What is open architecture in manager selection?

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Open architecture: the institution hires any manager (internal or external) based on best fit for each mandate. No requirement to use affiliated or in-house products. This maximizes the opportunity set and aligns selections with clients' best interests. Closed architecture: the institution is required or strongly incentivized to use in-house or affiliated managers, even when superior external alternatives exist. Common historically at banks and some consulting firms with affiliated asset managers. Benefits of open architecture: 1. Broader opportunity set — more managers to choose from 2. No conflicts of interest — no pressure to favor affiliated products 3. Better alignment with client fiduciary interests 4. Ability to combine best-of-breed across asset classes 5. More competitive fee negotiation Costs: 1. Higher selection/monitoring effort 2. Lost revenue capture for organizations with affiliated managers 3. More complex operational setup (multiple custodians, reporting frameworks) Example: Ashwood Trust Company serves UHNW clients. Previously closed architecture (used Ashwood Asset Management funds exclusively). Transitioned to open architecture in 2024 — now uses ~40 external managers. Client retention up 22%, AUM up 35%, despite losing internal AUM, because fiduciary story is far stronger post-regulation. ```mermaid flowchart TD A[Open Architecture] --> B[Any manager
internal or external] C[Closed Architecture] --> D[In-house
affiliated only] B --> E[Best alignment] D --> F[Conflicts of interest] ``` Regulatory trends: DOL fiduciary rule, MiFID II, and similar frameworks push toward open architecture by requiring best-execution and conflict disclosure. Most modern OCIO/consulting models are fully open architecture by design.

What is open architecture in manager selection?

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