The Role Most RIAs Need But Few Have: Chief Technology Officer

In the ever-evolving landscape of wealth management, registered investment advisors (RIAs) must adapt to the rapidly changing financial and technological arenas. Arguably, no role could better facilitate this adaptation than a Chief Technology Officer (CTO). Yet, according to recent reports from Cerulli Associates, fewer than a quarter of RIAs have filled this crucial role.

Meeting Technological Disruption Head-On

Technology's growing influence on wealth management is undeniable. As per Capgemini's 2020 report, nearly 80% of high-net-worth individuals expect their future wealth management relationship to be digital. The rapid adoption of technologies like AI, machine learning, and blockchain is driving innovations in client communication, operation efficiency, analytics, and risk management.

A CTO has the necessary skillset to understand these technological disruptions, anticipate the industry's future trajectory, and leverage the right technologies for better client service and business optimization. Without such a role, RIAs find themselves struggling to ferry their organization towards a digital future.

Ensuring Cybersecurity

With the digital transition comes a critical concern – cybersecurity. According to the SEC's Office of Compliance Inspections and Examinations (OCIE), RIAs were among the most attacked entities in 2020. Having a CTO ensures a robust cybersecurity framework is in place to safeguard both the firm and its clients.

Facilitating Regulatory Compliance

Regulatory bodies are increasingly integrating technology into their compliance measures. A study by Accenture indicates that RegTech spending (technology that address regulatory challenges) could reach $127 billion by 2024. Having a tech-aware leader who understands the client data's rights, usage, and protection makes the compliance process smoother.

However, despite the clear need for this role, Boston-based research firm Cerulli Associates claims that only 20% of RIA firms have a CTO. The apparent lack of tech-focused leadership in many RIA firms could serve as an Achilles heel in a future defined by digital innovation, cybersecurity threats, and intricate regulatory conformation.

RIAs should take proactive steps to attract, develop, and retain CTOs, not as a luxury but a necessity for their firm to grow and thrive in the digital era.