Riskalyze - A Conversation with Aaron Klein

In this birthday edition of The Money Script Podcast, host Yohance Harrison celebrates his special day with a captivating conversation featuring Aaron Klein, co-founder and CEO of Riskalyze. They dive into the power of risk assessment tools for financial planning, investor psychology, and the importance of aligning risk with individual goals. Aaron shares insights into the challenges of today’s volatile markets, how Riskalyze empowers advisors and investors, and why he believes financial literacy starts with understanding risk and reward. With personal anecdotes and actionable advice, this episode is a must-listen for anyone looking to invest fearlessly.

Engineer/Editor: Gregory White
Music: Kevin Gullage

Transcript

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Yohance Harrison 0:14

Welcome back to the Money Script podcast. It's your host, Johannes Harrison. So happy to be with all of you. Thank you for all the outpouring support that we've received. We did get dodged by the tornadoes. None of those hit us. But I am in tornado alley. It happens. And then, of course, I'm in the great state of Texas, which has continually found its way into the news. If you haven't seen Matthew McConaughey speaking at the White House press conference, a tearjerker, I encourage you to give that a listen. No matter where you stand on the issue, it's actually quite compelling. And I like Matthew McConaughey. He's great. I don't know if I'm liking the new Lincoln Lawyer, though, that they did on Netflix. It's kind of. I'm longing for Matthew McConaughey, my wife. I think she's got five episodes ahead of me. She just left me behind. But that's okay, because I'm going to leave her behind in Yellowstone and Stranger Things eventually. Because, you know, who has time to watch all these shows? But that's not what we're here to talk about, of course. This is a financial advice and financial planning podcast. It's the Money Script podcast. It's all about learning how to get more in touch with your own Money script and make better decisions about your money. And also kind of accepting some of the things that happen in the economy, happen in the market, happen around us. I know dozens of our listeners, you've reached out. You've been recently laid off because you were in some of the industries that are not doing as well as they used used to. And so you're struggling with that a little bit. And I just want you to know that we're here for you. If you need some support, if you like me to take a look at your resume or, you know, just want to bounce some ideas off of me, please, by all means, reach out and just know that you have a village, you have a community. Make sure you're reaching out to your community and saying, hey, here's what I'm going through. How can I help? You never know where that help may come from. I am so excited today, by the way. It's my birthday. Did I mention it's my birthday? It's my birthday. I don't have rights to the song, so we won't sing it. I'll spare you that. But it is my birthday. And on my birthday, I have the unique, distinguished honor I have Aaron Klein. We've been trying to match our calendars for a long time. If something didn't change in his schedule, it changed in mind. But we finally did it. Aaron Klein is the co founder and CEO at RiskAlize. Look, I love Riskalyze Advisors out there. We all have our tech stacks. Okay? I'll admit my CRM is at the top, but right after CRM is Riskalyze. It's right there. It's like, okay, are they in CRM? Okay, great. Send their Riskalyze out. He's the CEO of Riskalyze. It's a company that invented the risk number and really empowers the world to invest fearlessly. And I am so excited to have him with me today. And we have so much to talk about. So, Aaron, how are you? Welcome to the Money Script podcast. Oh, man.

Aaron Klein 2:49

So great to be with you. And I cannot believe I get to be on the happy birthday Johance edition of this podcast. This is so awesome. So great to be with you.

Yohance Harrison 2:58

I will remember this day for the rest of my life. I will. I will. Like, what were you doing on your 42nd birthday? I was with Aaron doing a podcast, man, and we had so much fun.

Aaron Klein 3:08

Now we got to figure out if we can match this up with your 43rd birthday and be like, at a conference or something and grab a drink. We could make this a tradition.

