Today’s Chief Investment Officer (CIO) must essentially play to both large arena crowds and intimate coffee house audiences.
They serve as the outward voice for a wealth management firm, providing thought leadership and high-level commentary on the markets and economy. CIOs help firms craft brands and reputations to the outside world, an essential tool in attracting new clients.
But as advisors increasingly hire outside firms to construct and manage their clients’ investment portfolios, CIOs have emerged as the key glue in individual advisor-client relationships. They use finely tuned communication skills to educate clients about risk, market downturns, the impact of government policies, and new asset classes like cryptocurrencies and venture capital.
And CIOs play a pivotal role in crafting credible strategies that exploit emerging opportunities on the go and protect clients from undue risk and market volatility.
In other words, CIOs strengthen advisor-client relationships by providing clients with top notch market expertise and clear, transparent communications that inspire overall trust and confidence between advisor and client.
As we announce the CIO 5: Top Wealth Management CIOs today, we asked last year’s winners about the role of the modern wealth management CIO.
Advisors And Clients’ Expectations Of A CIO
“Advisors and clients want a wealth management CIO to provide thought leadership and consult on investment ideas, acting as an extension of their team,” said Bob Shea, CIO of Dynasty Financial Partners. “They value accessibility, thought-provoking commentary, and a clear house view on the market to help guide their investment decisions and strategies.”
At the same time, CIOs should offer clients both ambition and a measure of comfort and sure handedness, said Cameron Dawson, CIO of NewEdge Wealth.
“A wealth management CIO provides a steady hand in times of uncertainty and an open mind in times of opportunity,” Dawson said. “Advisors and clients want a CIO that has a distinct perspective on the macro and market landscape and the broad product and investment insight as to how to take advantage of market dynamics.”
Megan Horneman, CIO of Verdence Capital Advisors, said that advisors want: “A CIO that can be calm during volatility and negative headline news. A CIO that can be patient and disciplined when making asset allocation decisions. Instead of investing with a fear of missing out, make investments that have attractive valuations. Also, a CIO that has thoughtful and strong conviction with the ability to explain in a matter clients can understand.”
Adapting To New Demands
CIOs can’t rest on their laurels, according to Rafia Hasan, CIO of Perigon Wealth Management. Given the complexities of the market and explosion of information, CIOs must constantly educate themselves and communicate with advisors and clients.
“Information on products is now much more readily available, which requires CIOs to parse through mountains of information, separating marketing jargon from authentic answers to critical investment questions,” Hasan said.
“Today’s CIO shouldn’t spend all their time with investment managers, as their advisors and clients need and want additional expert guidance. It is very important to spend time developing a strategic communications approach to ensure these constituencies understand their investments.”
CIOs have to become outward facing, according to Shea. “The role of a CIO has evolved to become externally focused – meeting with advisors and their clients, investment industry leaders, and presenting at conferences and webinars to share insights and how they are affecting portfolio management decisions.”
“CIOs not only need to be students of and well versed in the markets and the economy and investment solutions,” said Tim Holland, CIO of Orion, “but they also need to possess the communication skills – oral, written, in person and virtual – that allow them to communicate their team’s world view concisely and confidently to advisors and their clients.”
How CIOs Are Getting Ahead Of The Curve
“We see the investment landscape as getting increasingly challenging and complex due to the potential for lower market returns, shifting relationships between asset classes, and a surge in opportunities to invest in asset classes that are relatively new to the wealth management channel,” Dawson said. “This puts a greater onus on the portfolio construction and due diligence processes to achieve optimal outcome for clients.”
Shea said Dynasty is working to expand so it can meet the growing demand of advisors wanting to hire outside firms to manage their clients’ investment needs.
“Advisors are increasingly wanting to outsource investment advice and management so they can focus on growing client relationships,” he said. “As a CIO, I am now focusing on building Dynasty’s investment brand and institutionalizing our business to allow scalable growth.”
Wooing The Next Generation Of Clients
“It will be important to adapt your messaging to meet potential clients where they are today, including leveraging social media and shorter-form content that still provide enough actionable information,” Hasan said.
“In portfolios, CIOs need to understand the next-gen clients’ risk tolerance with more volatile investments, like cryptocurrency or venture capital, and find ways to provide thoughtful exposure.”
Preparing Advisors And Clients For Potential Long-Term Market Downturns
“CIOs need to psychologically prepare clients for volatile markets at all times by training clients to see volatility as opportunity,” Dawson said. “CIOs help to ensure that clients are taking the appropriate amount of risk for their portfolios to avoid the permanent loss of capital during weaker markets.”
One particular challenge is younger investors, some of whom have only participated in a bull market, Hasan said.
“Many younger investors and advisors have not experienced a period of long-term market declines,” she said. “CIOs have a key role in client education and mitigating risk in portfolios in a period when everyone feels ready to press the accelerator on risk.”
Explaining The Possible Impact Of The New Trump Administration
“We are encouraging all clients to put personal politics aside in order to remain open minded to the potential opportunities and risks that could result from potentially significant policy changes out of D.C.,” Dawson said.
Holland said Trump’s policies will likely be favorable to the wealth management industry but there are still risks.
CIOs are “analyzing proposed policies, their potential impact on the economy and markets and – importantly – their odds of becoming law and sharing that information with advisors and clients as needed,” he said.
“We have been emphasizing that the fiscal policy construct in 2025 will likely be supportive of growth but potentially inflationary, and that markets tend to outperform in the first year of a Presidential term.”
Michael Madden, Contributing Editor and Research Analyst at Wealth Solutions Report, can be reached at michael.madden@wealthsolutionsreport.com.
