Category: The Tolerisk Blog

Effectively managing risk is key to long-term investment success. While diversification and cost-effective strategies are essential, accurately assessing and addressing client-specific risk tolerance is the cornerstone of a robust investment plan.

Determining the optimal level of risk for an investor is akin to the classic Goldilocks dilemma: too much risk can lead to significant losses, while too little can hinder long-term financial growth. The key lies in finding the perfect balance.

Risk tolerance is a complex interplay between an investor’s psychological disposition and their financial capacity. While traditional risk assessment tools often oversimplify this dynamic, a more nuanced approach is necessary to create truly personalized investment plans. 

Let’s dig deeper into the limitations of traditional risk assessment methods and explore innovative solutions that align with the evolving needs of investors.

The Limitations of Traditional Risk Assessments

For years, the financial industry has grappled with the complexities of accurately assessing client risk tolerance. While risk tolerance assessments are recommended, their effectiveness has been limited by simplistic methodologies and a lack of standardization.

Traditional risk questionnaires often oversimplify the concept, forcing clients into broad categories like aggressive, moderate, or conservative. This approach fails to capture the nuances of individual investor profiles, which leads to suboptimal investment decisions.

Is Your Risk Assessment Tool Up to Par?

The broad, generic categorizations fail to capture the nuances of individual investor profiles. There are several indicators that suggest it may be time to reassess your risk assessment tool, including:

• Inaccurate Client Profiles: If your tool consistently misrepresents client risk tolerance or leads to suboptimal investment decisions, it may be time for a change.
• Lack of Customization: A rigid tool that doesn’t allow for tailoring to specific client needs or firm objectives may not be meeting your requirements.
• Outdated Methodology: If your tool doesn’t incorporate recent advancements in behavioral finance or risk modeling, it may be time for an upgrade.
• Limited Integration: A tool that doesn’t seamlessly integrate with your existing technology stack can hinder efficiency and accuracy.

A More Scientific  Approach

To address these shortcomings, a more comprehensive approach is needed. By combining psychological, financial, and behavioral factors, advisors can gain a deeper understanding of their clients’ risk profiles.

When selecting a new risk assessment tool, consider the following factors:

• Accuracy & Relevance: The tool should provide accurate and reliable assessments that reflect the current market conditions and client profiles.
• Customization: It should be flexible enough to adapt to your firm’s specific needs and client demographics.
• User-Friendliness: The tool should be easy to use for both advisors and clients.
• Integration Capabilities: Ensure compatibility with your existing technology stack.
• Data Security: Prioritize data privacy and protection.

Tolerisk, a pioneering risk assessment tool, takes a holistic approach by:

• Separating Willingness & Ability: Recognizing that a client’s desire to take risk (willingness) may differ from their financial capacity to do so.
• Leveraging Advanced Analytics: Utilizing sophisticated algorithms to analyze client data and generate accurate risk profiles.
• Providing Dynamic Assessment: Enabling ongoing monitoring of risk tolerance to adapt investment strategies as client circumstances change.
• Offering Superior Customer Service: Having the ability to make products that align with your clients help create a lasting partnership

Nailing the art of risk management is crucial for the success of any financial advisor. By adopting a sophisticated approach and utilizing advanced tools like Tolerisk, advisors can confidently navigate the complexities of the investment landscape and deliver optimal outcomes for their clients. Contact us to learn more. 

The enhanced Portfolio Scoring Tool was recently named to the list of finalists in the 2024 Wealth Management Awards in the category of Risk Tolerance/Client Profiling

Marlton, NJ – June 10, 2024 – Tolerisk, a leading fiduciary-caliber risk tolerance assessment technology provider, announced several significant upgrades to its Portfolio Scoring feature, designed to transform the client experience and empower informed investment decisions. 

“These enhancements demonstrate our unwavering commitment to supporting advisor practice growth and reducing compliance risk,” said Mark Friedenthal, CEO & Founder of Tolerisk. “By empowering advisors with the tools they need to foster informed decision-making and build trust with their clients, we’re on a mission to revolutionize the investment experience.”

The latest upgrades to the Portfolio Scoring tool streamline the risk assessment process and provide actionable insights for both advisors and clients. Following their 2023 UI redesign, which achieved an impressive user satisfaction rating of 8.87, the tool has been enhanced even further, earning recognition in the 2024 Wealth Management Awards in the Risk Tolerance/Client Profiling category. Tolerisk introduces three key features:

• Probability of Returns Graph: This feature visualizes the 90-99% probability of returns within a 3-12 month range. Advisors can leverage this clear data to guide clients toward informed investment choices with a deeper understanding of potential outcomes.

