Risk in portfolios is nothing new to advisors and investors alike. But the risk isn’t always addressed appropriately, leaving investors open to losses. We aren’t saying that risk analysis isn’t a part of most advisor’s technology because likely there is some form of risk analytics—some that are simply better than others. 

The risk analysis component may be outdated, perhaps part of some old legacy system, or developed before the financial crisis or the latest economic downturn. Or, more detrimental, advisors may have the notion that risk solves through diversification or long-term investing. Some advisors also believe that risk doesn’t need analyzing regularly. Those ideas are false.

At AdvisorPeak we believe that advisors must periodically analyze portfolio risk due to market conditions and their clients evolving needs. As risk is analyzed, holdings trade for others that align with the portfolio’s investment strategy. Your tech stack must include risk analytics for this simple reason: risk analysis often determines trades.

Remember that portfolio risk doesn’t go away or entirely change; it always comes back. The types of modern risk that technology can address is constantly changing. Our partner risk analytics providers specialize in risk analysis as their primary business in these critical areas:

  • Volatility Risk- A systematic risk that often results in market swings.
  • Diversification Risk- Correlation must be analyzed, or losses amplify.
  • Tail Event Risk- Occurs with a market shock event caused by global, regulatory, or political influences.
  • Concentrated Stock Risk- Influences the entire portfolio’s value if the portfolio suffers a loss.


Another step to develop a more objective and consistent process is to consider creating a firm-wide risk tolerance assessment approach that standardizes the use of risk tolerance technology with clients, along with a set of guidelines on how to discuss assessment results with clients. Using technology removes the advisor-gender voice bias concerns and generally makes it much easier for firms to standardize the risk tolerance assessment process across the firm. Which can further reduce the risk of advisors unintentionally introducing their own preferences or biases in a purely conversational approach – and according to some research is a prevalent (and serious) problem.”

—Meghann Lurtz, Why It’s Best To Measure Risk Tolerance With #FinTech Questionnaires Instead Of (Just) Risk Conversations.

The risk analysis that emerging technology provides through integrations removes biases and addresses various types of risk that can impact investors. Can your firm go without risk analysis? It can’t—not when you must execute trades and manage wealth in your clients’ best interest (aka RegBI).

At AdvisorPeak, we partner with risk analytics providers that provide advisors and their firms with the best risk analysis solutions. We don’t partner with just anyone; we work with partners aligned with our mantra of delivering the wealth management industry with best-in-class innovative software. Contact our team for an introduction to any of our software partners.