Author: Mark Friedenthal

The world of risk tolerance tools is constantly evolving, and we are proud to be recognized as a steady beacon of excellence by many industry leaders including the most recent 2024 T3/Inside Information Software Survey distributed and analyzed by industry veterans Joel Bruckenstein and Bob Veres. With an impressive 8.87 user satisfaction rating, it’s clear that we’re not just keeping up – we’re setting the standard.

This exceptional score isn’t a flash in the pan. It represents a sustained upward trajectory since 2021, highlighting our unwavering commitment to evolving alongside advisor needs. While competitors grapple with stagnation, we’ve consistently climbed from 7.98 to 8.07, then 8.17, and finally to its current peak of 8.87 — a clear testament to our dedication to continual improvement and responsiveness.

Focus on Client & Advisor Experience

Our core focus is streamlining risk assessment for both advisors and clients. In 2023, we embarked on a UI redesign project to enhance the client experience and create a sleek interface.

By simplifying the process and equipping advisors with intuitive yet robust tools, we’re empowering advisors while ensuring clients grasp the underlying principles through clear and elegant data presentation.

Comprehensive Risk Assessment

But what truly sets us apart is our two-dimensional approach to risk assessment. Unlike competitors who solely consider willingness (personality), we incorporate both willingness and financial ability to take investment risk. This provides a more comprehensive and accurate picture of an individual’s risk tolerance.

Our holistic approach empowers advisors to navigate complex financial landscapes with confidence, ultimately enhancing the quality of service they deliver to their clients.  They report increased client confidence in the advisory process, leading to greater retention and more referrals.

Award-Winning Recognition & Future Innovation

We’re also honored to be named one of two distinguished recipients in the prestigious “Software All Stars” category, recognized for exceptional features, functionality, and user experience. This accolade is awarded amidst a competitive field of 12 industry peers.

Looking ahead, we remain committed to continuous improvement and innovation. This includes expanding the network of integration partners, introducing enhanced visualization tools for clear data storytelling, and refining the user experience to further empower advisors. 

Ultimately, our goal is to equip advisors to achieve maximum client and prospect engagement, driving up conversion, retention, and referrals, all while mitigating compliance risk.

Advisors interested in learning more about Tolerisk can register for a one-on-one demo or register for a webinar.

For decades, the standard for financial risk tolerance was a thin, seven-to-12-question quiz with multiple choice responses and nebulous at best results, wherein most people would be categorized as “moderate.”

The results didn’t help clients make better decisions, and offered next to no direction or insight for advisors

It’s understandable, then, that advisors treated risk tolerance questionnaires as an internal compliance requirement to be checked off– not a baseline for establishing a sound financial plan – and relied instead on conversations to gauge their clients’ risk appetite. 

As the industry has evolved toward a more holistic approach to financial planning, largely driven by the catalyst of increasing client expectations, risk tolerance questionnaires and risk tolerance itself as a practice have also progressed. Big names have put risk tolerance on the map, but even these well-known behemoths still don’t take into account the full picture of risk.

They measure risk tolerance in a one-dimensional way, taking into account a client’s willingness to accept risk but not their ability to take on risk.

That’s the foundation of what makes Tolerisk so different. Using the SEC’s two-dimensional risk tolerance directive as a prescriptive model of what risk tolerance should be, we’ve pioneered the ability to objectively, scientifically and mathematically measure the ability to take on risk and illustrate a comprehensive, much more realistic picture of one’s future financial situation.

I’m here to tell you this isn’t easy to do, which is perhaps why, to this point, no one else has been able to replicate our capabilities or rigor. Measuring the ability to handle risk over time requires incorporating dynamic risk scores that change as financial situations evolve. We’re also able to consider historical scenarios for assets and inflation, enabling us to create more accurate paths for real returns – a better measure of financial longevity. Finally, we factor in the uncertain lifespan of both partners using mortality probabilities which can even incorporate age, gender, and various health and lifestyle factors.

The complexity that makes our solution so effective, thorough, and reliable, though, shouldn’t translate to difficulty communicating its results to the client. Other tools on the market use their own proprietary scoring models – scales from 1-7, for example, or 1-99, which don’t correlate to anything outside of the tool itself.

Put more simply, the client has no context through which to understand them. Because Tolerisk uses a standardized scale based on a total stocks and total bonds equivalent benchmark, advisors can much more clearly explain risk tolerance results to their clients. 

