Don’t like a tool? Build a better one. That’s exactly what John Ndege did when he launched the risk profile analysis software Pocket Risk in late 2013.
The first step advisors often take with clients is the dreaded “risk profile” questionnaire. If clients are lucky, it’s short. Either way, it’s usually not very good at accurately portraying a client’s tolerance for risk.
John Ndege came across one of these questionnaires in 2012 when he was working on the operations team of Facebook. Prior to that firm’s IPO, the company brought in several financial advisors to help employees manage their equity stakes.
Most of those conversations with employees started with a paper-based risk questionnaire. “I looked at the tools out there and they just weren’t really doing the job,” Ndege says, adding that on a psychological level, clients don’t always know what they’re willing to lose. So he decided to develop his own.
Pocket Risk is based on a series of 20 questions. The difference is those results give clients a score and assigns them to a risk tolerance group level and calculates where their responses fall in relation to a peer group. It’s a gauge for advisors and a tool to help educate clients on their fears and goals.
“Our goal is to move away from the boilerplate questionnaire,” Ndege says. “They’re not very useful—more of a compliance requirement than anything else.”
Joel Bruckenstein, an industry technology consultant, says tools like Pocket Risk and its competitor Riskalyze are challenging traditional market heavyweight FinaMetrica. “It’s a needed tool. One of the biggest problems today is that clients and their advisors misgauge what they’re willing to lose,” he says.
Starting at $99 per month, Pocket Risk provides advisors with access to the questionnaire and the ability to customize the interface and add questions. The platform will provide email updates. Pocket Risk can be used on a website as lead generation, as well as to connect the scores to model portfolios the advisors may use, Ndege says. “At one time, advisors were just portfolio managers; now they’re a coach for their clients,” Ndege says.
Since its launch, Ndege says Pocket Risk has mostly targeted small- to mid-sized RIAs. He hopes to integrate Pocket Risk with Salesforce and Redtail in the coming months.
Maybe not a lot in common with Facebook, but, Ndege says, “Applying technology to this industry can be a lot of fun.”