By: Aaron Klein
Co-Founder & CEO, Riskalyze

 

As an advisor, when you build a portfolio for a client, you typically have a common set of tools that you use — the “old reliable” funds that you’ve been building your portfolios with for years.

 

But sometimes, you have to go outside that core when you need to look for something special that will solve a particular need or a desire that the client has.

 

Sometimes, you might sense there’s an opportunity to upgrade a fund in the toolbox. 

 

The problem advisors have traditionally run into with these two fund selection process scenarios is that it takes too much time, tinkering, and frustration to get outdated boolean screens configured. Finding securities should be fast—and even fun—but it’s not.

 

I’d love to show you something that represents an opportunity for you to consolidate some of your technology spending, get more efficient, and deliver the best for your clients—all while helping you locate the exact fund you need to find, faster.


Today’s Fund Screening is Like the Internet in The 90s


 

The old way of trying to find that perfect new fund is to build a filter or a screen. Effectively, you’re clicking through a bunch of filtering mechanisms to drill down and find the needle in the haystack.

 

It’s not unlike how we navigated the internet in the 1990s.

 

Remember Yahoo? The “h” in Yahoo actually stood for “hierarchical” because it started out as a kind of a screener for websites. You’d start by selecting “Business and Economy,” then “Economic Indicators,” then “Bureau of Economic Analysis”…basically you just kept drilling deeper and deeper to try and find what you were looking for. Tedious and slow.

 

Then Google came along, and we just type what we want, and it arrives.

 

Most Investment Research Today is Tedious and Counterintuitive

 

But with the way that most investment research works today, you’re stuck back in the Yahoo days. It involves a lot of clicking.

  • You start by selecting which type of fund you’re looking for—and have 13,284 options.
  • Then you scroll through a near-infinite list of possible filters, pick one, and click-click-click to filter more settings, and your list drops down to 9,315 options.
  • Then you scroll back through and find another filter, and click-click-click to manage more settings—and oh, this one has a text box to fill out! Is this a percentage value? Is it filtering for above or below this value? I guess we’ll find out! And then it drops down to 2,152 options.
  • And you keep going—it can take ten minutes and 45 clicks until you’ve painstakingly added enough filters to get your search down to a manageable set of funds.

 


Simplifying Fund Discovery with the Risk Number and Riskalyze GPA


 

Now, one of the reasons this process is so arduous is that we don’t actually need 1,200 different filtering criteria to find the perfect fund. In fact, a big part of what we need are just two incredible metrics — the Risk Number, and  Riskalyze GPA.

 

The Risk Number and Riskalyze GPA

 

The Risk Number quantifies the risk of a fund, and GPA measures how much return efficiency we get in exchange for the risk the fund is taking.

 

So we asked ourselves—what if we reimagined this entire process? How would we create a powerful, intuitive, easy way for advisors to intelligently discover that perfect fund to upgrade their toolbox, or solve a specific problem for their client?

 

Introducing: Discovery

 

We’re extraordinarily excited to introduce Discovery — the intelligent way to search the universe of securities and find the perfect fit for your clients and their portfolios.

Here’s a little look at how it works.

 

A Discovery Test Drive

 

Imagine we’re working with a brand new client, Diane. She was self-directed before and one of the things I’ve noticed is that she has a stock holding in “The Gap” (man, talk about the 90s!), and when I pull up that fund, it’s really underperforming with a very low Riskalyze GPA of 2.8.

 

I want to find a good fund that will give her some of that consumer exposure she was getting with The Gap. So, let’s go to Discovery!

 

We went and spent some time with advisors, talking about the criteria you use to find funds, and we discovered something interesting. Every single one of the searches you like to do with the cumbersome tools out there today really end up using a maximum of 13 key criteria.

 


The 13 Criteria to Find the Perfect Fund


Below: The Risk Number, Riskalyze GPA, Security Type, Net Expense Ratio, Equity Sector, Market Cap Size, Annual Dividend Yield, Style, Historical Annual Return, Max Drawdown, Alpha, Beta, and Standard Deviation. 

 

So we’ve made Discovery incredibly easy to use — just point and click to set criteria, and find the perfect fund that fits your portfolio or your client.

  • I want to stick with an ETF for my example portfolio.

  • The Gap was a Risk 98, but I want to look at fund options between Risk 40 and 75.

  • Let’s search for consumer defensive funds.

 

 

I’ve still got 13 choices though, so let’s think about the quality of these funds. What if we look for a Riskalyze GPA of 3.8 or higher?

 

There we go... I am able to locate a variety of great funds that will work perfectly for Diane’s portfolio. When the time is right, I can easily jump back over to Diane’s portfolio and add the right fund.

 

It’s easy and intuitive.


My Favorite Shortcut in Discovery 


The moment we realized just how much faster Discovery makes investment research, we asked ourselves: “Is there anything else we can do to really push the limits of how efficient this could be?”

 

And it turns out the answer was yes. We’re using cutting-edge natural language search technology to give Discovery some superpowers when it comes to searching the universe for just the right fund. And it’s so incredibly fast. 

 

Natural language search means I can do that same search I illustrated earlier, but I can do it all by keeping my hands on the keyboard the entire time.

 

Now you’re just typing instead of pointing and clicking.

  • ETF [enter]
  • Risk 40-75 [enter]
  • Cons [enter]
  • GPA 3.8 [enter]

 

You can get your search done in literally seconds, without removing your fingers from your keyboard.

 

Discovery's Natural Language Search

 

Discovery’s natural language search starts with about 35 keywords it will recognize to let you rapidly set criteria and discover exactly what you’re looking for.

 

As you use it, you may search for something that doesn’t pop up immediately. Rest assured that both the algorithm and our team are learning with every search you make, so that we continually innovate here and make it easier and faster for you to find what you need.

 

With Discovery, it’s never been easier to find the solutions you need to solve big problems for your clients.

 

Going Beyond Your Standard Security Research

 

Discovery searches the universe of stocks, ETFs, and mutual funds today, but it’s a quantitative engine, so we expect to expand its search capabilities to other types of securities, strategies, and products.

Discovery is a free upgrade for every advisor with Riskalyze Select or Riskalyze Elite and is now live for every account. Those equipped with Riskalyze Elite can drill further into the funds they find using Individual Security Analysis (ISA). About 70% of the advisors who join Riskalyze today choose Elite, so that means most of you will immediately see just how beautiful Discovery is when combined not just with ISA, but with Detailed Portfolio Stats tools that you know and love.

 

Want one of us to show you around? Request a demo here and a specialist would love to help out!