Yohance Harrison 3:16

I'm with it. I'm with. I am fearless. I'm with it. Let's do it. And by the way, we have some fun for you. Thanks to all of the fintwit community out there. I've got some special questions we're going to ask Aaron later about some risk alive. He's going to sign some numbers to some everyday things that we do. I got some from my team. I got some from the Twitter followers there. We're going to have some fun. Let's really just start, Aaron, with what's going on in the world today. I mean, we went through the shortest recession I've ever seen in 2020, right. And then went through the fastest recovery I've ever seen. And here we are again, starting to tiptoe into what might be a recession. I know we don't have all the numbers yet, but the market is definitely signaling, like, hey, look, it's things got to calm down. You got Target saying the whole store is on sale. You got Walmart saying, yeah, we don't quite know what our consumers are buying anymore. And then you have, you know, just everyday investors saying, wait, I used to have about 20, 30% more in my retirement than I do now. Now it feels like as we're recording, this is June, my birthday month. It feels like we've kind of met somewhat of a bottom, but there's a lot of folks saying it's probably a false bottom and we won't know if we're in a recession until July because we gotta wait for these GDP numbers to come out. But a lot of people are starting to realize, really try to reassess how they view risk, especially the new investors. So I'm just wondering from your. I mean, you see multiple firms, multiple advisors, dozens upon dozens of, dozens of thousands of individuals that are using the tool. What are you seeing out there as far as just investor sentiment?

Aaron Klein 4:54

It's definitely a unique vantage point because we have somewhere on the order of two and a half million American households represented in risk allies across the tens of thousands of financial advisors that we serve. And so I think what's definitely true is that, boy, are we in a risk first decade or what?

Yohance Harrison 5:12

Oh, man, you walk into the beginning.

Aaron Klein 5:15

Of this decade and you go global pandemic, civil unrest, divisive election, rampant inflation. And then Russia invades Ukraine and I'm. Alien invasion. Right.

Yohance Harrison 5:26

Waiting for aliens to land.

Yohance Harrison 5:30

Or the zombie apocalypse. That's all that's left. Bingo.

Aaron Klein 5:34

Well, the deal is, if you believe in reversion to the mean, it's going to be a really calm rest of the decade. I'm not betting on it. I'm not betting on it. It feels like this kind of stuff is ratcheting up a bit in our world. And I like the point that you made that now we're starting to look at some of these stores and some of these public companies that are coming out. And these are companies that were so incredibly predictable and so incredibly well run that they could tell you what their earnings were going to be within a couple of percentage points, three months in advance. And that a big part of that was managing their inventories and knowing how demand was going to come out. And they don't know which way is up. Right now if Walmart and Target and Amazon don't know which way is up, and you've got Amazon overbuilding by a couple hundred warehouses or something along that order, it's crazy. They're a couple billion dollars overbuilt in terms of warehouse capacity or something like that. Right. It's a very interesting time in our world and it's creating a lot of risks that are, frankly, challenging and hard to quantify. This is an environment where we have been able to be at our best in helping financial advisors tell their story more effectively. A big reason for that is we don't try to predict the future. I think that it's absolutely foolish to engage in what I call predictive guesswork and try to build these risk models that are going to tell you what's going to happen in the future. Because guess what, the future is less predictable today than it has ever been in the past. And a little secret, nobody could really predict it well in the past. They just got good at some things they could control. The truth is, nobody could really predict in a complicated system, as complicated as the markets, what was going to happen in the future. At the end of the day, that's where we, I think, are at our best, because we're able to help financial advisors like you turn around and help their clients see and understand the things that they've been telling them for years. I think you would probably agree, and I'll let you fill in for yourself, but riskalyze didn't create the message that your advisory firm is delivering to its clients. We just gave you a tool to help tell your story. And that's one of the things we say about technology, is that, great advisor, technology isn't an end in itself. It's a means to an end. It fades into the background so the brilliance of the work that you're doing for your clients can really shine through.

Yohance Harrison 7:59

Amen. Amen. When you talk about the message, what I really love about riskalyze is it gave me a consistent way to deliver the message over and over and over again. And so I'll get calls now from clients. And I have a few. We all, as advisors, have the few clients that are going to always freak out. And they may not be freaking out because they actually look at their portfolio. They're freaking out because they watch cnbc or they watched fox News or whatever. Fox Business, whatever it is, they watched it and they said, oh, things are horrible. And then they'll call me up. And I was like, you're at a risk. Number 30.

Yohance Harrison 8:37

Well, how much have I lost? How quantify. Let's talk about the word lost first. I had to ask her. I said, well, let's quantify what you mean by what you lost. And she said, okay, well, let's look at my statement. She's like, okay, well, you know, at the end of December, I had, you know, let's call it a million dollars. Okay? I was like, what do you have today, a million dollars?

