The risk analytics vendor will use the money to hire more staff and bolster its cutting-edge systems such as a robo platform.
Riskalyze, an Auburn, Calif.-based risk analytics vendor, reports that it has received a $20 million minority growth equity investment in an initial “outside institutional round,” led by FTV Capital, an equity investment firm.
FTV, which specializes in fintech-related investments, says that it has raised more than $2.7 billion for positions in 93 portfolio companies that are focused on enterprise technology and services, financial services, and payments and transaction processing. FTV’s investment will be “used to bolster and expand [Riskalyze’s] line of digital offerings which already includes the company’s flagship Riskalyze product, the Autopilot robo platform, and Compliance Cloud big data analytics.”
The Riskalyze software enables investment advisors to “capture a quantitative measurement of client risk tolerance, and use that data to win new clients, capture and meet expectations and quantify suitability,” the vendor says, pointing out that it “now employs more than 106 Riskalyzers from its offices in Sacramento and Atlanta. The company expects to aggressively hire new employees, especially on its product and engineering teams.”
Robo advisors, such as Riskalyze’s Autopilot, are the “next step in the evolution of asset management and financial advice,” according to a study by venerable management consulting firm A.T. Kearney, which estimates that approximately $2 trillion will be managed by robo advisors by 2020.
As part of the Riskalyze transaction, FTV Capital managing partner Brad Bernstein will join the Riskalyze board, according to its statement.
“Frequent episodes of market volatility since the financial crisis have reinforced the imperative for investment advisors to have a deep understanding of their clients’ risk tolerance,” Bernstein says in the statement.
Bernstein also says in the statement that the Riskalyze technology is a “unique digital offering that is significantly improving the advisor’s ability to quantitatively measure a client’s risk profile and build a portfolio that accurately reflects that profile. The regulatory environment, and most recently the DOL [Department of Labor] fiduciary rule, is providing further tailwinds to the rapidly growing demand for Riskalyze’s digital platform.”
“We’re excited to expand our impact on the industry and the 240,000 advisors we built Riskalyze to serve,” Aaron Klein, Riskalyze CEO, says in the statement.
Financial Technology Partners LP and FTP Securities LLC “acted as sole strategic advisor to Riskalyze in this transaction,” the company says.
Among the companies that FTV has invested in are Aspire Financial Services, ETF Securities, Financial Engines, IndexIQ (acquired by New York Life Investment Management), InvestCloud, PowerShares Capital Management (acquired by Invesco), Swan Global Investments, True Potential and VelocityShares (acquired by Janus Capital), per FTV.
Its “target” companies’ characteristics, FTV says, include: “$10 million to $100 million in revenue, 20 percent plus annual revenue growth, profitable business models, and blue chip enterprise customer and distribution partner validation.”
In September 2016, FTV closed its fifth fund, with $850 million in limited partner contributions. The fund will “continue to focus on high-growth companies with innovative, proven technology and service offerings, established business models and strong management teams that value FTV’s collaborative approach to building great companies,” FTV says. FTV has offices in San Francisco and New York.
For more information about the fiduciary rule, go to www.dolfiduciaryrule.com/.
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