Earlier this year, after a successful 12-year run, one of the most familiar brands in wealth management technology was retired as Riskalyze and became Nitrogen.
The change was made because over the years Riskalyze had grown well beyond a simple risk-tolerance and risk-management tool for financial advisors, said CEO Aaron Klein.
"I invented the brand," said Klein. "I still remember when my wife said to me, 'What!? You're going to rename one of our kids?" It definitely was a change for us all, but we kind of felt like we had to do it."
Too many of Nitrogen’s potential clients and customers were becoming hung up on the name Riskalyze and identifying the company’s platform for its risk tolerance capabilities alone, said Klein. The platform’s actual depth—which include an expansive suite of growth-oriented tools for advisors and wealth management firms—had become “an uphill battle,” he said.
So Klein set out to find a new name that would better represent what’s become his company’s primary focus: creating technology that helps advisors grow, attract new clients and retain their current clients.
Why Nitrogen?
Nitrogen, according to Klein, is more than just the seventh entry on the periodic table of elements. The firm selected its new name with the help of Lexicon Branding, a consultant that has helped the likes of Apple, Intel, Procter and Gamble, Sonos and Impossible Brands come up with company and product names.
“Nitrogen is the essential element for growth in our universe,” said Klein. “It evokes growth and velocity and helping. It's a force-multiplier, a catalyst for change. We looked at 40 different ideas, but when nitrogen came up, we felt we had to have it. It evoked what we do.”
Klein said that Nitrogen’s focus is both on serving established enterprise firms and supporting the growth of smaller and newer wealth management practices—hence it has differentiated its services into Elite for solo practices and smaller ensembles, and Ultimate for large enterprise firms with dozens, hundreds or thousands of advisors. A newer service level, Ignite, concentrates on driving growth for the newest and smallest wealth managers.
But regardless of service level, Nitrogen strives to make its full range of capabilities available to its client firms, said Klein.
While many legacy wealth management technology providers have moved to create asset management platforms and model marketplaces to support advisors, Nitrogen does not intend to launch a TAMP in the future.
“We will stay a pure-play technology company, we’re not going to launch a TAMP because that’s just not who we are,” said Klein. “We’re not going to ask firms for a piece of their basis points for two reasons. One is that we very clearly have technology company DNA, the other is that there are a lot of companies who have added TAMPs to their business as they have grown, and as it turns out, people are valuing those firms very differently: people value technology companies one way, and TAMPs another, and for our strategy it is best for us to remain a technology company.”
At last year’s Fearless Investing Summit, Nitrogen’s annual conference, Klein pledged to attendees that his company would never found a TAMP.
As it turns out, that pledge has resonated with advisors, he said.
“I underappreciated how much our clients—large RIAs, enterprises and mid-sized RIAs—are building TAMP businesses inside of their firms as additional revenue sources," he said. "So When a tech provider becomes a TAMP, it feels competetive to them to their core business. ... A lot of mid-market and large ria firms and enterprises tell us that this clears way for us to work with them at a deeper level, because Nitrogen will not be competing with any internal TAMO or drawing their advisors away.”
Defending The Risk Number
Nitrogen’s core and legacy functionality still analyzes a client’s tolerance for risk and the risk contained in client portfolios or proposed portfolios, assigning each a “Risk Number,” a quantification of their sentiment towards risk itself. Like most risk tolerance tools, a client’s sentiment towards risk is registered using a questionnaire.
This practice of using a qualitative questionnaire to quantify risk tolerance or risk sentiment has come under fire from some within the wealth management industry as too abstract and potentially arbitrary to be an effective tool. Others have questioned whether measurements of a client’s risk tolerance or capacity move with financial markets—whether they’re really more of a measure of market sentiment than a honest illustration of a client’s feelings
While Klein couldn’t speak for every tool and technology measuring risk tolerance on the marketplace, he did defend Nitrogen’s Risk Number as a true assessment of risk.
“We invented something differentiated from a typical risk tolerance questionnaire,” said Klein. “It's stable and more reflective of how ppl are going to feel, and it's not rocket science. We cannot create a paper-based version of our questionnaire because in each case, the questions are based on dollar amounts unique to the investor. It's like a make-your-own adventure book. The questions are absed on your investment amount and where you prefer risk and where you prefer certainty.”
In recent years, the company began to track how stable its Risk Number actually was in the face of market volatility using “check-in questions” that ask clients about their market sentiment before a risk tolerance assessment is completed.
“Whether they indicated that their sentiment towards the market was positive or negative, it didn’t impact their Risk Number,” said Klein. “Over 2021 and 2022, the inflation crash hits. <arket sentiment dropped like a rock. Our data nerds gave every person who clicks positve a plus one, and everyone who clicks negatively a negative one, and our market sentiment index swung from +0.6 in 2021 to -0.16 in 2022, yet people’s Risk Numbers stayed within a 2% plus-or-minus range year-over-year. So the Risk Number created a stable measurement of how much risk clients are comfortable with in any market.”
Klein said Nitrogen’s risk assessment works because it uses real numbers that resonate with clients taking the questionnaire instead of hypotheticals, which grounds its work in more realistic, less abstract terms.