“By 2025, a CTO will ascend to the role of CEO within at least one of the largest wealth management firms in the U.S.”

That’s the prediction F2 made at the beginning of 2021. I know this is entirely realistic because of one simple fact—the importance that technology and data have in all aspects of our business today. Every wealth management firm needs a Chief Technology Officer (CTO). Whether in-house or outsourced, the function is essential to maintain efficient business operations and sustained growth. 

Why is the CTO Role Increasingly Important?

A lack of technology tools means a wealth management firm offers a poor client experience, a limited prospect experience, a clunky advisor experience and a less efficient operational set up. CTOs navigate firms through technology decisions to improve all of these areas, avoiding bad decisions and setting them up for efficient use of the tools. They also help firms get a grip on their data.

There are countless ways to use data—so many that no one yet knows how to do it all, or has the tools to mine, store and analyze all of it. Advisors need a leader who understands the importance of how to use data to:

  • Increase efficiency in operations and client reporting
  • Understand more about clients’ behaviors (for example, examining what clients are investing in can drive asset management decisions, and analyzing the time they spent on your website can uncover new opportunities)
  • Highlight opportunities to the sales team

Finally, wealth management firms need a forward-thinking leader who will continue to push the envelope and guide them through implementations of future technology such as AI (artificial intelligence) and machine learning. The speed of change in technology means that standing still is never an option.

History of the CTO

So how did we get to this point and what comes next? As recently as five years ago, most advisors didn’t recognize the power of data and the opportunity to leverage technology. The CTO was instead a“Systems Manager” in charge of making sure the systems functioned. An order taker. The systems team focused on applications and infrastructure, and not on the full scope of the business and what other departments might most need from the technology platform.

Slowly, the systems team evolved into the technology team where they started to cross over to designing, building and maintaining a platform that supported the strategic business needs of the firm.Still the CTO was not truly an independent C-Suite leader. Often the CTO operated underneath the Chief Operations Officer (COO). 

Fast forward to today where technology IS the client experience. COVID-19 has only accelerated this trajectory. Technology is too big of a piece of the firm to not have an executive who understands the full business lead the department. The CTO is a critical player who must understand:

  • Operational elements including the risks, how to mitigate them and where to place controls
  • Who the clients are and what opportunities technology can offer them
  • Investment strategies and the Chief InvestmentOfficer’s (CIO) needs

The role is much more client facing than it used to be and requires that the CTO has the skills to collaborate with all lines of business in order to best position his or her team to deliver valuable tools and features. No other position in the C-Suite (aside from the CEO) must be as widely versed in its understanding of different departments, and as a result, the CTO has shifted within the C-Suite to a more valued role alongside the COO and CIO. With this level of importance in today’s wealth management firms, it's easy to see how the next few years will only grow the CTO’s experience and expertise and groom one or more of them for the job of CEO.

Need a forward-thinking partner to guide you through decision-making and implementations of your technology? Contact us to learn how our outsourced CTO (OCTO) service can support your needs with  experts who understand the wealth management ecosystem.