Yohance Harrison 9:02

Well, they say that the market's down. Are you're not the market, you have a risk number 30. Now I did have to tell her you have a lot of bonds, which concerns me with interest rates going up, you actually we have seen your principal amount come down just a little bit instead of one point, you know, oh, 5 million, you just have the one. But did you really lose 50,000? I was like, no, you haven't lost any principal, you're fine and you're at a risk number 30. So my clients that are at a risk number 85. Oh, now we can talk about losses there. But they get it, they know. Because I love so in Risk Ally. So for those that haven't used Riskalyze, and by the way, if you don't have an advisor that uses Riskalyze, ask your advisor to talk about the tool Riskalyze. But if you haven't seen this, by all means reach out to us, Twitter, Instagram, email, website, what have you. I'd love to see. I'll send you the Risk Ally's questionnaire for free and you can figure out what your risk number is. And the most telling part is when my clients do the questionnaire and they get the risk number and they see that band that shows their six month probability and I can say to them, I say with 95% certainty, I know that within six months you're going to be somewhere between negative X and positive Y and there's a 5% chance you're outside of that right after Covid and. Right. And then the recovery, we're both on those 5% chances. So it could happen 5% probability events, but with 95% certainty, I know you're going to be in this range and some of them will look at that range and like I could lose 28% in six months. Yep. You could also gain 32.

Aaron Klein 9:27

Right.

Aaron Klein 10:43

Yeah, you have to decide what you want. When we rolled that out, it was kind of a really interesting step forward because part of the reason why we were able to deliver that to the industry was just fresh eyes on the problem. And when we delivered that, it was very interesting because a lot of advisors were like, oh my gosh, I finally found a way to get across a very simple concept to the client. Risk and reward go hand in hand. You don't get to have one without the other because that's what all the clients ask for.

Yohance Harrison 11:11

And I don't have to say words like alpha, I don't have to say standard deviation, I don't have to explain beta sharpe ratios. No. Risk and reward go hand in hand.

Aaron Klein 11:21

Risk and reward go hand in hand, the more we ratchet up the green number, the more it's going to ratchet down the red number and that range is going to have to expand. So we have to decide what we want in life and we have to decide what we're comfortable with. And I think that's just a great point on your part. One thing I would ask, do you use our check ins feature?

Yohance Harrison 11:39

Absolutely. That's a step in our workflow. Put everybody on the check in. And those emails come pouring in.

Aaron Klein 11:42

Okay.

Aaron Klein 11:45

Yeah, yeah. So smart. Because of the point that you're talking about with cnbc, we literally call that the CNBC Fox News antidote. Right. And nothing against our friends at CNBC or Fox News, it's just this, okay. They get paid to rile people up and get them to click and watch. That's their incentive. That's what they do. Okay. You and I get paid to calm people down and get them to make rational decisions. Okay. I look at it this way. Your clients, when they leave your office or your zoom call after a client review, okay. They are at peak psychology. Your client that you're just talking about, she's like, I'm a risk 30. Nothing can kill me. I'm in good shape. Johance has it handled for me. I've got it. And it will take mere days for CNBC and or Fox News and or whatever she's watching to like start bringing her psychology down. Okay. And the deal is, is that curve goes down faster for some people than others. I'm betting it's correlated with how many hours they have the Fox News or CNBC on the tv, but I haven't proven that one yet. Okay. But like, it starts going down, it has nowhere to go but down. I'm so glad that you're using it that I love that because that is how you get to have your finger on the pull speed of how fast that curve is going down for that client. So you can figure out when to jump in and like save their psychology before it hits rock bottom.

Yohance Harrison 12:02

Yes.

Yohance Harrison 12:10

Yes.

Yohance Harrison 12:43

Yes.

Yohance Harrison 13:07

I've also noticed that with the check ins, and this is important for a client of another advisory firm or you're doing it on your own, it's important to check in with yourself and your emotions because some of the worst decisions, financial decisions, have been made in a heightened emotion state. And especially as you're getting all this different stimuli from different areas, whether it's your friend at work or the commentator on the news or it's the random email that's coming into your Email box. And you're also going to seek out confirmation bias. You don't want to be wrong. So if you think the whole market's going to hell in the handbasket, that's all you're going to see. So, but if you could take that moment to kind of check in and say, okay, let me detach myself. How do I really feel about my risk versus reward? You know what's also interesting on this, Aaron, is that I'll have these conversations with the client and then we get that risk reward. And there's that little number that says a portfolio like this can expect X return. And so then I take that number and go plug it back into their financial plan.

Aaron Klein 13:51

That's right.

