Auburn’s Riskalyze, a financial software startup, has tripled the size of its staff over the last two years and now employs about 120 people, and that momentum isn’t fizzling. CEO Aaron Klein said he expects to make roughly 100 new hires this year.
Klein co-founded the business with money manager Mike McDaniel and tech guru Matt Pistone in 2011, using their own funds in addition to money from family and friends. Their signature product, Riskalyze, helps financial advisers analyze their clients’ tolerance for investment risk and ascribes each one a so-called risk number from 1 to 100. The most aggressive investors have higher risk numbers, while conservative investors come in lower.
“We’ve invented something that is spreading across the industry like a wave because it’s a new way to deliver advice to clients,” Klein said. “Let me give you an example: We had an adviser who started with us. He does his own risk number. He’s a 51. He plugged in his own portfolio and it’s a 52, and he goes, ‘All right. I know what I’m doing here.’ ”
Then, Klein said, that same adviser imported all of his clients’ portfolios into the Riskalyze software, and he found that all the portfolios had risk numbers ranging from 45 to around 60. As he did his client assessments, however, he discovered that their risk numbers ranged from the 20s to the 80s.
Klein said the adviser came back to the Riskalyze team with the results and said, “It didn’t take me too long to figure out the pattern. I was really good at figuring out who was more conservative than me and who was more aggressive than me, but I was anchoring them to me. I was making them a little bit less risky than me or a little bit more risky than me. … Now I understand why my conservative clients were so nervous, and my aggressive clients were so frustrated.”
The real power of Riskalyze, however, hits investment advisers when they realize they are getting significantly fewer calls from clients who better understand their risk tolerance and how it affects portfolio performance, Klein said. In March 2014, when this columnist first interviewed Klein, Riskalyze was being used by roughly 1,000 financial planners. Now it has been adopted by 15,000 advisers managing more than $121 billion in assets.
The company has grown as well and now occupies a three-story mixed-use building in Auburn. Still, Klein told me, that may not be enough, and he may have to lease more space nearby. Despite all this growth, Klein said, he, McDaniel and Pistone wanted to ensure that all new hires were grounded in company values as soon as they started.
By being intentional about teaching core values, Klein said, the company has helped to keep the entire team on mission and expanded sales at a rate that helped Riskalyze secure a $20 million investment from private equity firm FTV Capital in October. The company’s staff is expected to expand from about 125 to 220 people this year.
“Every new class of Riskalyzers who come aboard, I personally do mission and values training with them to help them understand where we’ve been, how we work,” Klein said. “We will talk through our mission of empowering the world to invest fearlessly. That’s how we’re going to change the world.”
Klein said he starts by defining the problem for them: Average investors are buying equities when markets are high, and they sell out of fear when markets decline. That’s exactly the wrong time to sell, so they wipe themselves out, then wait until the market feels safe again and buy back in at higher prices than they sold their shares. Enough repeating of this cycle, and they can end up losing much of their life savings. The Riskalyze assessment and the education modules help investors get out of that cycle and invest with confidence for the long term.
“We go through our whole philosophy of why we exist,” Klein said, “and then we go through our core values – how we work together. A really good example of one of our core values is delight. We say every interaction with the product, an email, phone call, meeting or even the bill is designed to delight our customers.”
McDaniel and Klein gave their employees a heaping dose of this core value in the holiday video they showed at their company party. In it, the two men meet up to head to the party and find themselves wearing matching attire: blue button-down shirts and khaki pants.
A clearly dismayed McDaniel insists the two step up their game. The next thing you know, they magically appear in tuxes as the music segues from tinkly elevator music into a guitar rock anthem. They then take a rambling path to the Christmas party, where their risk numbers pop up in balloons to explain their antics: why McDaniel creeps along like a Sunday driver, for instance, while Klein burns rubber as he exits a parking lot.
The duo end up being tossed out of their car by a police officer, portrayed by Riskalyze marketing chief Justin Boatman, who told Klein: "Do you see that sign over there, Mr. Klein? (Mr. Clean, as Boatman pronounced it) There's a two-digit number on that sign, and I don't know if you know this, but you're supposed to be in alignment with that number."
If any employee found any element of the video questionable, they could have spoken up, as prescribed by a core company value.
“Teammates are empowered to pull each other aside, respectfully, kindly, nicely, and tell each other that some aspect of their work needs to be better or they’re going to screw up our company,” Klein said. “People say that to each other around here.”
In Riskalyze’s high-feedback culture, Klein said, there are also no “meetings after the meetings.”
“I don’t know if you’ve ever seen an organization where you have the meeting after the meeting. You have the meeting. Then you have the ‘real meeting’ after the meeting to decide what is really going to be done. And that (outcome) is totally different from what you all decided to do in the meeting.”
Instead, Riskalyze’s veterans have continually stressed open, direct communication, Klein said.
“Every single person in the organization is empowered to say, ‘Whoa, whoa, whoa, time out. We were just in a meeting together. You can’t walk out of the meeting and say, “That was such bull----.” You can’t do that here. Let’s turn around. Let’s walk back in the meeting and let’s sit down and let’s have the real discussion.’ ”
Correction: This column had incorrectly stated the name of Riskalyze's marketing chief. It is Justin Boatman. He played the part of a police officer in a video shot for Auburn-based Riskalyze.