If you’ve spent any time reading industry headlines lately, you undoubtedly have come across titles like, “AI: Embracing the New Frontier in Your Practice,” and “AI in Wealth Management Accelerates.” And if you have recently attended any industry conferences, you likely noticed that nearly half of all sessions now revolve around AI, and even sessions on unrelated topics all seem to find a way to mention AI and its role in wealth management. Conference panelists touting AI for meeting notes, CRM workflows, proposal generation and prospecting have created a sense of urgency among RIA owners, making them feel like they must implement AI immediately to avoid falling behind.
However, this rush toward AI overlooks a crucial reality: many RIAs are grappling with foundational technology problems that must be addressed before they can tackle the complexities of AI. Investing in AI without solving these issues is like building a skyscraper on sand—exciting at first but ultimately unsustainable. Before tackling AI, RIAs must resolve three core technology challenges that may be holding their firms back.
Problem No. 1 – Insufficient Technology
Many RIAs struggle with a lack of essential technology, often due to a reluctance to invest in tools that promote operational efficiency. Without the right systems in place, firms become unscalable for growth—whether organic or inorganic, through acquisitions. Employees are often forced to perform manual tasks that could easily be automated, which wastes time and resources. For example, if it takes days to generate quarterly client reports because the system can’t handle the firm’s growing number of accounts, or if report aggregation for a single client takes hours and hours due to limited integration between systems, it’s a clear sign that more robust technology is needed.
Addressing this issue is urgent because scalability, operational efficiency and long-term growth depend on a strong technological foundation. Firms that lack proper tools risk falling behind competitors in both client and advisor/employee retention. Furthermore, AI systems require clean, well-organized data and streamlined workflows to function effectively. Without these, even the most advanced AI will fail to deliver meaningful results. By investing in essential technology now, RIAs can optimize their operations, better meet client expectations and lay the groundwork for successful AI integration in the future.
Problem No. 2 – Misaligned Technology
Some RIAs take the opposite approach stated in Problem No. 1 and eagerly adopt the latest technological solutions. Unfortunately, they adopt this technology without ever considering their firm’s specific needs. While being informed about new tools is important, rushing to implement systems without proper due diligence (often called “shiny object syndrome”) can lead to wasted investments. For example, an award-winning performance reporting tool might excel at reporting on alternative investments, but if an RIA does not invest in alternatives, implementing such a tool would be a poor investment. This type of error often happens when one advisor or RIA owner talks to another and hears them praising a technology tool without realizing that the other RIA serves a completely different client base or has a different value proposition.
Conversely, some long-established RIAs may cling to outdated systems out of comfort, failing to recognize that their client base and operational needs have changed. Even if the right systems happen to be in place, weak integrations between them can result in duplicative data entry, inefficiencies and employee frustration. Moreover, this reluctance to evolve not only stifles innovation but also puts the firm at risk of falling behind competitors who are leveraging modern technology to enhance their services and client experience.
It’s critical to resolve these misalignments before introducing AI. Without a cohesive technology stack tailored to the firm’s needs, AI will only add complexity rather than streamline operations. By addressing technology gaps and ensuring proper integrations, RIAs can create a unified infrastructure that sets up AI to succeed rather than fail.
Problem No. 3 – Overcomplicated Technology
All too often, advisors unintentionally create overly complex technology stacks by adding new features or systems based on individual client requests. While responsiveness is important, catering to specific needs that don’t apply to most clients often leads to redundant tools and an unnecessarily complicated infrastructure. This can confuse staff, waste time and reduce productivity as employees struggle to determine which tool to use for a given task. Simpler, more efficient solutions may be available that can better meet the firm’s needs without overwhelming employees.
Overcomplicated technology not only hinders efficiency but also creates a significant barrier to integrating AI. As stated earlier, AI systems thrive in environments with clear workflows, streamlined processes, and well-organized data. If an RIA’s technology infrastructure is cluttered and disjointed, introducing AI will exacerbate existing inefficiencies rather than solve them. Simplifying the technology stack by prioritizing essential, well-integrated tools ensures employees can work effectively and that AI can seamlessly enhance operations instead of adding to the chaos.
The rush to adopt AI is understandable, but it’s important to remember that AI is not a quick fix—it’s an enhancement that requires a solid operational base to succeed. While AI holds immense potential to revolutionize RIA practices, it should not be the top priority for RIA owners. Before exploring AI, firms must focus on solving their foundational technology problems—whether it’s investing in necessary tools, aligning existing systems with business needs or simplifying overly complex infrastructures. By addressing these critical issues first, RIAs can create a strong foundation for future growth and ensure that AI delivers meaningful results when the time is right. Rather than building on sand, take the time to lay the foundation your firm needs to truly thrive in the future.
This article originally appeared at Wealthmanagement.com.