Aaron Klein 14:12

Yep.

Aaron Klein 14:17

Yeah, yeah.

Yohance Harrison 14:18

And then all of a sudden they're like, well, I can take on more risk than that. No, no, no, no, no. You said that you're not willing to have a portfolio that falls more than X percentage. Yeah, but I don't want to be working till I'm 60. Well, maybe we need to learn a little bit more about what risk really is for you. And I've had clients that have realized that their risk doesn't exist in the market. Their risk exists with the conversations they have with their spouse or their children about how they're going to spend their money.

Aaron Klein 14:49

That's profound.

Yohance Harrison 14:51

Their risk exists with the type of car they choose to drive. Their risk exists with the neighborhood, the size of the house that they're willing to buy or the job that they willing to take. That's where their real risk it's actually not in their portfolio.

Aaron Klein 15:07

When advisors started having that kind of conversation, I feel like risk was the only lever advisors used to pull. So it's like, well, if we can't meet your goals, push the risk lever up. And that's how we get the plan to work to meet your goals. And it's all great until the day that the market goes down and people freak out and they sell at the low. Right. I was talking to one of the smartest people in the technology space that I'd met in a long while. This is about five or six years ago. And this guy, very high profile executive in technology companies locally and super smart guy. This was back in the day when location mattered. So you were trying to find people who were local to you to hire. I'm talking to this guy and he doesn't work in the fintech space or the financial services space at all. Different kind of technology. And I just said to him, I'm telling him a little Bit about the company and what we do. And he goes, that's really interesting. Now this is 2015. He goes, that's really interesting. That kind of hits home for me. I'm like, tell me more. He says, well, in 2009, he goes, I sold everything and put it in cash. I'm like, wow. I'm like, how long did you keep it in cash? He goes, oh, no, it's still in cash.

Yohance Harrison 16:20

Oh.

Aaron Klein 16:24

Right.

Yohance Harrison 16:25

And this is someone that you said is an intelligent individual.

Aaron Klein 16:28

Yes. And he. 2009 to 2015, he's busy. He's got a busy job. He's making a lot of money. Okay. He's not growing the money that he. He's made. Okay. He's actually pretty good at savings. All his principal growth is coming just from saving new money that he's making. Okay. But he literally had everything sitting in a risk one savings account, like, on the sidelines. Okay. Probably worse. He probably still had it in the brokerage account just sitting in cash. He was making nothing on it. It's crazy. And it really does come back to confirmation bias. Exactly what you talked about earlier. Because when we started riskalyze, I had this insane thought. I'm like, we're going to defeat confirmation bias. That's what we need to do. We got to kill confirmation bias and defeat it, because it's the number one thing that just kills people in the markets. They see red and they're like, bad. Go away. Time to sell. Time to take risk off. Trying to take money off the table. They see green, they're like, go, go, go. Let's put more money on, more risk on. And that is buy high, sell low. That's what that is. And so we're like, we've got to defeat this confirmation bias thing. So we're probably, I don't know, a year, year and a half in, and I kind of turn to the team. I'm like, guys, we've been testing a whole bunch of different stuff and working the lab with lots of these focus groups and studies to try to figure this all out. I finally turned around, like, guys, you can't defeat confirmation bias. It's not possible. I'm convinced. I'm just convinced it's not possible. Behavioral scientists call it the mother of all biases.

Yohance Harrison 16:55

Nothing.

Yohance Harrison 18:00

Yes. Yes.

Aaron Klein 18:01

And it is. And so at that moment, it just kind of clicked into place, and I was like, you know what we need to do? We need to stop trying to defeat confirmation bias, and we need to harness it and make it work for the investor and that is what that 95% historical range is all about. Because if I sit down with you, let's say I decide risk 65 is right for me, and I look at that and I go, well, that means I'm going to be. I could be down 10%. I could be up 13%. That's my 95% historical range there for that portfolio. Okay, that feels like me. Six months later, the portfolio is down 6%. Confirmation bias is actually now working for me because you as the advisor, can put that back up and say, hey, remember, we made this decision. It was a good decision for you. Just because we're down 6% doesn't mean that it was a bad decision six months ago. You made the right decision now, and now is not the time to change that decision when you're down. So all of a sudden, the client can now start to see the things that confirm they were right all along. And we're harnessing confirmation bias to make it work for the client instead of constantly sabotaging us as investors.

