Tolerisk with Mark Friedenthal | E368

Assessing clients’ risk tolerance and capacity.

In this episode of Fintech Impact, Jason Pereira interviews Mark Friedenthal, Founder and CEO of Tolerisk, about the innovative risk profiling platform his company offers to financial advisors. Mark explains how Tolerisk differentiates itself by integrating financial data into client risk profiles, providing a more holistic understanding of both risk tolerance and capacity. He discusses the company's origins and challenges, highlighting the improvements Tolerisk has made over traditional methodologies like Monte Carlo simulations. The conversation underscores the importance of proper client profiling in risk assessment and the significant role Tolerisk plays in bridging investment management with financial planning.

Episode Highlights:

  • 00:09: Introduction to the podcast episode and the guest, Mark Friedenthal, CEO of Tolerisk.

  • 01:04: Mark shares the origins of Tolerisk and the problems it aims to solve with client risk profiling.

  • 02:07: Development of a solution for profiling client tolerance that integrates with financial information.

  • 03:29: Discussion on the learning curve in managing a tech project and developing a solution tailored to clients.

  • 05:56: Overview of how traditional risk tolerance metrics work and introduction to Tolerisk’s novel approach.

  • 07:34: Explanation of using psychometric profiles to measure willingness to accept risk, and the limitations of other methods.

  • 11:12: Mark describes how Tolerisk uses a standard scale to convey financial ability to take risk.

  • 12:02: Introduction of portfolio scoring to assess the real risk level of investment portfolios.

  • 14:08: Tolerisk evaluates the likelihood clients will run out of money alongside risk assessments.

  • 17:12: Explanation of Tolerisk’s improvements over traditional Monte Carlo simulations, using historical data effectively.

  • 21:03: Creating a tailored approach to help better engage clients and reduce compliance risk for advisors.

  • 22:08: Discussion of the benefits of proper risk assessment and client profiling in avoiding financial pitfalls.

  • 23:07: Importance of understanding the right level of risk for clients and ensuring decisions are bespoke.

  • 26:42: Difference between fiduciary advisory and suitability in terms of risk management.

  • 28:01: Mark discusses the wish for democratization of technology access among advisors.

  • 30:10: Challenges faced in the early stages of Tolerisk, especially in managing technology projects.

  • 33:46: Excitement over the innovation and aha moments Tolerisk provides to advisors and their clients.

Key Points:

  • Tolerisk offers a sophisticated platform for integrating financial data into risk profiling, providing a more holistic approach to assessing client risk tolerance and capacity.

  • Traditional risk measurement methods can be improved by addressing constant statistical assumptions and introducing variability in future predictions, which Tolerisk achieves through its proprietary methods.

  • Proper client risk profiling is crucial in financial advising, not only for better client outcomes but also for reducing compliance risks.

  • Advisors need improved technology access to personalize client advice and strengthen corporate culture aligned with fiduciary duties.

Tweetable Quotes:

  • "Risk is a Goldilocks exercise; it needs to be just right for each client, right now." - Mark

  • "Tolerisk bridges investment management and financial planning to ensure robust and tailored client outcomes." - Jason

  • "A mathematical approach to risk profiling can enhance decision-making and inspire client confidence." - Mark

  • "Effective client profiling goes beyond questionnaires to include financial capacity, making it data-driven and objective." - Mark

Resources Mentioned:

Fintech ImpactJason PereiraFintech