For example, if a client has a risk tolerance score of 70, meaning a risk level equivalent to a diversified 70-30 stock-to-bond benchmark portfolio, that’s easily digestible and simple to articulate – much more so than trying to make a risk score of 62 on a scale from 1-99 make sense. 

Why is this all so important to an advisor’s practice? 

Unlike simply checking off the risk tolerance questionnaire box as advisors have done in the past, this sophisticated, multi-dimensional and dynamic approach turns risk tolerance into a powerful growth, retention, and protection tool for firms.

Let’s think, for example, about a common client concern: “Am I going to run out of money?”

Even if the answer is no, not in a million years, there’s a big difference between an advisor saying, “Just trust me, you’re never going to run out of money,” versus showing the client the calculations that prove they have less than a 1% chance of running out of money.

The latter builds trust by enhancing a client’s impression of their advisor’s diligence, intelligence, and customization capabilities, driving up the possibility of retention and referrals, while decreasing the chance that a client might lose confidence in their financial path.

When it comes to interacting with prospects, such a thorough, yet easily digestible, risk tolerance display increases confidence that an advisor is going to be able to offer sound, methodical guidance and navigate unexpected financial challenges.

Finally, from a compliance perspective, a highly scientific approach to risk tolerance creates a process that’s objective, repeatable, and documentable, offering consistency from client to client and advisor to advisor.

I encourage modern advisors to reimagine the way they think about risk tolerance. When it’s done well, it can be a significant advantage for growing firms.

If you have any questions, or just want to chat about risk tolerance, feel free to shoot me a message on LinkedIn here.

Building on its existing Black Diamond integration, Tolerisk provides more portfolio granularity for advisors and their clients.

”Expanding our integration with Black Diamond builds upon our long-standing vision for the delivery of accurate and comprehensive financial advice.”

— Mark Friedenthal, Founder and CEO, Tolerisk

MARLTON, NEW JERSEY, UNITED STATES, October 10, 2023 – Tolerisk, a leading analytical risk-tolerance assessment software developer, is enhancing and further strengthening its integration with SS&C’s Black Diamond^® Wealth Platform, an award-winning portfolio management platform for wealth management professionals.

The latest integration enhancements expand the data available to advisors using the two platforms, pulling and mapping position-level data across interfaces. This new capability makes it easier for advisors to compare existing portfolios with portfolio proposals more thoroughly. The capability opens up opportunities for advisors to envision and create a more customized client experience aligned with clients’ unique goals and outlooks.

Advisors using the two platforms already enjoy a custom notation feature that posts information directly to the Black Diamond Relationship Timeline communication tool, as well as a one-click risk assessment build-out and tools designed to minimize manual data inputs.

“Each integration enhancement improves advisors’ financial guidance and helps them grow their businesses,” said Justin Wayne, Director, Partnerships and Integrations for Black Diamond at SS&C. “This deeper integration with Tolerisk makes it easier for advisors to assess client positions within their portfolios, providing improved transparency and granularity across client accounts.”

Unlike traditional risk tolerance assessment tools, Tolerisk uses a scientific, multidimensional approach to risk assessment that quantifies an investor’s willingness to accept investment risk, validates advisor and client assumptions, measures the evolution of risk tolerance over time and provides best-in-class granularity and transparency—all within a single platform. These factors are layered into each risk assessment, providing advisors and their clients with simple, measurable, and actionable directives.

“Expanding our integration with Black Diamond builds upon our long-standing vision for the delivery of accurate and comprehensive financial advice,” said Tolerisk founder Mark Friedenthal. “We are pushing well beyond single-dimensional risk evaluation. Our multidimensional risk assessments strengthen advisor-client relationships, improve the feasibility of meeting and exceeding clients’ financial goals, and extend greater stability and effectiveness to advisors’ financial planning, portfolio reporting, portfolio analytics, and CRM capabilities.”

About Tolerisk
Tolerisk^® is an analytical, multidimensional risk-tolerance assessment tool designed to improve and enhance advisor-client relationships through in-depth risk evaluations. In contrast with traditional risk tolerance assessment tools, Tolerisk measures a host of factors, including a client’s willingness and ability to take investment risk, client and advisor risk assumptions and the evolution of risk factors over time. For more information, visit https://p5wealth.com/.

About SS&C Technologies
SS&C is a global provider of services and software for the financial services and healthcare industries. Founded in 1986, SS&C is headquartered in Windsor, Connecticut, and has offices around the world. Some 20,000 financial services and healthcare organizations, from the world’s largest companies to small and mid-market firms, rely on SS&C for expertise, scale, and technology.