Yohance Harrison 19:12

Oh, well put, sir. Well put. We made a mistake, Aaron. We made a small mistake. We've been talking about risk Ally's like, everyone that's listening knows what it is. So can we back up? Because we've been throwing numbers out and no one probably has a reference. Was like 30, 15. Yeah. So let's rewind a second. So if you would, could you give just the elevator spiel of what the risk ally system does?

Aaron Klein 19:28

That's a good point.

Aaron Klein 19:37

First of all, I'll just say, like, I was working in, like, technology product management for a division of an options brokerage firm. And this company literally started as a conversation between friends because I had a buddy who was a financial advisor, and I said to him, mike, it is crazy how the average individual thinks about the concept of risk. And he said, you think that's crazy? You should see how many of us financial advisors think about it. We just haven't had the tools in our profession to really understand who our clients are and match that up with the amount of the risk in their portfolios. A lot of times I meet a lot of advisors, they have a risk tolerance, and they invest all their clients like them.

Yohance Harrison 20:18

I've seen it. I've seen it.

Aaron Klein 20:20

It's crazy because half their clients are scared and half their clients are pissed off that they're not getting enough return. So at the end of the day, it's crazy how this works in the profession. So we started talking about that, thinking about that, working on that, and we started the company around this basic idea that if we could help financial advisors create this framework to help their clients understand and react to risk appropriately, then you could absolutely transform a fearful investor because you take those decisions and transform them into an amazing long term financial outcome. So what the software really does is number one, helps a financial advisor like you assess how much risk the client can handle, how much risk they want, and then really take a look at how much risk they need to take in order to reach their goals. You can do that through comprehensive financial planning process. We have that retirement maps feature that lets you do that in a 60 second way to get a quick look at whether the client's risk number is compatible with a basic retirement goal and then ultimately match that up with the amount of risk that's in their investment portfolio and really help build a portfolio that fits the client. And so that's really what risk wise does. And the risk number runs on a scale from 1 to 99 and it looks like a speed limit sign. So that's the really cool thing is that clients just innately get it. Every single time a competitor has come out and tried to copy riskalyze. To some extent they've always run up against the fact that it might look simple because it's a speed limit sign, but there's actually a lot of complex methodology under the surface that allows us to actually model the risk in those portfolios. It's not an easy task. It took us a few years to build it and it's taken us about a decade since then to refine it. That's really where we've come from. A technology company with technology company DNA that believes that financial advisors are such a key critical part of how we're going to get the next generation of investors to success. I think that's been what's unique about us because frankly there's a lot of financial services companies, they have their own point of view on the world. They don't have technology company DNA. And then there's a lot of technology companies who aren't bought into the idea that advisors are part of the solution. They see advisors as the problem. I believe that a technology assisted advisor is the solution that just about every investor needs. Because when things get complex and important, we need a human being to help us figure out which way is up and keep us on the right track. And perhaps someday the robots will actually gain empathy. I don't think that particular piece of science fiction is coming along in my lifetime. So in my mind we're going to need financial Advisors and brain surgeons for a really, really long time. Because I want the best human at those kinds of controls. Technology assisted to be sure. But I want the best human at those controls because those things are complex and they're important.

Yohance Harrison 23:15

Risk number one to 99. I do have some clients who try to shortcut it and they just say, oh, I'm a 99. Then they take the quiz, end up being an 80. Like, okay, yeah, not quite a 99 now. I noticed something changed in risk allies. And this is for my advisors out there that are listening. You probably saw this too. After we came out of COVID and inflation started spiking, all of a sudden the risk number on cash went from one to a four or three, depending.

Aaron Klein 23:21

Really?

Aaron Klein 23:48

You're telling me something that I didn't actually notice myself. That's fascinating.

Yohance Harrison 23:53

Yeah. So it actually, it was very fascinating. Go back to confirmation bias. I knew inherently. Or a long term portfolio, cash was risky because the cost of living went up. And if the cost of living is growing faster than cash, it actually put a risk number higher than one. It is. And. But that's what it was supposed to do.

Aaron Klein 24:12

All I can tell you is like we are a quantitative objective shop that uses math to solve these problems. So there's no human back there flipping a switch to say, what's the risk number of cash? We're not making these decisions on the risk number of Tesla or the risk number of Apple, or the risk number of this ETF or the risk number of cash ourselves. It's all mathematical. So what I can say is that the return on cash was being a bit volatile. Four is not super volatile, but it was volatile enough to register and update and say the risk of holding cash is actually rising because we're watching the returns on cash largely connected with inflation. I would argue get really interesting and volatile there in some of these funds. That's really, really interesting. That's intriguing to know.

