Based on an interview with Davyde Wachell,
CEO at Responsive AI
|Clients:||Private managers, banks, and RIAs focusing on mass affluent clients.|
|Value proposition:||Helping advisors rapidly monitor and assess what’s going on in the client’s life through their financial data and then compiling the best options to take.|
|The executive team:||Davyde Wachell, CEO
Chris Sandford, CTO
Logan Grosenick, VP Research
Responsive AI uses behavioral analytics to help wealth advisors make better faster decisions. The platform generates prioritized action that helps them focus on the right client at the right time with the right advice. Responsive focuses on assisting the client advisor relationship and services as a holistic framework that integrates other tools such as risk management, planning, and rebalancing.
Davyde Wachell has spent the past twelve years in FinTech. He’s a wealth manager and second-generation quant finance specialist. Davyde studied AI in the Symbolic Systems Program at Stanford then worked designing investment management research and compliance platforms until he founded Responsive AI four years ago to solve wealth management for the future and optimize how advisors serve their clients.
In this article, we’re going to dive deep into this Canadian startup’s business model and product and engineering approach, as well as define their biggest challenges and opportunities.
Holistic platform and human-centric AI
Davyde worked in financial data for a long time, so he knows the devil’s in the details. One can’t do Data Science on data that’s not in the right frame. That’s why the priority mission of the company that he founded is building a system that integrates holistic data from both custodian and bank systems, to create a high-resolution financial image of clients for the purposes of analytics in wealth management.
Advisors want to service more mass affluent clients, whereas clients want more personalization, convenience, and responsiveness. Responsive AI helps to shrink the time to insight for an advisor when they’re looking at a client case and coming up with a quick profile and actions that might be useful both for the clients and for the adviser’s enterprise. To make that possible, advisors should apply a human-centric AI.
“For us, the really interesting thing is using machine learning and AI in a human context. We’re focused on how we can add value to the advisor–client surface and design our software for multiple users so that the usage of the software contributes to the learning of the system.”
At Responsive AI, modeling humans is the core. Responsive’s VP of Research Logan Grosenick has a PhD in neuroscience and spent the past twelve years applying machine learning to animal and human behavior. He spends all his time analyzing rats’ behavior in mazes and how brain activity leads to different kinds of personalities. The aim is to look at lives as something cyclical, understand their seasonality, and determine which behavior types are predictive of certain outcomes.
“I think it’s fun to talk about AI at a more conceptual level. Our platform allows us to do basic kitchen table stuff and then much more advanced segmentation and clustering around personality archetypes.”
European expansion and regulations
In Canada, Responsive AI is working with around nine RIA-like businesses, who manage from $30 million to $4 billion. Across the ocean in Finland, they’re working with OP Financial, which is Finland’s largest bank.
“Europe is our big focus because we like the GDPR story, and it’s a big part of what we’re doing. How can you maintain privacy while doing analytics on client data and make people feel comfortable? We think it’s a good place to lead.”
They had some notifications after MiFID II about what they want platforms to look like, Davyde says. They’re advocating for hybrid wealth management and systems that aid decision-making, make a record of decisions, and establish a holistic view of the client’s financial life.
“MiFID II is trying to get away from just selling a fund in a sales transaction to providing a larger advice framework so that people are well-served. In a strange way, that almost conflicts with GDPR, which says you can know certain things about your client and make certain kinds of decisions without their consent.”
So, it’s a question of how one can privately and securely make decisions about client data without exposing that data and protecting the data in a way where the clients own their own data.
Product road map at Responsive
There’s an awkward thing about road maps based on feedback: clients might want something and give you feedback, but it means they want something else. Simple feedback, “Oh, just add this in there” may mean that something is broken. So, platforms have to dig deeper. They should think, for a manager in Toronto who’s got a $2 billion book, what’s important to them? What are the pains they’re experiencing? For Davyde, product management is about listening and understanding.
“We also have what I call a “lazy” just in time attitude toward development. So, we kind of wait until the last possible minute – gathering as much feedback as possible – to build something. We try and get as much value out of what we have to build.”
To promote their business, Responsive AI went through the Plug and Play accelerator in Silicon Valley and raised investment. Davyde says this accelerator has been a major help in regard to connecting people to innovation and wealth leads in big organizations and setting up meetings. This fall they’re doing the accelerator again in Frankfurt sponsored by partners like Deutsche Bank and UniCredit.
“We’ve been most successful at inbound and creating conversations online, being present at events, and getting our ideas out there. Cold sales have been a tough road.”
Davyde says more funding is needed for them because wealth management is a hard problem with a lot of moving parts. There’s so much more a startup can do, especially collaborating with other wealth techs and FinTechs. As an engineer at heart, Davyde has the desire to build something beautiful that helps people.
Managing teams and challenges
Responsive AI’s team is distributed. Davyde says they have one of the largest presences in the world for a team so small. They have people working in Toronto, Vancouver, and New York. To keep on the same page they use Slack, but communications in the company are more than that.
“We go on trips together to do projects. So there’s sort of this team bonding that happens with people who are far away. Like you’re the person from Toronto or New York, and you’ll see them in Helsinki or London and then you bond that way. A lot of early mornings, a lot of just staying in touch, but I think there’s good esprit de corps on the team, so that helps us stay connected and working together.”
The project stack includes Python for the hardcore analytics, Vue.js and D3.js for a lot of our front ends, Vuetify for the advisor back-office tool, and Node.js. The platform itself is running on AWS.
The biggest challenge for them today is the inertia and friction selling to large incumbents. The organizations they’re selling to operate on a quarterly or biannual cadence, so there’s a bias toward sticking with the devil you know, rather than experimenting.
The Canadian and European wealth management markets are fragmented. Solutions such as Responsive AI tend to integrate as many products as possible to provide clients with holistic advice and a great user experience to advisors. That’s why it’s important to shine a spotlight on such startups.