• Expense Ratio Data: This feature integrates Expense Ratio data for all generated portfolios. This increased transparency fosters trust and confidence by allowing clients to see a complete picture of their investments.
  
• Portfolio Comparison Tool: This feature allows advisors to create and compare up to four unique portfolios to clients’ Tolerisk risk assessment scores. The comparisons can also be included in clients’ portfolio analytics reports for easy sharing and visibility, enhancing the proposal generation process by providing comprehensive and easily understandable comparisons.

These upgrades offer many benefits for both advisors and investors, including:

• Informed Decision-Making: Reduce guesswork and emotional bias by providing a clear visualization of potential outcomes.
• Improved Risk Management: Understand the range of potential returns to align investor strategies with risk tolerance, leading to greater comfort and confidence.
• Enhanced Client Relationships: Strengthen client trust in an advisor’s expertise by showcasing the ability to navigate investment complexities.
• Transparency & Trust: Empower clients to understand investment costs and make informed allocation decisions.
• Reduced Compliance Risk: Comply with regulations and standards, minimizing potential misunderstandings or disputes.
• Efficient Proposal Generation: Quickly generate and present tailored investment proposals, saving time and enhancing client engagement.

These features are a direct reflection of client input. “Our customers asked for a clearer picture of potential returns, more transparency around investment costs, and the ability to compare portfolios — and that’s why we developed these new tools,” said Friedenthal. “These enhancements showcase our commitment to continuous improvement and position Tolerisk as the partner you can trust to elevate your practice.”

To learn more about these features, watch the tutorial or book a personalized demo.  

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/. 

Brian Edelman joins an esteemed group of 10 industry leaders

MARLTON, NEW JERSEY, UNITED STATES, March 19, 2024 /EINPresswire.com/ — Tolerisk, a leading provider of fiduciary-caliber risk tolerance assessment technology for investment advisors, today announced the appointment of Brian Edelman, CEO of FCI and a nationally recognized cybersecurity expert, to its Advisory Board.

Edelman joins an esteemed group of 10 industry leaders with extensive experience in financial planning, insurance, fintech, business development, legal & compliance, and more. Their collective expertise is instrumental in guiding Tolerisk’s strategic growth and continued innovation within the risk tolerance assessment landscape.

Tolerisk Board of Directors:

– Frank Anguiano – Managing Partner, Alcanza Global
– Brian Edelman – CEO, FCI
– Mark Friedenthal – CEO, Tolerisk
– Jonathan Jacobs – SVP, LIBRA Insurance
– Miriam Lefkowitz – Compliance Attorney, principal of Miriam Lefkowitz, LLC and Coda Advisory Group LLC
– Michael Raneri – Chief Technology Officer, Voya Financial
– David Ritchey – DVP, Symetra
– Colin Slabach – Assistant Professor at NYU, Faculty Lead of MS in Financial Planning
– Kelly Waltrich – CEO, Intention.ly
– Ryan Wheeler – CTO, Tolerisk
– Michael Zebrowski – COO, Docupace

“We are thrilled to welcome Brian Edelman to our Advisory Board,” said Tolerisk Founder & CEO Mark Friedenthal. “His deep understanding of cybersecurity and the financial services industry will be invaluable as we continue to provide our users with the most advanced and secure risk tolerance assessment solutions.”

Edelman brings over 35 years of financial services experience, including 27 dedicated to cybersecurity. This expertise will help Tolerisk ensure the highest level of security and data protection for its clients.

Tolerisk has repeatedly been proven a standout risk tolerance provider as recognized in the 2024 T3 Advisor Survey. With a user satisfaction rating surpassing industry leaders, soaring to an impressive 8.87 — a significant increase from 8.17 in 2023 — this marks three consecutive years where Tolerisk has been significantly above the category average.

“I’m excited to join Tolerisk and contribute to their mission of providing advisors with the tools and insights they need to make informed risk management decisions in an increasingly complex and ever-evolving environment,” said Edelman.

One of Edelman’s areas of expertise is Cybersecurity regulations and compliance at both the Federal and State levels. This includes the 23 NYCRR 500 regulations from the NY Department of Financial Services, which impact every major financial services organization.

He’s frequently sought after by media outlets and industry organizations, an active member of the Open VRM Advisory Board, and a Forbes New York Business Council Cybersecurity Expert. He has a B.S. in Marketing from Upsala College and a Certificate in Cybersecurity Risk Management from Harvard University.

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/.

Amanda Larson
Intention.ly for Tolerisk
+1 856-306-8873
tolerisk@growintentionally.com
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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.