Deciding how to structure the investment function is one of the more significant organisational decisions a family office can make.
The Chief Investment Officer is often a pivotal appointment. They may be responsible for translating the family’s objectives into investment strategy, overseeing portfolios and external managers, assessing new opportunities, managing risk and ensuring that investment decisions remain aligned with the family’s long-term ambitions.
But the more important question is not always, “Who should we hire?”
Sometimes it is, “What expertise do we actually need and what is the best way to access it?”
That distinction is becoming increasingly important as family offices evolve. Succession, generational change, new investment priorities, unexpected departures and changes in scale can all alter the expertise required by the office, sometimes very quickly.
In those circumstances, automatically beginning a search for another permanent CIO may not always be the right first step.
An outsourced Chief Investment Officer, or OCIO, model can provide an alternative: access to experienced investment leadership and specialist capability without necessarily adding another permanent senior hire to the organisation.
When the Family Changes, the Investment Function Often Needs to Change Too
For senior leaders within a family office, one of the challenges is ensuring that the organisation continues to reflect the needs of the family it serves, because those needs rarely remain static.
A wealth creator may have built an investment approach around the operating business and a relatively concentrated portfolio. The next generation may want greater diversification, more international exposure, increased allocation to private markets or a stronger focus on impact, technology, entrepreneurship or philanthropy.
Risk appetite, liquidity requirements and time horizons can all change. The individuals responsible for running the family office must then decide whether the existing investment function remains appropriate for that next stage.
This does not necessarily mean that the current team is underperforming. It may simply mean that the family now requires expertise that did not previously need to exist in-house.
That is an important distinction for Princpals and CEOs and making organisational decisions. The answer to a changing investment requirement does not always need to be a permanent restructuring or an immediate senior hire. Sometimes bringing in complementary external expertise can allow the office to adapt without prematurely changing a structure that otherwise works well.
Succession Creates Organisational Questions as Well as Investment Questions
Succession planning within a family office is often discussed in terms of the Principal and the next generation. Yet succession within the professional team can be equally important.
If a long-standing CIO is approaching retirement, for example, the obvious response might be to begin looking for their replacement.
But should the family automatically recruit a like-for-like successor?
If the next generation is beginning to take a more active role, the investment objectives of the family may be evolving at the same time. The family office may therefore need to understand what its future investment function should look like before determining who should lead it.
An outsourced CIO arrangement can provide valuable breathing space during this period.
Rather than forcing the Principal or CEO into making an immediate permanent appointment, external investment leadership can provide continuity while the family evaluates its strategy, governance, internal capabilities and future requirements.
This can be particularly valuable where the existing CIO has held the role for many years. Replacing an individual with deep institutional knowledge and trusted family relationships is rarely straightforward, and the temptation to move quickly can sometimes work against the interests of the office.
A senior hire of this importance should be driven by the future needs of the family, not simply by the existence of a vacancy.
What Happens When a Vacancy Is Unexpected?
Not every recruitment need can be planned for. A senior investment professional may resign with relatively little notice. Illness or other personal circumstances may create an immediate absence and in the most difficult cases, an employee may die while in post.
For the Principal, CEO or Chief of Staff, this creates two problems simultaneously.
There is an immediate operational requirement; investments still need oversight, managers still need managing and decisions still need to be made.
There is also a longer-term organisational decision; who, if anyone, should permanently replace the person who has left?
Those two questions should not necessarily be answered at the same time.
Bringing in outsourced or interim investment leadership can separate the immediate requirement from the permanent hiring decision. It allows the office to maintain continuity without forcing the leadership team to rush into recruitment because a role suddenly needs covering.
This is a principle we see repeatedly in senior family office hiring. A vacancy may be urgent, but the permanent solution should still be considered. Creating that space can lead to a much better outcome.
Key person risk should be a serious consideration for family offices. Having one individual who is solely responsible for all investment related matters represents a significant risk to the family office in the event of unexpected absence. Whereas having a team of professionals who all understand the investment strategy and implementation alleviates that pressure. Not to mention the fact that the family office also benefits from the greater intellectual capacity of a team of investment specialists rather than one individual, thus reducing the risk of entropy.
A Smaller Family Office Does Not Necessarily Need a Smaller-Calibre Investment Function
For some family offices, the question is not how to replace a CIO but whether employing one full-time is necessary at all. This is particularly relevant for smaller, newer or deliberately lean family offices.
There can be a tendency to view an internal CIO as part of the infrastructure a sophisticated family office is expected to have. But organisational design should be driven by need rather than convention.
A family office may require high-level investment governance, strategic asset allocation, manager oversight and access to specialist investment expertise, while still not having sufficient day-to-day requirements to justify a permanent senior investment executive. In such cases, an outsourced model can offer a different balance.