Yohance Harrison 24:57

Yeah, I was fascinated by it. I was like, oh, finally Riskalyze gets it. I was like, riskalyze is paying attention. Riskalize is paying attention. I promised everyone to top it as two things. So one, well, of course everyone knows we have to get to our key question that we ask to all of our guests. And just what I'm hearing about your background, I think this is going to be quite fascinating. So Aaron, what we want to know is what is your first memory of money?

Aaron Klein 25:25

It's a great question. I have to go back. I grew up in Southern California. My grandfather was World War II in Korea. Korean War vet. And then he worked for Lockheed, Lockheed Martin, big aerospace company. He was part of test flights at the Burbank Airport down there in Southern California where we lived. He was incredibly good with money. So incredibly good. He passed away 1982 from lung cancer. I was very young, but I have some memories of him. My grandmother lived until 2004. My grandfather had her so set up with financial planning that on the day she passed away, I believe there was $2,000 left for my mom and her sister to split. My grandfather stuck the landing 20 years in advance. Amazing. So all this to say my first memory of money was a lesson passed down from him. It was a few years after he passed away, but I still remember my mom telling me what your Grandpa Belle taught me that I will teach you is something very, very simple. When you make a dollar, the first 10 cents you give, the next 10 cents you save and everything after that is what you live on. And that just stuck with me. That stuck with me all throughout life. And my parents, not super well prepared for retirement, but have done well because they have followed that principle consistently for themselves. I have tried to follow that principle consistently. I try to share that with my kids. We have our kids do that. We use Greenlight. I don't know if you've heard of Greenlight. Very cool app for kids and a debit card for kids that teaches them spending and saving habits. And so our kids get allowance every week for the chores that they do. 10% goes into giving and 10% goes into savings. And it's just a great life lesson. It's my first memory of money.

Yohance Harrison 27:05

I've heard of Greenlight.

Yohance Harrison 27:21

Beautiful. That is a beautiful memory. Thank you for sharing that. And for all of our listeners out there, if you're looking for, for something that's really easy, a concept of where you can start, there you have it. Every dollar comes in give 10%, save 10% live on the remaining 80. Now, mind you, that's the dollars after your taxes are paid. Talking about the net. So it's what you get is what goes into your bank account. If you can start there, that is a beautiful place to start. That is beautiful. Thank you for sharing that, Aaron. I love that one. I can see right now that's going to be one that we're going to have to talk about many, many times over. All right, Fintwit, I know you're waiting for this moment. I've got some questions here. So risk numbers, again, they go from 1 to 99. I got some for my team and I got some from Twitter. So this one, this is the easy one. We have to do this one just because it's June 8th and I like basketball. So rooting for the Celtics 1 to 99, what would the risk number be?

Aaron Klein 27:42

Yeah, absolutely.

Aaron Klein 27:47

Goes into the bank account.

Aaron Klein 28:23

Oh, well, my 18 year old son is the big basketball fan in the family, so he would probably handicap that and say that's pretty close to like a risk 75 move when you're up against Steph Curry and the Golden State Warriors. There you go.

Yohance Harrison 28:40

All right, we got 75. Okay, now one for next year for all the people that are upset and especially the Southern Californias, rooting for whatever team LeBron is on.

Aaron Klein 28:53

Yeah, I moved north when I was seven years old, so I'm a Dodgers baseball fan, but otherwise definitely not a Lakers fan. Definitely not a LeBron fan. I'll take Steph over LeBron any day of the week. So it's the risk number of rooting for whatever team LeBron is on as.

Yohance Harrison 29:09

The championship for next year.

Aaron Klein 29:11

Well, so the hard part of calculating that is you kind of start, maybe anchor it like, oh, that's probably a risk force 40. Okay. But then you've got to compound it by going like, how well can LeBron pull off the flop next year? He's getting a little older. Okay. I mean, he's won some Oscars before for those flops. Right. So if he can continue to pull off the flop, you might be able to tick that risk number down a little bit.

Yohance Harrison 29:34

Okay. All right, so here's one from some advisors. This is something new that's happening out there. Direct indexing, which is now a thing that's available.

