Riskalyze’s strategy to reel in large wealth management firms appears to be working as independent broker-dealers struggle to ensure advisors keep portfolios within clients’ risk tolerance.
The advisor technology company has a new agreement to make its risk assessment and portfolio analytics software available to Cetera’s entire network of wealth management professionals. Cetera will offer Riskalyze through its digital workstation, AdviceWorks, for no additional cost to member firms. Cetera affiliates will also get an exclusive discount rate to Riskalyze’s premium products.
The deal aims to build a unique offering for advisors that goes beyond just putting another technology vendor on the shelf, says Riskalyze CEO Aaron Klein. Cetera wants to use the software to standardize risk management across its entire network, help advisors set expectations with clients, and document that advisors met their fiduciary obligations.
“This is a very different decade that we just walked into. Risk is at the center of how clients are going to engage with financial advisors,” Klein says. “[Cetera] wanted to take a very different approach of having an enterprise-wide, holistic approach to how their advisors think about risk.”
By integrating Riskalyze into the AdviceWorks portal, eventually every new client coming to a Cetera advisor will go through the Riskalyze process, Klein says.
In an email, Cetera President Tom Taylor clarifies that the firm is not requiring new accounts to go through the Riskalyze process at this time, though he did not comment on future plans.
But the integration will help deliver a consistent digital experience for both Cetera advisors and their clients, Taylor says: “Financial professionals and clients alike can enhance how they navigate and adjust risk preferences throughout the entire client lifecycle, from sales to growth and servicing.”
The company also plans to incorporate the Risk Number — the one through 99 number Riskalyze assigns to investors to quantify their risk tolerance — across other technology products Cetera uses, such as Envestnet’s portfolio construction and investment management platform.
“They are not going to have five different flavors of risk questionnaire, they’ve picked the Risk Number and are standardizing and aligning the rest of their technology ecosystem around it,” Klein says.
Riskalyze pivoted towards enterprise deals with large wealth management firms in 2019 after years of growing by selling to individual advisory practices. Cetera has more than 8,700 representatives,
The fintech firm also has enterprise deals with
“We’ve known for awhile that [enterprise deals] have been their goal, and Cetera is obviously one of the large, highly respected broker-dealers in the industry,” says Joel Bruckenstein, a technology consultant and founder of the T3 Conference. “I think it’s a big win for them.”
Klein attributes his company’s success to new products that meet the demands of these large firms, such as a redesigned risk assessment tool it launched in September, and some key hires who are now leading the firm’s enterprise strategy. Riskalyze’s chief growth officer is Drew DiMarino, former head of enterprise sales at eMoney Advisor; its vice president of enterprise sales is Patrick Hannon, who had a similar role at Advicent; and the managing director of enterprise services is Dana Rhodes, who was vice president of Advisory Services at Kestra Financial.
Riskalyze also helps broker-dealer executives with one of their biggest headaches: giving reps who act as portfolio managers the freedom they need to successfully operate while providing guard rails that keep them compliant, Klein says. With Riskalyze, corporate headquarters get a lens into advisors’ managed accounts and how they align with a client’s documented, quantified risk assessment.
“I have not spoken to a single broker-dealer CEO in the last two years who doesn’t tell me that is their number one challenge,” Klein says.
Cetera’s decision to work with Riskalyze is smart given increased volatility in the market and changing investor demographics, but is especially timely a week
“The rep-as-PM model is clearly core to Cetera’s value proposition,” Fritz says. “This could be a really compelling tool that helps them be flexible and control compliance risk.”
Cetera chose Riskalyze for its ability to centralize and standardize risk measurement throughout the Cetera technology stack, and for its capabilities as a business growth tool, according to a statement from the company. Cetera's Taylor adds that many of the advisors on the IBD network are already using the software.
Taylor also agrees that Riskalyze can be a helpful tool for financial professionals to document that they are acting in a client’s best interest. Even active managers who focus more on investment performance and beating benchmarks can benefit from an integrated risk tool, he says.
“Risk management for investors, and business risk for financial professionals, represent two of the profession’s greatest challenges year after year,” Taylor says. “This strategic alliance will address both.”
Bruckenstein says the deal is a step in the right direction for the IBD market.
“I think the industry in general should be moving to automate things more on the risk side and have an enterprise overview or surveillance of what clients are doing,” he says.
