OCIO vs. Consultant vs. Broker: Who Actually Holds the Risk?

What Are the Three Models?

The consultant model: an advisor recommends; the investment committee votes. The committee owns every decision and every delay — including the meetings where markets moved and the committee couldn't convene. Advice is typically fiduciary in nature, but implementation accountability stays in the boardroom.

The OCIO model: the board sets policy through the IPS and delegates implementation — allocation within ranges, manager selection, rebalancing — to a discretionary fiduciary. Decisions execute in days, not quarters, and there is one accountable party for how the policy was implemented. The board's job shifts from picking investments to supervising the picker.

The brokerage model: the organization holds accounts with a broker whose recommendations are governed by a sales standard rather than an ongoing fiduciary duty, and whose compensation may be embedded in the products. Common at smaller organizations by inertia; the model boards most often migrate away from once assets and scrutiny grow.

Where Does the Risk Actually Sit in Each?

Under UPMIFA, the board's duty of prudence never leaves the boardroom — but its shape changes. With a consultant, the committee is prudently deciding: every allocation call, every manager hire, every delay belongs to the minutes. With an OCIO, the committee is prudently delegating: selecting the OCIO with care, defining the mandate in the IPS, and monitoring performance and compliance. Delegation done that way is expressly permitted; delegation without supervision is where boards get hurt.

The honest framing: an OCIO doesn't remove the board's fiduciary duty. It narrows the board's job to the part boards are structurally good at — governance — and moves the part they're structurally bad at — timely implementation by a part-time volunteer committee — to a full-time professional who can be held to account and, if necessary, replaced.

How Do the Fees Compare — Really?

Compare all-in cost, not headline fee. Every model has up to three layers: the advisory or OCIO fee, underlying fund and manager expenses, and trading or custody costs. A low consultant retainer can sit on top of expensive fund lineups; an OCIO fee can look higher until the underlying vehicle costs are counted. In the brokerage model, compensation embedded in products is still a cost even when no invoice arrives.

Ask each candidate for total cost in dollars at your asset level, all layers included, in writing. The answers are more revealing than the pitch decks.

What Questions Should a Board Ask Before Choosing?

1. Are you a fiduciary to our organization at all times, in writing, for all services?
2. Exactly which decisions would you make without our pre-approval, and which come back to the committee?
3. What is our all-in cost, in dollars, including underlying vehicles?
4. How do you report against our IPS — not just against markets?
5. What does terminating the relationship look like, and what's portable when we do?
6. Who, by name, is accountable to this board?

A candidate who answers all six crisply is telling you something. So is one who doesn't. Before running the search, get the governance document right — our guide to reading your IPS like a fiduciary is the place to start.