It has been a busy 2021 for Riskalyze CEO Aaron Klein.
In January,
Over the summer, an escalating rivalry with competing wealthtech Orion Advisor Solutions boiled over in the form of
The firm developed several
Financial Planning caught up with Klein to discuss the latest updates to its software, how his company balances growth with serving small advisors and the decision to bring advisors together in person during the COVID-19 pandemic.
This interview has been lightly edited for length and clarity.
Financial Planning: Riskalyze’s newest product, Discovery, was first announced at the Fearless Invest Summit in October and went live last week. What exactly is it, and why is Riskalyze so excited about it?
Aaron Klein: It’s a huge leap forward for advisors trying to find investment solutions to solve a particular client problem or build a better portfolio allocation. A lot of the investment research and screener tools out there were built in the 1990s. They have a bit of a hierarchical, drill-down,Yahoo-style approach. We kind of stepped back and asked ourselves: what would this look like if we took a Google, natural language processing approach to the problem and let people search for the investment solutions that they're trying to find for their clients. It's just a revolutionary user experience because an advisor can pull up Discovery and say, “I’m looking for a technology fund with a Risk Number between 50 and 75, with a Riskalyze GPA of 3.8 or higher, and I want a minimum of 10% annual trailing returns,” and, boom, it's going to pull every fund in the universe up that matches that set of criteria … and sift through it to find great solutions to put into your client portfolios.
It just underscores our belief that if you build incredible user experiences with cutting-edge cloud technologies, you can really create a unique product that ultimately makes a difference for the advisor.
FP: Morningstar is one of the more popular tools advisors use for investment research, and it
AK: First of all, Morningstar is one of those firms that we have a lot of respect for. We have competed with them in a number of ways for years, we have partnered with them in a number of ways for years, and we’re also a client of theirs in a number of ways. We continue to have a great relationship with Morningstar.
When you look out at all of the different firms that deliver some of these investment research and portfolio analytics and client engagement tools, we’ve been really engaged in competition with all of those different tool providers for some time. We’re always gratified when we see people recognizing that risk really should be at the center of client engagement, but ultimately we’re just kind of keeping our eyes focused on the advisor and thinking about how we help them research great investments, analyze portfolios and really engage with clients more effectively. And we’re just going to stay focused on that.
FP: What can you tell me about the reception since the launch? Is it true that your website went down for a few minutes because of so much demand?
AK: It’s definitely been off the charts. Lots of excitement from advisors, and we’re thrilled by that. We’re not super proud that the website went down even for a couple of minutes, but our engineers have assured me that will not happen again, and they are well prepared for the kinds of spikes in traffic that we might see from Discovery in the future.
We had a bunch of stuff just hit at the same time, both news coverage about the launch and email newsletters from a lot of the trade pubs like [Financial Planning], and it all seemed to hit at about the same time and the traffic spiked in a crazy way. But all that’s to say, what I'm really excited about is not just the excitement from potential new customers and folks who want to upgrade to the latest and greatest, but, man, the response from our existing customers who were already on Riskalyze Select or Elite, and it's a free upgrade for them. We just added a bunch of value to these individual advisors who didn't have to pay another dime to dramatically increase what they can do with the platform and probably consolidate some of their tech spend.
FP: For those existing clients, what are they excited about? What pain point is this solving for them?
AK: Up until now, you may have centered your client engagement and portfolio analysis around Riskalzye’s Risk Number. Our biggest fans use our product every day with clients, and when you came to the job of trying to find a fund and you didn't know what you were looking for to solve a particular problem inside of a client portfolio, you had to go to a different product. We couldn't solve that problem for you. So for a lot of advisors, this is the last piece of the puzzle for what they need in order to consolidate some of their technology spend and really stay in one platform to solve the problems.
We’re going to build on what we’ve delivered with Discovery to make that even more seamless. It’s great to be able to search for investment solutions, but we want to expand that beyond stocks, ETFs and mutual funds. In the future, we’ve got a lot up our sleeve for how we’re going to keep innovating on Discovery.
FP: You mentioned this is a free upgrade for customers on Riskalyze Select and Elite, but what else can you share about pricing? Advisors have to upgrade to one of those top tiers in order to access this?
AK: We have some customers that joined back in our earliest days — 2013, when our advisor product first came out of beta — and we have just always wanted to honor the loyalty of our long-time customers. We’ve done that by trying to keep choice for them for as long as possible. You can't maintain 2013-era pricing and plans forever, but we're still in a place where we have not forced those customers to upgrade. In effect they've had, you might call it, negative inflation on their price of Riskalyze over the course of those eight years. We’re continuing that, even with the rollout of Discovery.