Aaron Klein 29:37

Okay.

Aaron Klein 29:44

The thing about trying to guess about innovation in the future is that it all depends on timing long term view. I'm a risk 10 on direct indexing. What I mean by that is I'm pretty bullish on it and I think that it's going to do really well. Why do I think it's going to do really well? The custodians have to get really, really good at fractional shares for direct indexing. But when direct indexing does work and is scalable for advisors to leverage with more of their clients, it's going to be super interesting for you to be able to say, my client wants to invest their values and I can, with a couple of clicks, customize and build a unique investing solution for them that's still like super diversified and has lower fees. So I think it's somewhat inevitable as soon as some More of those enabling technology pieces kind of fall into place.

Yohance Harrison 30:04

Yes.

Yohance Harrison 30:30

All right, we have one more technical one, then we got some fun ones. The future of stablecoins and cryptos into the everyday portfolio.

Aaron Klein 30:43

So talking about crypto is almost like the third rail of financial advisor discussion. It's so controversial sometimes people were mad when we added bitcoin coverage into risk lies and they're like, if rocks were anti correlated, would you assess the risk of those? And I said, well actually yes, I believe GLD would give you some anti correlated rocks that you could go ahead and assess inside of risk allies. So my job is not to tell the advisor what to invest in. My job is to try to assess the risk accurately with math of what the advisor wants to assess. And by the way, if you're an advisor who doesn't believe in crypto, you still want risk allies to assess it because you could be having clients come in who own it and you want to show them why they shouldn't. All that to say crypto is in a risk 75 moment right now, I would argue. And what I mean by that is I've always believed that the most interesting thing about crypto was blockchain technology. And if you're investing in crypto, you're really investing in whether or not that particular blockchain or that particular network is going to get used for some really cool commercial applications that will drive up its value. The tough part is that, is that the future of bitcoin, big question. Is that the future of the Ethereums or the Solanas or some of the other really interesting high scale crypto networks? It looks really interesting, but crypto is in this Risk 75 moment because if enough people lose faith and kind of leave, it could take a long while for people to get back engaged with it. I don't sit around and go like, oh, I think every advisor should allocate a client to crypto. But on the other hand, you're sitting there looking at a really interesting, potentially transformative technology and it's about the use of the underlying technology. It's not about the investment itself. So if you want to invest in the underlying technology, that's what you should really be thinking about with crypto.

Yohance Harrison 32:32

Aaron, this is what I've been saying for two years to all my clients.

Aaron Klein 32:35

I love it. I love it.

Yohance Harrison 32:37

We did not have a pre conversation about this. Thank you for being my confirmation bias. Love it. I appreciate it.

Aaron Klein 32:39

We did not.

Aaron Klein 32:44

Love it. I am the facts that you want to see right now, but that's because we're both right, man. That's why.

Yohance Harrison 32:50

Here you go.

Yohance Harrison 32:52

All right, so the first one is a food one risk level of chicken salad that has fruit in it.

Aaron Klein 33:04

For me, that's inching up into the 60s. It depends what fruit. Right. There you go.

Yohance Harrison 33:10

Okay. All right. Now this is one that I can appreciate as a father. What is the risk number of raising three teens simultaneously?

Aaron Klein 33:20

Yeah, my 18, my 15, and my 13 year old. And by the way, for those who don't know, we've adopted three times, we'd like to call ourselves your typical average Korean, Ethiopian, American family. But one of those kids, English as a second language, like, came home to the United States as an older kid. And so as a result, they're all bunched together academically. They're just finishing sophomore, freshman, and seventh grade. So you know what that means. I'm not only having three teenagers, I'm having three high schoolers at the same time and three kids theoretically in college at the same time. I don't know who did the financial planning on that one, but there you go. So, yeah, we're up there in the high 80s there, man. They're awesome kids. That's kind of what gives it a little bit of cross correlation, kind of brings that risk number down a little bit, is that they are awesome human beings and awesome kids. My wife and I feel very blessed in that way. But three teenagers is a lot like you start at risk 99, and then you kind of correlate it down with awesome human beings down to the 80s.

Yohance Harrison 34:20

Beautiful. Beautiful. Okay, last two. And this is all about the Fearless Conference. So advisors know that riskalyz is host of a Fearless Conference each year. I'll be excited to see all of you there later in October. So the first one, what is the risk number of wearing a pink tutu for the entire Fearless Conference?

