Ep #6: Helping Investors Survive and Thrive in a "Risk-First" Decade with Aaron Klein from Riskalyze

Aaron Klein is co-founder and CEO at Riskalyze, the company that invented the Risk Number® and empowers the world to invest fearlessly.

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10/19/2020 - 74 minutes


Episode Summary

My guest today is Aaron Klein, who is co-founder and CEO of Riskalyze, one of the most popular risk alignment tools in the financial services industry, and a darling in the FinTech community. Riskalyze invented the Risk Number®, which is a quantitative methodology that helps financial advisors drive alignment between clients and their portfolios. Their mission is to empower the world to invest fearlessly.


On today's episode, Aaron and I discuss how the global pandemic has vaulted us into a "risk-first" decade, why financial advisors without a risk alignment tool in 2020 are like advisors without computers in 2000, and why using a quantitative approach to risk assessment is superior to a qualitative one. We also discuss how behavioral economics impact the way investors and retirement plan participants make decisions, and ways that tools like Riskalyze can help advisors harness that behavior for their clients, rather than trying to change it. Aaron provides insights on the opportunities and challenges that he and his team have experienced in the ERISA world versus the wealth management space. Aaron also shares his single best piece of advice for making ERISA fiduciaries smarter, which is to get risk at the heart of helping participants make investment elections, so they can be fully bought into their decisions. And be sure to listen to the end, where Aaron shares a little about he and his wife Cacey's personal story as adoptive parents of Spencer, who was born in South Korea, and Emma and Teddy, who were both born in Ethiopia. This experience led Aaron and Cacey to co-found Hope Takes Root, which is an initiative that uses vocational training and life mentoring to change the future for orphans and at-risk kids in Ethiopia. It's a very cool, inspiring story that I really connected with, and I think you will, too. And so, with that introduction, I hope you enjoy this episode of The Fiduciary U™ Podcast with Aaron Klein from Riskalyze.


What You'll Learn

  • What prospect theory is and how it is useful when assessing risk.
  • How the global pandemic has created a "risk-first" perspective.
  • Why Riskalyze took a quantitative vs. qualitative approach to assessing investor risk tolerance when building Riskalyze.
  • Why it’s important to make the client the hero of their investment story.
  • How Aaron saw investor and advisor behavior change during the market downturn of the global pandemic.
  • How Riskalyze views defined contribution plans and what the future looks like in that space.
  • How Aaron sees the delivery of retirement investment advice changing in the next decade.


Links to Resources


Ideas Worth Sharing

  1. "How do you cross the chasm of aligning what somebody feels about their money with the same kind of risk number scale on portfolios?" - Aaron Klein
  2. "The truth is that advisors have to make the client the hero of the story." - Aaron Klein
  3. "We have to go back to embracing wholeheartedly American individualism and letting people self-determine their values and what they want to do with their future." -Aaron Klein
  4. "Here we are in 2020, and I really believe that this has launched a risk-first decade" - Aaron Klein
  5. "Risk is at the center of how people are making decisions." - Aaron Klein