Riskalyze Compliance Cloud aims to single out portfolios that drift outside a client’s risk tolerance
In a press release today, Riskalyze, the provider of client risk tolerance quantification tools, announced the anticipated launch of Compliance Cloud, a utility that identifies portfolios that are outside their risk tolerance ranges established for individual investors.
Compliance Cloud was first announced by Riskalyze CEO Aaron Klein at the Laser App 2014 conference last month in San Diego. Today’s press release sheds additional light on the benefits Compliance Cloud offers to its institutional users.
Compliance Cloud aims to reduce the number of unsuitable portfolio allocations applied to client accounts by automatically screening allocations advisors establish for clients and compares the amount of risk in each portfolio with each client’s risk score (likely the Risk Number™ generated by a Riskalyze assessment).
Any portfolios found to significantly exceed the client’s risk tolerance (or be significantly below) will be flagged by Compliance Cloud for further review. Not only is this automated risk scanning useful to individual advisers and broker-dealer representatives, Compliance Cloud will be a welcome feature for any institutional compliance officer responsible for oversight on thousands of the institution’s representatives.
‘Big Data’ for broker-dealers and institutions
Compliance Cloud is intended for use by broker-dealers and large registered investment advisory firms. Once again, these institutions typically have oversight over thousands, and potentially millions, of investor accounts, and manually identifying risk characteristics of investor portfolios is costly and inefficient.
Riskalyze takes advantage of the general adoption of “big data,” where useful insight and information is extracted by processing large volumes of disparate data spread across multiple systems. In Compliance Cloud, Riskalyze uses risk analytics obtained from millions of individual client portfolios and compares the data with risk tolerance data identified during the client data gathering and on-boarding process.
Historically, financial institutions and compliance officers lacked the tools to programmatically assess millions of holdings each day. Instead, client portfolios were selected at random and then spot-checked against the client’s (often incomplete or outdated) risk tolerance information.
Orion Advisor Services Integration
According to the Klein, Compliance Cloud has been in beta testing for several months with the general release of the product anticipated in October this year. In addition, Orion Advisor Services, the nation’s largest privately held portfolio accounting service bureau, was identified by Riskalyze as “the premier launch partner” of the Compliance Cloud solution.
Compliance Cloud will be made available directly to Orion Advisor Services’ RIA clients where advisers can take advantage of the integration of reconciled portfolio accounting data, avoiding duplicate or manual entry of client holding information into Compliance Cloud.
Pricing for Compliance Cloud was not disclosed in the company press release, so check back in here at FPPad for more updates as this product enters the market.