The Five Key Operational Risks for RIAs

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As the RIA industry transitions from its first-generation founders, the second-generation leaders must look back at the risks they inherit in their businesses. Here is a checklist for five key risk assessments.

1. Is your tech up to date?

According to a study by research consultant Aite Partners, RIA firms that harness tech earn an extra $100,000 in annual revenues compared to their less tech-savvy peers – and their average client has nearly twice the investable assets. Another industry report found that 60% of firms using four or more systems experienced 8% higher AUM growth on average, as well as a 10% increase in their client bases.

More integration means more time spent on client services and prospecting: Tech-integrated firms spend only about one-third of total staff time on business operations and processes, compared with 50% of staff time for other advisors.

2. What if your most valuable asset walks out the door every night?

Could you handle a quarter of your workforce jumping ship? Business research firm Gartner reports that 26.6% of the global workforce (and nearly 25% in the U.S.) is actively seeking another job. In a competitive job market, independent advisors need to work hard to attract and retain top talent.

Internal mobility can boost employee willingness to stay with their current companies by up to 33%, according to IBM.Beyond defining development and career pathing for your team, revisit your employee benefits – work-life balance, paid time off, work-from-home flexibility, parental leave, etc. Also, do you have a plan in place to handle employee complaints or conflicts?

Finally, in terms of recruitment, how are you managing your online presence and reputation? This is your first chance to make an impression on top-level recruits and get the right people in the right positions from the start.