Smarting Up Onboarding

April 2024, by Bob Veres, Inside Information

Synopsis: The Andes Risk instrument goes beyond traditional risk tolerance measurements, providing a deeper look at clients’ investment preferences and facilitating more sophisticated conversations about portfolio recommendations. 

Takeaways: Advisors quickly learn about their prospects’ mental biases, and prospects select the portfolios they prefer, making the process more defensible. The tool includes illustrations of different efficient frontiers over various time frames, clearly depicting downside risks.

I first wrote about Andes Wealth a few years ago, viewing it as a client onboarding tool that combines client profiling with risk tolerance assessment and risk management. 

Since then, Andes has won numerous industry awards for its sophisticated approach. Unlike other popular risk tolerance instruments, Andes doesn’t reduce the conversation to arbitrary scores. Instead, it allows advisors to ‘smart up’ the process, facilitating sophisticated investment conversations that demonstrate expertise.

Andes Risk is not a marketing tool but drives conversations that help prospects see your investment expertise. Advisors can close a higher percentage of prospects using Andes, with the key difference being that the Andes portfolio decision-making process is defensible in court as an accurate assessment of what the client wants, needs, and can tolerate in difficult markets.

Imagine a severe bear market where a client takes legal action, claiming the portfolio recommended was unsuitable. With Andes, advisors can defend their recommendations by showing that the client selected the portfolio after a thorough process. The assessment tools are based on academic research to help advisors understand the prospect’s investment personality.

Advisors use Andes to show clients several proposed portfolios, listing the expected returns over different periods based on Modern Portfolio Theory. The client selects the portfolio, and before investing, the advisor follows up with profile instruments to clarify the client’s loss aversion, investment sophistication, and personality. This thorough process ensures a clear understanding of the client’s risk capacity before making investment decisions.

Before the initial meeting, the advisor will go to the Andes dashboard and auto send the prospect a link to a series of mini-questionnaires. When I say ‘mini,’ I mean literally two or three questions each that get to the heart of the prospect’s investing personality. 

Andes founder Helen Yang has co-authored academic research with Dr. Andrew Lo at From this data, investors are categorized according to their investor type based on Dr. Lo’s research. The types are: passive investors (35% of the investor population), trend followers (27%), contrarians (8%), safety-seekers (19%), risk seekers and adaptive investors (few, but they’re out there) and people who don’t fit neatly into any of these categories.

On to the first meeting. The prospect is shown the screen which illustrates the advisory firm’s spectrum of model portfolios, with increasing risk asset weightings from left to right. The green bars represent the range of expected upsides over a 1-year time period, and the red bars show the range of expected 1-year losses. 

Andes does too, but in a more nuanced way. It offers several ways to compare an existing prospect portfolio with what the prospect selected a few moments ago. “Andes Risk will show clients where their current portfolios fall on the efficient frontier, which can generate a rich discussion.”

The output of this conversation is an investment policy statement. The document outlines the investment objectives, the results of the various risk tolerance assessments, the planning horizon that the new client provided to the advisor in that initial prospect meeting, the top holdings in the portfolio, and the asset allocation in pie charts, range of outcomes over time, drawdowns during bear markets. 

Andes also offers, through integrations, a dashboard which shows all of these portfolio variables on an updated basis, showing whether the portfolios are out of tolerance from their initial allocations and by how much.

Read the full article here.