The Exchanges

Q So why not just go be a keynote speaker Speaker and tell the world to expect, you know, plus or minus eight percent fluctuations. What, what software tech value does risk lies out of the equation?

A Well, it's a little bit more complicated than that, right? Because everybody's different. And that's one of the things that our industry has not done very well is we tend to stereotype people based on their age, right? So we go, well, Nathan looks young. Therefore he must be aggressive. Or, you know, this investor sitting in front of me looks a little bit older. They must be conservative. And then we take that stereotype, and a typical question that you'll see in the industry is something along the lines of, um, well, uh, if your portfolio was a car, what kind of car would it be? Or do you get a thrill out of investing, right? Well, I'll tell you what, I got a far greater thrill out of investing over the last few months than I did in, say, 2008, right? That's a market sentiment question. So I stereotype you based on your age, and then I nudge your stereotype a little bit aggressive or conservative based on your market sentiment. I can call that your risk tolerance till I'm blue in the face. It doesn't make it your risk tolerance. What we found, actually, we had a team of academics delve into the data and the methodology behind the risk number, and what they found was that about 52% of investors aged 20 to 29 are aggressive, just like the stereotype. But the other 48% are spread across the rest of the risk number spectrum. And so what the technology really does is helps the advi…

AI assessment note: “what the technology really does is helps the advisor assess who the client is”

Q These advisors, though, don't make money unless They're convincing you to change. They, they make money off velocity of, you know, new stocks being sold or stocks being bought. Or do you agree with that or not?

A No, that's not true. The new fiduciary advisor charges a flat fee based on your assets. Okay. And they, and, and they, they make the same amount of money, whether you don't change anything at all or whether you do. In fact, one of the really controversial things in our industry is that a lot of advisors are fighting against is the sec will come in and say, Hey, you're charging this management fee to help somebody manage their money. And you haven't executed any trades in the client's account for the last year. That, you know, we're going to assess a penalty against you, Mr. Advisor. And advisors are going, wait a minute, what if the right decision for the client is not to change anything? So there's a lot of discussion going on in our industry around that. And so, yeah, the old line brokers got paid commissions for transactions. I would say the vast majority of the industry is beyond that. And, you know, if, if we want to have a debate around the value of human advice, Um, that's one that I think that we're, you know, long since in the process of winning.

AI assessment note: “No, that's not true. The new fiduciary advisor charges a flat fee based on your assets.”

Q All right. Riskalyze. Financial services. FinTech. It's a hot space. Where do you play? What do you do?

A It is. You know, um, our, our mission and our, our, our dream from the very beginning of this company was to empower the world to invest fearlessly. It's our belief that, you know, investing is really broken for the average consumer. They really struggle to understand what they're invested in and how to, how to, you know, um, uh, understand the context of, of the choices that they're making. And, you know, a big problem is that our psychology works against us as investors, right? Because When markets are up, we're feeling optimistic. We're excited about putting money to work. When markets go down, we start getting fearful. We want to sort of pull back. Uh, Warren Buffett probably said it best that, you know, stocks are the one thing the American consumer refuses to buy when they're at their cheapest and only wants to buy when they're at their most expensive. So we invented this thing called the risk number. And the idea is, is we can create a short-term framework, a score to understand how to react to risk appropriately in the short term. And if we can do that using the risk number, that allows us to become a long-term investor. Somewhat counterintuitively, the only way to become a long-term investor is to make a bunch of really great short-term decisions along the way. So we focus on the short-term, very counterintuitive for our industry, but it has really transformed how our …

AI assessment note: “we invented this thing called the risk number. And the idea is, is we can create”

Q In order to understand and really, you know, have a lot of confidence behind that statement, you have to do cohort analysis over time to actually see if that pans out. But you have to kind of game that because you haven't been around for 80 years. So How do you know your current short-term decisions do indeed pan out over the long term?

A Well, I'll put it this way. Um, we know that all the harm that comes from, you know, from when people make bad investing decisions, all that harm comes from short-term decisions. What I mean by that is something bad happens in the market. We get scared. We sell at exactly the wrong time. And the reality is what just happened was normal for the kind of portfolio that we've been in. So what we need to do is we need the context to understand how to make a good decision in the short term. Uh, and, and, and generally what we've seen is investors who get in all of a sudden, I'll give you a really good example. Investors will call advisors who aren't using Riskalyze and they'll say, um, hey, my portfolio is down two percent. Am I okay? Um, the normal behavior for that portfolio is that in a six-month period, it could be down eight percent. It could be up 12%. Like, that's normal for that portfolio that they're in. When you equip the investor with that kind of short-term framework and context for what is normal, you allow them to, like, get comfortable and go, okay, I get it. Like, I've got to be comfortable with my portfolio dropping eight percent in a six-month time frame, or I have no business investing in this portfolio in the first place.

AI assessment note: “When you equip the investor with that kind of short-term framework and context”

Q But, but, you know. That's what I meant. You guys split the equity fifty-fifty?

A Well, yeah, but we quickly brought in, we brought it, we, we, we acquired some patents as a part of that with stock. We actually raised capital from the beginning, so none of us started, neither of us started out with fifty-fifty, so, so, but, you know, we, we were both on the board, and we built a great board around us, even before we brought on real investors, you know, by, like, institutional capital, okay? Um, but our early investors have done very, very well, um, you know, knock on wood, and that's great. We've actually, you know, done a transaction that, that bought back some of their shares, and so they've, they've seen good returns, and, and have done really What's a good return, like, 10%, 20%? No, there are some of our early investors who've earned a 10 X return already, um, from the company. So that was great for them.

AI assessment note: “neither of us started out with fifty-fifty”