The main challenges of scaling a RIA, OCIO, or Institutional Investment Firm

Fremont, CA: As investments in private and alternative assets increase, the growth of an institutional investment firm, registered investment advisor (RIA), or outsourced chief investment officer (OCIO) is getting more complicated. 

Many Registered Investment Advisors (RIAs) and Outsourced Chief Investment Officers (CIOs) continue to rely on manual methods for handling data and reporting workflows related to their alternative investments. As firms expand their operations and acquire additional clients, the difficulties associated with scaling these manual processes become increasingly pronounced.

Challenges to Scaling

The following are the three primary challenges that we frequently encounter:

Human Resources:

In the realm of alternative investments that necessitate manual performance reporting, many Registered Investment Advisors (RIAs) and Outsourced Chief Investment Officers (CIOs) contend that the sole method to facilitate growth is through an increase in the workforce. The rationale is straightforward: a more extensive client base translates to a greater volume of alternative investments to oversee, which demands additional personnel to handle the manual processing of reporting documents.

Investing further in human resources complicates scaling operations while ensuring employee and client satisfaction. Additionally, as fee margins continue to tighten, firms are confronted with the challenging decision of either recruiting new staff or overburdening current employees, which risks diminishing the quality of work and leading to employee discontent.

Technology Adoption:

Recently, technology vendors and service providers have introduced a range of solutions developed to reduce the challenges associated with manual reporting; however, these solutions remain highly fragmented. A universal solution for the unstructured data related to alternative investments has yet to be established.

Numerous Registered Investment Advisors (RIAs) and Outsourced Chief Investment Officers (OCIOs) have experienced disappointment with technology providers and systems that quickly become outdated as their portfolios expand. This unfortunate reality complicates the process of securing internal support for the adoption of newer products that address this specific issue. Firms often find themselves engrossed in the allure of the latest technology, losing focus on the problem that needs resolution.

Scalable Processes:

A business that manages tailored portfolios for high-net-worth individuals or institutional investors primarily operates on a bespoke model. The nature of this work leaves minimal opportunity for standardization that could enhance service across the entire client base. Each new client presents a distinct array of needs, challenges, and data.

As competition intensifies among providers catering to alternative investors, firms increasingly promote their capacity to deliver highly personalized advice and services. This practice is both costly and challenging to scale. Beneath the surface of this marketing narrative lies the reality that such firms often resort to hiring additional personnel to manage the necessary manual processing.