How to evaluate ocio search consultants

Why Hire a Search Consultant

Are you thinking of engaging a search firm to help you run a consultant search or OCIO search? You’re not alone. Although practically unheard of five years ago, the outsourced CIO (“OCIO”) model, in which a committee hires an investment manager to oversee the portfolio rather than soliciting advice from an investment consultant, has exploded onto the institutional landscape and has garnered significant interest from a wide range of institutions. The investment world has gotten increasingly complex, and more and more boards, committees, and organizations are unsure of their ability to truly fulfill their fiduciary obligation to the assets they oversee (at a time when fiduciary lawsuits are on the rise). OCIO models offer a solution for organizations struggling with a lack of internal resources, a desire to improve governance process, and the need to improve risk-adjusted returns. The traditional investment consulting model has evolved to fill these needs, but at the same time, it has complicated the investment advice landscape.

This added complexity has led to a new niche service provider: the consultant or OCIO search firm. These are sometimes referred to as “OCIO Search Consultants,” but we believe this terminology is confusing as consultants historically provide investment advice while OCIO search firms provide very targeted services to enable organizations to vet investment advice and implementation providers. We like to say, “don’t call us a consultant!” OCIO search firms exist to guide organizations through the search process, everything from designing the RFP and developing search criteria to identifying candidates and analyzing the responses. More than one-third (34%) of providers polled in a recent industry survey by Cerulli used a search firm, and this number continues to grow. They manage the entire project from start to finish, greatly simplifying this important fiduciary process for institutions.

7 Characteristics of High Quality Search Firms

1. No consulting or OCIO services offered
   
2. Investment expertise
   
3. Active in the industry full-time
   
4. Owned by key professionals
   
5. Search experience
   
6. Well resourced
   
7. Strong references
   

Ten Questions to Ask Search Consultants

It may seem silly to go through an RFP process to hire a firm to run your RFP process, but as a leading search firm, we often receive “mini-RFPs” with a handful of questions designed to compare us against our competitors. As RFP architects, it makes sense to us from a due diligence perspective. We encourage firms to consider this exercise, and to help, we compiled 10 sample questions that organizations can use to learn more about search firms.

1. Briefly describe your firm’s history and ownership structure.
   
2. Describe your core business focus.
3. What are the primary client types for which your firm provides search services?
4. How many searches have you performed in the past 3 years? Characterize your search clients by client type, plan type, and size. Provide 3 references from recent searches.
5. How long does a typical search project take?
6. Provide an overview of how you propose to lead our organization through the process, including identification of potential candidates, development of the RFP, and the review and evaluation of responses. Include a timeline.
   
7. Provide brief biographies of key professionals that would be responsible for working with our organization.
8. Do you have any compensation agreements with any investment consultants, OCIOs, or money management firms that you include in searches? Are any such firms clients of your firm in any capacity?
9. Do you provide investment consulting or OCIO services to institutions?
10. What are your competitive advantages? What are your limitations?

Want to see our answers? Email us to request our due diligence questionnaire.

Download a copy of our search consultant RFP to share with colleagues.