The newly released SmartRisk tool from Covisum is a web-based platform designed to gauge the risk of a client’s portfolio based on its holdings. The tool allows advisers to import portfolio information from spreadsheets or other CRM [customer relationship management] software and then provide the client with multiple model portfolios demonstrating different risk estimations.
According to the firm, SmartRisk calculates downside expectation and determines if the risk the client is taking aligns with what it can handle. An “asset interaction” score also notes the degree of a portfolio’s diversification.
“Clients don’t always react well to negative news—behavior plays a huge role in estimating risk,” says Joe Elsasser, Certified Financial Planner (CFP) and Covisum president. “In 2008 and 2009, it became obvious that the way we have been evaluating risk is not sufficient. Our goal is to get sophisticated tools into the hands of every adviser before it’s too late.”
The firm, in a statement, said, “Advisers can now efficiently link a client’s risk tolerance to portfolio risk, and establish proper downside expectations to avoid potential behavioral mistakes that can sink a portfolio when markets fluctuate.”
“Much like Social Security and tax, investment risk is an essential part of the discussion as people are saving for and preparing to retire,” Elsasser says.
Joining Covisum’s Social Security Timing and Tax Clarity tools, “SmartRisk takes into account what an adviser needs to communicate; it reveals the real risks that the client is taking in its portfolio, in simple terms the client can understand,” the company stated.
SmartRisk was initially a risk-management platform for financial services professionals that was acquired by Covisum early this year. It was developed by a team of quantitative technology professionals led by Ron Piccinini, Ph.D., a risk modeling expert who now serves Covisum as director of product development.