Aaron Klein 34:41

I believe that was focused on Dan Bolton.

Yohance Harrison 34:43

It was, yeah.

Aaron Klein 34:45

He's our vice president of brand experience, and the Fearless Investing Summit is his brainchild. Okay. If we're assessing the risk that it actually happens, that's probably pretty low because Dan is a very buttoned up, very respectable guy. Right. So I'm going to put that at about a risk one or a two. If you're talking about, like, the risk of the event going off the rails. If he were to show up in a pink 22, you're back at risk 99 territory. I don't even know what would come next in the script after that, that's for sure.

Yohance Harrison 35:15

All right, so while we're talking about hypotheticals.

Aaron Klein 35:18

Yes.

Yohance Harrison 35:19

Finally, risk number of you, Aaron, making a skydive landing into the Fearless Conference.

Aaron Klein 35:30

Well, I believe this question probably came from Dan Bolton because he would like to see that. In fact, he tried to make this happen for the first Realist Investing Summit. Okay, so this is 2017. We're on the shores of Lake Tahoe. The opening party is literally on the beach on the shores of North Shore Lake Tahoe. And he's like, okay. He's pitching the idea. We're going to have these speakers. We're going to have this, we're going to have this. He's like, now here's maybe a little bit of a crazy idea, but we think it'll be really great. We want to have you skydive onto the beach to kick off the park. And I'm like, whoa, whoa, whoa, whoa, whoa. Timeout. What? And he goes, yeah, think about it.

Yohance Harrison 36:07

Fearless, man. Fearless, yeah.

Aaron Klein 36:09

He's like, you were on stage earlier that day. And then all of a sudden he just like, here comes somebody from the sky. And you skydive and you land right on the beach and kick off the party. And I'm like, points for creativity. Okay. But I've got a few board members and a wife who. Who would murder me if I agree to this. So that's a risk 99 move, man. We gotta call it a risk 99 move, and we gotta come up with a different way to kick off the party. So he hasn't given up yet. I seriously doubt I'm going to be skydiving into Salt Lake City into the venue for the Fearless Investing Summit. But we are going to have an amazing time. And there's rumors. There's rumors that you might be on stage for us there.

Yohance Harrison 36:31

That's risk 99 right there.

Yohance Harrison 36:54

Rumors. Well, that's how rumors get started.

Aaron Klein 36:57

There you go. There you go. I love it.

Yohance Harrison 36:59

Let's keep the rumor going. All right, ladies and gents, everyone, thank you so much for joining us for another edition of the Money Script Podcast. Had so much fun today, and again, just take a few of these things home with you and try them on. If you haven't done any sort of risk assessment, hit me up or talk to your advisor and say, hey, I'd like to figure out what my risk number is. Spend that time with yourself to get to understand your risk versus reward and what you're willing to give or what you're willing to get. And if you haven't come up with some sort of plan that you can use yourself or you can also instill in your children. Try Aaron's 10 in 10 rule 10% you give away 10% you save. Learn how to live on the rest. It's a great place to start. As always, you can catch us at the Money Script on all of the fun social media platforms out there. Feel free to share this episode with a friend. We're going to be talking about this on Twitter for a while. I can see it now. And if you're a Celtics fan, I mean, yeah, we'll see what happens tonight is still young. It's one and one. So we've got a game tonight and I look forward to go and watching myself and we will see you next time on the Money Script Podcast. Y'all take care.

Speaker 3 38:13

Thanks for joining us on the Money Script Podcast. Be sure to check out our other episodes, subscribe, follow and give us five stars. Continue to send your financial questions on Twitter or Instagram hemoneyscript. Go to moneyscriptwealth.com and schedule your complimentary consultation to discuss your specific goals and concerns. Financial advisory and investment management services are offered by MoneyScript Wealth Management PLLC, a registered investment advisory firm registered in the State of Texas and California and other states where exempt. The Money Script LLC and the Money Script Wealth Management PLLC and guests of the episode may have interest in the investments mentioned today. The opinions and views are expressed here or for informational purposes only. This material is educational in nature and should not be deemed as a solicitation for any specific product or service. All investments involve risk and a significant loss of principle. The Money Script nor Money Script Wealth Management offer tax or legal advice. Please consult your tax advisor or attorney for specific advice about your situation. Until next time.