Riskalyze is moving further into portfolio management and trading automation, according to announcements made at its virtual conference this week. Last fall, Riskalyze announced a partnership with trading network Fix Flyer in a move that put the risk metric software developer more firmly in competition with trading and rebalancing solutions, including TD Ameritrade’s iRebal.
This week, the company extended that move, revealing tax-aware trading, such as automated tax-loss harvesting and “intelligent tax optimization,” which allows advisors to set parameters around a capital gains budget based on a client’s risk metric, while running tax-aware trade scenarios.
Riskalyze’s major announcement was combining “risk alpha” with “tax alpha” using automation and scalable software-based techniques. “About 70%” of advisors use a manual trading approach to adjust client portfolios, said Aaron Klein, CEO of Riskalyze. Others use “legacy rebalancing products [that] are actually even worse than manual trading on being easy-to-use.”
Riskalyze is introducing tax-aware trading to its platform that reduces the number of decisions an advisor needs to make when deciding which tax lots to harvest, Klein said. The firm’s software can account for a capital gains budget and project future trading decisions to keep the client’s portfolio close to their preferred risk metric. The tool is meant to help advisors avoid making tax-aware trading decisions that could upset client’s risk preferences.
In order for advisors to capitalize on this software, they need to be working with custodians that support selling shares in specific tax lots. Charles Schwab, Fidelity, TD Ameritrade and RBC are all listed as supporting such trading, while Riskalyze is working to get LPL Financial and Pershing on that list.
Intelligent Tax Optimization will enter general availablity for most custodians by the end of September, said Klein, while Automated Tax-Loss Harvesting will be available for all custodians who can support it “later this year.”
Riskalyze also partnered with a firm used by Dynasty Financial Partners—Halo Investing, the platform allows advisors to monitor structured notes for their clients, analyze trends and sell for access to secondary liquidity. At Riskalyze, Halo will allow advisors to analyze “tens of thousands” of structured notes and move between the two platforms.
Lastly, Riskalyze demonstrated its commitment to more flexibility in portfolio benchmarks and improvements it’s making to the proposal generation process. Using Detailed Portfolio Stats, advisors can compare proposals to current portfolios, “a great way to highlight your winners and your losers,” said Jonathan Scott, director of core product at Riskalyze.
Scott also detailed proposal generation improvements. Using a product called Portfolio Sandbox, advisors can test adjustments to a portfolio and see its impact across a range of analytics, including how different investment sectors relate to one another. Once the advisor finalizes the portfolio adjustments, the changes are pushed into a proposal, which can be shared with a client.
“We're in a new decade,” said Klein. “‘Investment Alpha’ doesn't cut it anymore. It's all about ‘Tax Alpha’ to make you your client's tax superhero.”
“And ‘Risk Alpha,’ for this risk-first decade,” he added.
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