The family gains access to experienced investment capability, but the CEO or Principal does not need to create a permanent role, associated infrastructure and long-term employment commitment simply to replicate a traditional family office model.
For those responsible for building or reviewing the organisation, this raises a useful question; which capabilities genuinely need to sit permanently inside the family office and which simply need to be reliably available?
The most effective family office is not necessarily the one with the largest team. It is the one with the right expertise available when the family needs it.
Sometimes the Recruitment Brief Is Actually an Expertise Brief
This is also relevant to established family offices with strong investment teams already in place.
A family may decide it wants greater exposure to a particular asset class, market or investment strategy. The existing investment team may be excellent, but the new requirement might sit outside its specialist experience.
The immediate instinct can be to recruit, but before doing so, it is worth asking whether the office genuinely has a long-term role to fill or a more specific capability gap to address, because there is a significant difference.
Recruiting a permanent senior investment professional to solve a narrow or evolving requirement may add unnecessary complexity. Bringing in specialist expertise for a defined purpose may allow the family to access deeper knowledge while retaining the existing structure.
For a Principal or CEO, that can also reduce some of the organisational consequences that accompany senior recruitment: additional reporting lines, remuneration expectations, governance considerations and questions around role definition and long-term progression.
External expertise should not be viewed as a substitute for a good internal team. In many cases, its value lies in making that internal team stronger.
Access to Investment Opportunities Can Be a Capability in Its Own Right
Investment leadership is not only about portfolio construction and governance. Access matters too.
Some investment opportunities are relatively straightforward for a family office to source and assess. Others rely on specialist networks, manager relationships, sector knowledge and significant experience in due diligence.
For family offices without those capabilities in-house, there can be a practical limitation on the opportunities they can confidently pursue. This is where external investment expertise can add another layer of value.
A family office may not need to build permanent expertise in every investment area it might encounter. Instead, it can access specialist support when considering a particular opportunity, investment strategy or asset class. This opens up new opportunities and options for family offices to diversify.
Rather than restricting the family’s investment universe to areas where the existing team already has deep expertise, the office can broaden its capabilities when appropriate while maintaining disciplined external scrutiny.
The objective should not be access for access’s sake. It should be access accompanied by the expertise required to assess whether an opportunity genuinely belongs within the family’s strategy.
Knowing When to Recruit and When Not To
At Somers Partnership, executive search remains central to what we do. We know the transformative impact the right CIO can have on a family office, and there are many situations where recruiting an outstanding permanent investment leader is unquestionably the correct decision.
But more than two decades working with family offices has also shown us that recruitment should not be the automatic response to every capability gap.
Sometimes the office needs a permanent leader.
Sometimes it needs an experienced pair of hands while succession or recruitment is considered.
Sometimes it needs specialist investment expertise around a particular strategy.
And sometimes it needs a broader investment capability without the cost or organisational implications of employing a full-time CIO.
The challenge for the Principal or CEO is determining which of those situations they are actually facing. That decision is easier when there is more than one solution available.
Somers Partnership and Alumia
It is with this in mind that Somers Partnership is working with Alumia to provide family offices within our network with access to outsourced Chief Investment Officer support and specialist investment expertise.
Through this relationship, family offices can access experienced investment support across a range of circumstances, whether they are managing a leadership transition, addressing an unexpected vacancy, reviewing the structure of their investment function, considering a new strategy or looking for specialist insight around a particular investment opportunity.
For Somers Partnership, this represents a natural extension of our role within the family office community. Historically, a family office might have approached us because it needed to recruit a CIO. But increasingly, our conversations begin one stage earlier.
What has changed within the family? What capability does the office now require? Is this a permanent requirement? Does it need to sit in-house? Is recruitment the right answer today, or would an outsourced or interim solution create a better outcome?
Our role is to help family offices think through those questions and then access the right expertise. Our partnership with Alumia gives us another option to put on the table.
Designing the Family Office Around Capability, Not Headcount
There is a broader principle behind this.
Family office leaders are increasingly having to build organisations capable of adapting to change without becoming unnecessarily large or complex. That requires thinking differently about talent.
Not every important capability has to exist permanently on the payroll. A family office can retain a strong internal team while surrounding that team with trusted external specialists who can be brought in when circumstances require them. This can make the organisation more resilient.
If a senior employee leaves, there is another route to continuity. If the next generation wants the investment strategy to evolve, specialist expertise can be brought into the conversation. If a new opportunity emerges outside the knowledge of the existing team, the office does not have to build permanent infrastructure simply to explore it. The result is not a less sophisticated family office, but a more flexible one.
In an environment where families, markets and investment requirements can change far more quickly than organisational structures, that flexibility is becoming an increasingly valuable capability in its own right.
If you are reviewing the structure of your investment function, considering a CIO appointment, navigating succession or exploring whether outsourced investment expertise could complement your existing team, please contact Mark Somers for a confidential conversation.
