Analyzing Investment Risk with User Centered Design

Websites I Visit: I don’t visit a huge number of websites. Outside of the websites I use for school, one of my favorites (Reddit) has already been talked about. My professor recently got us access to a website called Riskalyze, which I have been messing around with and really enjoying. In addition to being incredibly user oriented, it’s a great tool for anyone thinking about investments as a career. I’ve mentioned that I’m interested in financial advising, which has an attractive job outlook for the future, although I’ve found quite a few people who think they will eventually be replaced by computers. Either way, this is a great tool to have access to because of the insights you can gain about your portfolio.

Riskalyze: The website is a paid tool for financial advisers that determines a client’s risk level (1-100, with 100 being the riskiest) and then chooses the portfolio best suited for them. The risk level is based on a questionnaire with general questions about their life situationrisk as well as ones like “would you rather potentially lose 25% and gain 35% or lose 10% and gain 5%”? The portfolio it proposes consists of the same fifteen ETFs and mutual funds no matter what, but changes the weighting based on risk. You can also search any publicly traded stock to find the risk level that they’ve determined. This is important, because based on your risk level there is a maximum gain and maximum loss that you want to be exposed to, which you can use to guide your portfolio decision making.

There is also a separate page dealing with retirement plans. The company developed a program called Autopilot that takes a client’s risk number and uses that to quantitatively map out their retirement. This was a great choice by them because it’s so interconnected with everything they’re already doing.

User Centered Design: The website succeeds because it has one clearly defined target audience: financial advisers. Riskalyze gives them the exact information they need to make decisions. They based their entire website design around the delivery of this information, which is why they can charge up to $175 per month for each member of the team that is using it. It also factors in clients, making it easy for advisers to manage relationships. While there may be other people who could come across it (such as a student, obviously), they haven’t factored that consideration into the website at all.

Perhaps this is a mistake on the website’s part, because the information they’re collecting is useful for much more than financial advising. Individual investors (which could become more common if millennials don’t get on board with the idea of someone managing their money) could benefit from having all of this information available to them, as could anyone individually planning for their retirement. Anyone valuing a company, including investment bankers and venture capitalists, could benefit from the math that Riskalyze is doing to determine risk. And finally, companies could use it to see what the market thinks about how risky of an investment they are.

Why This Matters: Everything has become digital, as we already know. Whether that’s your personal finances or your relationship with an advisor, there are hundreds if not thousands of websites and apps that try to cater to you in some way. For a website like Riskalyze, are they better off sticking to what they do? It seems like financial advisers will be around for a while longer and have a role to play in the digital client relationship, meaning Riskalyze will serve a purpose.  However, it might be better for them to branch out into some of the markets that I have discussed, especially marketing themselves to individuals such as college students.

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One thought on “Analyzing Investment Risk with User Centered Design

  1. Hey John,

    Great post! I think you and I are both taking the same investments class this semester. I haven’t had a chance to use the tool yet, but I believe I have a good understanding of how Riskalyze works and functions after reading your post. I had a chance to intern with a financial planning firm this summer, and we used a service similar in nature to Riskalyze. Like you had mentioned, it is really important to make sure you are meeting the needs of your clients when investing on their behalf. Thanks for sharing this with our class!

    – Curran

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