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Riskalyze growing into much more than a risk assessment tool

CEO Aaron Klein wants his firm to become central digital hub for an adviser's day-to-day client work.

Eight years ago, Riskalyze was created to provide a digital, mathematical approach to client risk assessment. In 2019, the technology startup is so much more than that.

At its annual Fearless Investing Summit last week in Boston, Riskalyze introduced an automated trading platform, adviser marketing kit, research on individual securities, a suite of new portfolio analytics tools and an updated version of its core risk assessment tool. The company already offers digital advice, a marketplace of third-party investment models, and retirement solutions.

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So what I wanted to ask Riskalyze CEO Aaron Klein when I got the chance to sit down with him following his keynote speech at the summit was this: What is Riskalyze today, and what is it becoming?

Mr. Klein said that today Riskalyze is a “wealth management platform” that can handle risk, investment proposals, portfolio analytics, trading and compliance. He disagrees with labels like TAMP (turnkey asset management platform), even though Riskalyze looks more like one with each update.

Nor does he agree that the company is necessarily changing what it offers advisers. For Mr. Klein, the new features are deepening what its core technology and “Risk Number” measurement are capable of doing for advisers.

Whatever you want to call it, Riskalyze’s goal is the same as that of most ambitious adviser fintech companies — to become that central digital hub for an adviser’s day-to-day work with clients.

“The place where you understand who a client is and align them up with where they need to go, and I think we’ve been preaching this since day one of our existence, risk, should be at the center of how you engage with clients and how you make great decisions for them,” Mr. Klein said. “At the end of the day, risk is the number one thing that blows up long-term plans. Risk alignment is the foundation on which long-term plans get achieved.”

Mr. Klein also sees growth opportunity in helping firms comply with the Securities and Exchange Commission’s Regulation Best Interest. It’s not the first time the company has positioned Riskalyze as a compliance solution, but the messaging is even stronger this time around.

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“Only Riskalyze and our process can help you prove and document best interest,” said Mike McDaniel, Riskalyze chief investment officer.

Riskalyze is also looking to grow among larger independent registered investment advisers and broker-dealers. In order to make Riskalyze more attractive to these firms, the company made Lori Hardwick chair of its board of directors. The move appears to be paying off.

The company already has a partnership with LPL Financial, and both United Planners and Sigma Financial are on board to roll out Connected Trading to their advisers.

As Riskalyze continues to expand, the company runs the risk of trying to do much, becoming a jack-of-all-trades and master-of-none fintech. Mr. Klein admitted that building a trading platform was a “huge debate internally” when first proposed and ultimately required hiring a lot of new talent, three years of development and partnering with a third-party on the final integrations with custodians.

But Mr. Klein said there are areas toward which he has no interest in steering Riskalyze. For one, he doesn’t envision building or acquiring portfolio accounting technology to compete with Envestnet Tamarac, Orion Advisor Services or SS&C Advent’s Black Diamond. Nor does he envision getting into the financial planning or client relationship management game.

“We would have millions of dollars of development if we wanted to go into a feature war with financial planning. We don’t want to go there,” Mr. Klein said.