment tasks you don’t have either the time or expertise to do. They’ll alleviate administrative burdens so your organization can focus on mission-critical tasks. This could include highly complex assignments, like manager transitions or integrating alternative investments into a total portfolio. But it could also include other assignments, no matter how unglamorous they might be. It could mean back-of-the-house functions like audit or financial reporting support, or cash flow management. Skilled OCIO providers won’t shun the menial or the complex work. They’ll ask for it.

One more thing

I came to Russell Investments because I believe the firm’s client-centric approach and robust investment capabilities raise the bar on success. And helping clients succeed is core to our mission of making financial security more achievable.

We have demanding clients, and earning their trust is not easy to achieve. It shouldn’t be. It takes hard work and the best thinking, but it also takes the intangibles. It takes a willingness to listen and, above all, a commitment to care.

As an institutional investor, you should demand nothing less.

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