As a risk profiling tool for advisors, Riskalyze is new to the scene. The original product was meant for individual investors. “We realized that many investors were actually using it with their advisors to talk about their portfolios,” said Aaron Klein, chief executive officer of Riskalzye. In October 2012 his team launched the professional version specifically for investment advisors.
With the premium Riskalyze Pro tool, advisors send a client or prospective client a link to a risk tolerance questionnaire customized to the advisor’s branding. The answers, along with other important client information, like investable amount, “desperation amount,” and any recent life changes, are sent as an email to the advisor who can copy and paste that information into a customer relationship management (CRM) system.
Advisors can also alter the generic model portfolios provided by Riskalyze by inputting their own constructions instead. Advisors can construct model portfolios with any publically traded stock or mutual fund or can even add a custom investment with enough data.
“Advisors are using Riskalyze to demonstrate existing risk, but also to design solutions,” Klein said. “If the risk level doesn’t seem to match where the person is in life, either because they are younger, and can afford to take on more risk, or because they are older, and don’t need to take on as much risk, it opens up the discussion.”
Josh Brown, an advisor with Fusion Analytics Investment Partners, said Riskalyze fit with exactly what his team was looking for in a software as a service (SaaS). Brown has also been pleased with how open Klein is to feedback, already modifying the software based on Brown’s request. “He’s looking to customize it for the ways RIAs want to use it,” Brown said.
The free tool is more limited. Advisors do not see all of the investor’s answers and are not able to customize the model portfolios.
While it may be nice for advisor to have a free risk profiling option, Timothy Welsh, an industry consultant said it may also be something to be wary of. If a legal issue did arise over the client’s investments, it might not stand up. Echoing regulators, he quipped, “You used a free tool to profile a client?”
On the other hand, an online tool could help advisors increase efficiency he said. “A lot of this is still done on paper and is very subjective,” Welsh said. “Because it’s online, it can save the advisor time.”
Industry technology expert Joel Bruckenstein said integration with the other tools an advisor uses is critical to the success of such a risk profiling tool.
Klein agrees that integration is an important element of tools for advisors and said it’s something Riskalyze will continue to invest in. “We make our outputs universally easy for advisors to drop into their other systems, which has meant that we're effectively integrated with every piece of technology in the stack, without creating a lot of work for the advisor or their administration.”