Along with the lucrative career of a registered investment advisor (RIA) comes a number of potential pitfalls, some more serious than others. Advisor Perspectives has outlined some of the biggest professional risks prevalent in the investment industry, which include:
Inadequate insurance coverage
Have you reviewed your errors and commissions coverage recently? If your business has grown since you established your policy, the limits you set down at the beginning may no longer be adequate to cover potential losses. After an event occurs is not the time to realize that your coverage is inadequate.
Failing to plan for catastrophes
Recent years have proved that unlikely “what-if” scenarios are not only possible, but likely, given a business is in operation for long enough. According to data from FEMA, 90% of small businesses that fail to reopen within 5 days of a disaster never reopen at all. Having contingency plans in place for a wide range of scenarios can help you ensure that your RIA is prepared to weather the numerous storms that can strike any business.
Losing the tech battle
Failing to take advantage of new processes, software and web services can prove costly in this competitive field. According to one study, RIA firms that fully harness the power of technology earn more than $100,000 more than competitors who are latecomers to tech advancements. Fully integrating new tech can decrease the total staff time spent on business processes from one-half to one-third.
Losing valuable staff members
A constant source of concern in many industries is losing key employees, and RIAs are no exception. Business research firm Gartner finds that nearly 25% of employees in the U.S. are actively seeking other jobs. Competitive benefit packages are one way RIAs and other employers are keeping their employees happy.
Keeping an eye on potential risk is one way RIAs thrive in a competitive marketplace. When problems do arise, taking a proactive stance can help mitigate loss to the greatest possible extent.