The Entrepreneurial Spirit of the RIA Community

In your recent TradeTalks interview, you highlighted how RIAs are focused on how private data and client information is stored. Can you share what Golsan Scruggs does in the event there is a data breach?  

This is where the rubber meets the road. We are often the first point of contact for an insured RIA once a breach is discovered. Typically, an insurance company representative then begins working the claim as the “breach coach.” Our job becomes oversight and monitoring of the claim to ensure it is being properly adjusted and addressed by the insurer. Having been through dozens of these claims, we are able to help our clients navigate these stressful scenarios.

You also spoke about how there are many misperceptions about what type of insurance should be secured for an RIA’s business. How can RIAs ensure they are properly covered?

Yes, titles of coverage lines and the way that coverage works can be quite confusing. Working with a specialist broker that speaks the RIA language and understands RIA functions and roles is critical. It is greatly important to read your E&O, Cyber and Crime/Fidelity policy forms in order to understand what each of them covers and/or excludes. It is likely that you need all three coverage lines and a broker that understands how they work together.

How are emerging technologies like AI and machine learning impacting your industry?

I will speak specifically to the potential risks posed by the emergence of these technologies as there are many visionaries who can far better speak to the overall impact on the industry. AI presents new and significant potential risks to RIA operations. Deep fakes, information scrapers and bots strike fear into insurance company executives. The underwriters are quite concerned about the use of AI by fraudsters, yet to date we have not seen these in play in any significant way within the RIA community.

How do you think the RIA space will evolve in the short and long term?  

Big question! The wave of mergers and acquisitions seem poised to continue, and while we see the formation of mega RIAs growing and I do believe we will have RIAs that begin to approach the client numbers and assets under management served by the wire-houses and large broker-dealers, I believe the entrepreneurial spirit and independent drive of the advisor community will thrive. We will see thousands of new RIAs launched and grow over the coming decades. The RIA space is full of opportunity and the capabilities offered by incredible technology and platforms continues to grow. While compliance is no doubt a real challenge for a small firm, there still exists the amazing opportunity to establish, build and grow great businesses within this space that have meaningful enterprise value for the bold individuals willing to take on the adventure.