“Many firms use model portfolios to standardize their investment practices, and the most direct approach is to ask the client to pick a model in the model set based on the upside/downside tradeoff that the client is most comfortable with (see chart). It is like going to a café that offers salad, soup, sandwich, and hamburger, and you pick one based on your appetite.”
“In 2017, Helen created her own company under the name Andes Wealth Technologies. She was one of the first females to have found a FinTech company in a male-dominated industry. Furthermore, it was the first company to combine behavioral finance with analytics to help financial advisors drastically improve practice management and deliver a client experience like never before.”
“Andes Wealth has brought back the investment policy statement generator—but that’s only a small part of what the program offers,” Bob Veres wrote. “It’s possible to determine a prospect’s risk tolerance with one image. The IPS pulls from a full suite of
client onboarding tools, and the program also offers a robust way to stress-test your model portfolios under different market
Will points out “the inexact and psychologically loaded nature of the risk profiling exercise, and the challenge of translating results into actionable strategy”.
“One way to illustrate possible tradeoffs among portfolio models or risk brackets is to show the upside and downside of each model and then ask the client to choose the model with which she feels most comfortable. This is the approach pursued by risk profiling vendor Andes Wealth, which takes the further step of automating the creation of an IPS.”
“With the tagline ‘Where Behavioral Finance Meets Analytics’, the company’s Real-Time Risk Monitor lets financial advisers visualize and communicate investment risk for clients; its Risk Tolerance Test and behavioral surveys help clients understand how much investment risk they can tolerate, and its Cognitive Ability Test lets advisers know if their clients are having cognitive issues that could impede their ability to make wise personal finance decisions.”
“Helen Yang, Andes Wealth Management’s founder and CEO, said her service uses investment personas for each client based on MIT research.”
“We are at the end of a bull market,” Yang warned, adding, “the relationship between risk and return varies over time and you have to stay on top of it.”
For the second year in a row, Andes Wealth Technologies, an innovative wealth technology company, has been selected as a finalist in the 2021 WealthManagement.com Industry Award in the Risk Tolerance and Client Profiling category, and for the first time, a finalist in the Portfolio Analytics category.
“When we started three years ago, we focused on two things: first, to fix things that didn’t make sense, for example, the risk tolerance products; and second, to fill the gaps, for example, there had been a lot of interest in behavioral finance but there wasn’t a good way to use it systematically. During the past year, we put everything together into integrated, powerful workflows for onboarding and ongoing client communications.”
“If a portfolio is assigned a risk number, would the risk number change during market turmoil? If it does change, as one might expect, does it mean we would have to change the portfolio to realign risk?”
Combining behavioral finance concepts with rigorous risk analytics creates a new way to deliver wealth management, that brings together risk profiling, IPS generation, and ongoing client communications into one centralized application.
“With financial planning getting commoditized, it is time for financial advisors to find ways to deliver real insights and better client experience. Fortunately, money is an emotional matter. Those deeper conversations are not something that algorithms can replace any time soon.”
“In a way this Walmart [for financial advice] already exists,” says Helen Yang, founder and CEO of Andes Wealth Technologies, a behavioral finance software company.
“Most companies are becoming more and more similar. What people get from RIAs is a relationship, but that might not be enough anymore. What they really want are insights into their financial lives that they can’t get anywhere else.”
“However, the market often deviates from 30-year averages, sometimes dramatically. According to Dr. Andrew Lo from MIT and his Adaptive Markets theory, the risk and return relationship changes over time, hence it is important to monitor it closely, especially during times of uncertainty.”
“It’s tough to stand out in the space for risk profiling tools, but Andes Wealth has built some innovative features into their product including behavioral finance that should help advisors know their clients better and identify at-risk accounts.” — Craig Iskowitz