Discovery costs us a lot more to deliver. First of all, we’re running a massive amount in the background to power all of the natural language search. Secondly, we have to spend a lot more on data to power the Discovery engine. It is a free upgrade for the thousands of customers we have on our newer plans, but [older customers] have to upgrade to [access it].
What we are doing just to honor those customers that have been with us is giving them an opportunity to get great pricing to move up to the newer plans. Honor some of the grandfather pricing they’ve gotten and help them move up without it being quite as big of a leap. We love supporting the individual advisors who made us a company in the first place. That’s really important to us, and we’re giving them time to phase into that. We’re definitely trying to manage that well and keep costs down for advisors.
We’re cognisant that advisors also have very high expectations for how software performs, and how we support and serve them. We’re trying to balance that appropriately so that we work to keep the costs down, make sure we’re delivering one hundred times more value than we’re ever capturing, but also able to invest in service and support in the way that they expect.
FP: Another one of the announcements was boosting the overall speed of Riskalyze, correct?
AK: It loads portfolios eight times as fast and can handle portfolios that are, like, five times as complex. It is a blazing fast experience, and we’re using some of the cutting edge cloud technologies that [companies like] Google and Amazon and Apple have used to make their cloud services really fast at scale. That is a free upgrade that every single one of our customers on all of our plans got.
FP: This isn’t specific to Riskalyze, but I’ve heard concerns that feel like the latest innovations from technology providers are really tailored to large financial services firms signing enterprise agreements and are leaving out those small firms that, as you said, helped the company get established. What would you say to them?
AK: We believe that the individual advisor is the backbone of this industry. All you have to do is look at [the Fearless Investing] Summit and what we rolled out for advisors. Discovery and the all-new portfolios experience is aimed right at the individual advisor and delivering value for them. If all you saw us roll out were new enterprise dashboards or new compliance tools ... that might be a conclusion you can come to. If you look at our R&D expenditure, I would venture to bet that we have about 20% to 25% of it pointing at the enterprise, which leaves 75% to 80% of it pointed at the individual advisor. That’s where we’re really focusing on a lot of our innovation.
FP: Building on the conference, Riskalyze was one of the companies that decided to go forward with in-person attendance. We’re about a month removed, what can you say about that decision and safety measures in place?
AK: It’s actually been about six weeks now, and we’re incredibly grateful for the response from advisors. One of the things that we did there is we had these colored wristbands: green, yellow and red. As we explained to attendees, the green wristbands were for folks who were hugging and high-fiving and fist-bumping, and the yellow wristbands were for folks who were keeping a little bit of difference even though they were there. The red wristbands were for folks who were really keeping their distance and not even getting into fist-bump range of others. Our team [asked], “why are we even buying these red wristbands when the folks who would wear one are joining the Fearless Online experience? They're not going to be here in person.” I said “because it’s a symbol of our commitment to serving every single one of our customers, regardless of what their health risk number turns out to be.”
We invested a lot to make sure it was a safe and comfortable experience for all of our attendees, and, knock on wood, not a single reported case … among either attendees or our staff.
FP: Were there any vaccination or negative COVID test requirements?
AK: We did not put those kinds of requirements in there. We followed all of the state and local guidelines that didn’t require those things to be requirements.
At the end of the day, I really believe that people have a strong tendency to act in their self-interest. People want to be considerate of others. We asked people not to come if they were in any way feeling sick. We had two people during the event who reported feeling sick. They went to their rooms, as was our protocol. We delivered tests to their rooms, and they tested negative. They were just under the weather for some other reason. Ultimately, I think we can look at those results and say that respecting the individual really worked.
FP: Was the decision to go in person driven at all by any of the sponsors of the conference?
AK: I wouldn’t say it was driven by that. It was far more driven by financial advisors who, in all candor, were emailing me. I had a couple of emails from advisors who were like, “hey, I'm kind of feeling nervous. I'm feeling like I'm not going to come.” We had a really strong refund policy that allowed them to get a full cash refund up to 90 days before, and then just pump the registration with no penalty into next year if they were nervous within 90 days. That worked really well.
For every one of those I got, we had probably 10 people who were emailing, “don't you dare cancel. I’m counting on this. This is like the one event I'm going to be at.” It was very much driven by the customer base saying they wanted to have the event there.
FP: What else can you tell me about the future of Riskalyze as a company?
AK: We’re a few weeks out from our next board meeting where we’re going to lay out plans for literally millions of dollars of R&D spending we’re going to do next year — investing in new products and new innovation that we’re going to deliver for advisors. I can’t talk about the details of that yet, but boy am I excited and optimistic about the future. We’ve got a long, long future of growth ahead with
