The findings in this blog post come from RIA in a Box’s annual survey, which was conducted in the first quarter of 2023.
In our last blog post, we talked about the top RIA financial planning software that RIA firms prefer. This time, we’ll be delving into the findings from our annual survey results in response to risk tolerance systems used by RIA firms and exploring the trends over the years.
Adoption rate of risk tolerance software at RIA firms
Portfolio risk tolerance software can assist with initial portfolio creation and monitoring to ensure portfolios remain suitable for a client’s risk tolerance level, simplifying the process for firms and helping ensure the safety of the client. Needless to say: portfolio risk tolerance software can be crucial for RIA firms.
However, portfolio risk tolerance software has only recently gained popularity at RIA firms. This is reflected in the lower adoption rates across the years as compared to other types of RIA software investments.
In 2018 and 2019, 26% of RIA firms surveyed adopted portfolio risk tolerance software. However, since 2020, there has been a 1% decrease in the number of RIA firms adopting this software, with only 23% of RIA firms surveyed adopting risk tolerance software in 2022.
However, despite the minor decrease in adoption of risk tolerance software in recent years, there appears to be a direct relationship between the size of a firm in terms of assets under management (AUM) and adoption of software.
Top risk tolerance software at RIA firms
Nitrogen, formerly known as Riskalyze, remains the dominant provider of risk tolerance software to RIA firms, having 59% market share. At RIA in a Box, we have integrated with Nitrogen to make the work of chief compliance officers (CCO) easier and establish a simple supervisory workflow in which CCOs seamlessly track, manage and document the client suitability and portfolio review process enabled by the two platforms.
Making up significantly less of the market but coming in second and third respectively are Kwanti and HiddenLevers at 11% and 6%.
As RIA firms continue to turn to technology solutions for increased efficiencies, we recommend they consider how risk tolerance software can help meet their regulatory compliance and duty of care obligations.
Tune in next week for a look at how RIA firms are using customer relationship management (CRM) software and how they have gained popularity among RIA firms.