Page 24 - Investment Advisor - Jan/Feb 2021
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RIA LESSONS & LEADERS

                By Jeff Berman




                Top RIA Trends in 2021


                Tech expert Joel Bruckenstein says advisors should ask their vendors
                immediately if the hacked SolarWinds software is in their “cyber” package.



                    ncreased cybersecurity threats                                  es in two Wealth Management business
                    stand to be the largest concern for                             data centers in the U.S.
                IRIAs  in  2021  —  whether  they  are                                Breakaway RIAs may be especially
                fully aware of the threat or not — while                            vulnerable, Bruckenstein noted. “When
                consolidation and wider use of analytics,                           you break away,” the larger firm you left
                artificial intelligence, machine learning                           is no longer around to be responsible
                and other tech by advisors are among the                            for security, “so if you are not aware of
                trends likely to continue into 2021 and                             it and you don’t ask the right questions
                beyond, according to Joel Bruckenstein,                             and you don’t take the proper precau-
                head of Technology Tools for Today (T3).                            tions, you’re at risk.”
                  “The industry is evolving, and it’s
                evolving at a rather rapid pace,” he told                           CONSOLIDATION CONTINUES
                Investment Advisor in a phone inter-                                Consolidation, meanwhile, has contin-
                view. He pointed to the huge increase   should be to deal with some of these   ued through the pandemic. “You’ve seen
                in advisors using video conferencing, as   threats,” he said. Larger firms typical-  numerous buyouts of smaller firms over
                well as new account openings and client   ly have somebody on staff or full-time   the course of” 2020 by larger financial
                onboardings being done digitally since   consultants who are experts at dealing   firms, according to Bruckenstein.
                the start of the pandemic.        with breaches. When it comes to smaller   He pointed to  Charles  Schwab’s
                  “These are major advances that   firms, however, “I’m not sure [they] are   recently completed purchase of TD
                would have happened anyway but might   even  fully  aware of  just how  great the   Ameritrade, as well as Goldman Sachs
                have taken three years,” he said. “That’s   threat is.”             buying Folio Financial/FolioFN as
                significant and there’s no putting the   SolarWinds software, which is at   examples. The list goes on and “I don’t
                genie back in the bottle … These are   the heart of the recent hacking opera-  think we’ve seen the last of that,” he said.
                structural changes in the industry that   tion, is used by financial services firms,   That “raises some potential concerns
                are permanent. And that’s a big deal.”  Bruckenstein points out.    for RIAs,” he noted. Among them: “Is
                                                    “Many firms in the industry have   too much power being concentrated in
                THE CYBERSECURITY THREAT          some sort of SolarWinds product that   the hands of too few firms right now? I
                Although the pandemic has ushered in   either they are using directly, or that a   don’t think so. But if the trend continues
                much wider use of tech by RIAs as a result   vendor is using as part of their ‘cyber’   as it is, there’s certainly a possibility
                of the shift to remote work, COVID-19   package. Every advisory firm should be   that that will happen and that it could
                has also invited an influx of bad actors   asking their vendors about this, but few   stifle innovation.”
                hacking into financial firms’ systems.  if any are so far,” he stated.
                  The U.S. government just got hacked   Meanwhile, regulators  are “cracking   THE VIRTUAL PARAPLANNER
                by Russia. “If that was an advisory firm,   down on” financial firms that aren’t   “You’ve already seen some major move-
                [regulators]  would be  fining them mil-  doing enough to protect their clients’   ment on the analytics side over the last
                lions of dollars,” Bruckenstein said.  data, he noted, predicting this will “con-  couple of years, and that’s accelerating …
                  The massive security breach “illus-  tinue to be an area of concern and focus   to put meaningful data in front of advi-
                trates  that  the  threats  from  bad  actors   for regulators over the coming year.”  sors in a way that they can digest it and
                are not going away and, if anything, I   The Office of the Comptroller of the   take action on it,” Bruckenstein said,
                believe, they’re going to become even   Currency recently levied a $60 million   calling that a “very positive trend.”
                more prevalent,” he predicted.    civil money penalty against Morgan   Meanwhile, we are also “starting
                  Unfortunately, “most advisory  firms   Stanley Bank, N.A., and Morgan Stanley   to  see the emergence of  a  number of
                are  just not  as  well prepared as  they   Private Bank, N.A., for 2016 data breach-  products that really do leverage either



             22 INVESTMENT ADVISOR JANUARY/FEBRUARY 2021 | ThinkAdvisor.com
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