How Riskalyze's Risk Analysis Software Works

Riskalyze was founded on the premise that an investor's risk tolerance can be quantified into a single number, which is then used to create a portfolio that matches this tolerance. It was founded by Aaron Klein, Michael McDaniel and Matt Pistone, who shared a common vision regarding the application of risk analysis. Headquartered in Auburn, California, it gained popularity with advisors who have found the single number system and easy and effective way to market products and craft client profiles. have in the past struggled to quantify risk as a way to market products or services. 

(For more, see: Riskalyze Gets $20M Funding to Improve Advisor Tech.)

How Riskalyze Works

The service that it provides allows advisors to ask their clients a list of questions related to financial risk and then assigns a number based on those answers. Patented Risk Number technology harnesses a computational platform that won the Nobel Prize for Economics in 2002. Advisors can use the numbers generated by this program to craft portfolios that contain exactly the right amount of risk. They can also use it to show clients that they may be taking more risk in their current portfolios than they realize.

Riskalyze offers a risk questionnaire. Once it is submitted, the advisor will input their client's investment choices directly into the program. Advisors find the program exceptionally useful when compiling complex data, as a single number is easier to sell than theoretical risk profiling. It is for this reason that the company found notable success in the investment advisor field. 

Riskalyze markets its products to Registered Investment Advisors (RIAs), independent broker-dealers, hybrid advisors, RIA networks, plan and account custodians, clearing firms and asset managers as well as local banks. The company's products helped advisors to build more than $2 billion in portfolios in 2012. There are currently no specific plans at this point to begin marketing products outside the U.S., or bring the private company public. (For more, read Managing Client Risk: A Look at Riskalyze.)

Available Tools

The company also offers an automated investing program called AutoPilot, which can be used to manage both retail and retirement accounts and plans. Other products include Compliance Cloud, a comprehensive compliance program that automatically monitors an advisor's book of business and sends an alert whenever a regulation has been breached. This module allows advisors to search through their book of business and quickly find mismatched objectives and over-concentrated positions and other potential issues before they become problems. It can also help advisors to automate their workflow and intelligently prioritize their accounts according to various criteria.

In addition to quantifying risk into a single number, the Riskalyze program also allows advisors to perform stress tests on a portfolio using a wide range of scenarios, such as a market crash or jump in interest rates.The stress testing tool allows clients to see where they are vulnerable in their portfolios and how they can mitigate these risks. The program's portfolio mapping module gives advisors a way to project with 95% accuracy whether a given client's portfolio will achieve the returns that the client wants. These unique tools brought significant investment interest into the company from outside sources, which amounts steadily increasing from their launch to their most recent funding round in late 2016. (For more, see: Riskalyze Gets $20M Funding to Improve Advisor Tech.)

MoneyGuidePro Integration

In November of 2016, PIEtech announced that it is integrating its MoneyGuidePro financial planning software with Riskalyze. The integration allows users of either program to launch one system from the other. “By coupling the Riskalyze near-term time horizon risk profiling tools with MoneyGuidePro’s holistic long-term risk profiling approach, advisors will be better able to evaluate a client’s current risk exposure and true risk capacity,” Kevin Knull, president of PIEtech, said in a statement. (For more, see: How Technology Is Changing Financial Advice.)

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. Riskalyze. "About Riskalyze."

  2. Riskalyze. "Fiduciary Standards."

  3. Riskalyze. "Calculating the Probability Range."

  4. Crunchbase. "Riskalyze."

  5. Riskalyze. "MoneyGuidePro and Riskalyze Integration Helps Advisors and Their Clients Bridge the Risk Gap."

Take the Next Step to Invest
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.