Don't Target An Average Annual Return, Target A Desired Risk Level, Fintech CEO Says: Financial Advisors' Daily Digest

by: SA For FAs


Riskalyze CEO Aaron Klein offers a novel way for advisors to build their businesses.

Pimco fires back at its former bond king Bill Gross in court papers.

Two opposite views of China and an update on the Greek debt crisis.

Advisors and their clients may be statistically doomed to conversations about underachievement during bull markets and hyper-underachievement in bear markets if clients are conditioned to expect an "average" equity return of 8% a year, which rarely occurs.

Comes along Aaron Klein, the CEO of Riskalyze, who counsels beginning client conversations with a risk (rather than return) target, then tailoring a portfolio to match the desired level of risk. It's an interesting idea and has implications for bringing in new business, as SA contributor David Pinsen makes clear in his Q&A with Klein, from whom I quote:

"We hear at least once a week that a prospective client pinpoints their Risk Number as a 45. Then the advisor plugs in their current portfolio, and they're invested like an 87. When an investor suddenly understands that they have far more risk than they want or need, that's a recipe for an advisor to quickly gain a new client."

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