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Bringing Protective Equity Investing to Retail Wealth with Joanna Kanakis

Technology has been changing the way we do business for years, and its impact will continue to affect our business outcomes as tech gets smarter. Still, no matter how good tech gets, human connectivity is irreplaceable in building a strong business. The combination of tech and human connectivity can be doubly powerful when executed properly.

Enter Halo Investing, a platform that provides access to protective investment solutions that sits at the intersection of human connectivity and tech. Jack talks with Joanna Kanakis, Executive Vice President and Head of Institutional Business Development at Halo Investing. Joanna recounts her experience joining Halo as one of their earliest hires and leaving her investment banking job to transform the way Americans can invest. She speaks about the benefits that financial advisors experience using Halo’s platform, strategic partnership initiatives that have expanded the business, and the role of field engagement in building trusting relationships.

In this episode, Joanna talks with Jack about what drew her to Halo Investing’s team, how to embrace the power of technology, and where Halo Investing is going in the future.

What Joanna has to say

“There are solutions that are available and out in the ecosystem where you can be managing your client fears, still exposed to equities, but have that level of protection and safety on the downside.”

– Joanna Kanakis, Executive Vice President and Head of Institutional Business Development, Halo Investing

Read the full transcript

Jack Sharry: I’m glad to have you join us on this week’s edition of well tech on deck as those of you who listen regularly now, we talk with people all over our industry on the confluence of digital and human advice. For today’s show, we’re going to look at advice in this new age from a slightly different angle. You’ll fill you in on what that means in a moment. Our guest today is Joanna Konakis. Joanna is the Executive Vice President and head of institutional Business Development at Halo Investing. Joanna, welcome to WealthTech on Deck.

Joanna Kanakis: Thanks for having me, Jack. It’s a pleasure to be here.

Jack Sharry: Yeah, good to have you. So Joanna, before we talk about your career, and what you’re excited about in your day to day work, and where you see industry going all the staple questions we’d like to ask each of our guests each week. Let’s start by filling our audience in Who the heck is Halo investing? I see you guys all over the place. So who’s Halo? What do you do and how you and your colleagues get this business started?

Joanna Kanakis: Thanks, Jack, it is a thrilling story to get the privilege to tell. So Halo investing is the technology and distribution engine, I would say we are focused really on bringing the world of protective equity investing to retail wealth. So when you think of the whole ecosystem, what’s our mission? What are we looking to do? US retail wealth assets are primarily inequities, but not usually with a level of protection in them. So our goal is to bring accessibility transparency and competition to the products that deliver that mechanism, and therefore then provide access to the rest of the world that doesn’t necessarily have access to these kinds of products. So we’re a first and foremost a tech infrastructure, a front interface that financial advisors interact with, to research, manage and transact these products. We have field engagement. So human engagement with the financial advisors that we work with, that we really believe that blending exactly to the point of this whole podcast, the blending of humans and technology together is critical for the successful implementation of these kinds of products. And then we also support the supply side in the design and development and manufacturing of these kinds of products as well.

Jack Sharry: So what’s the generic name? What are they known by?

Joanna Kanakis: Sure. So structured notes is the primary product that’s available on our platform, we also added fee based annuities. And we have buffered ETFs, as well. All three of those financial products, the way that they’re constructed is different. The way that you access that product is different. But the place in the portfolio, and what it does for the client is the same, you’re looking at the equity part of portfolio and you want protection on that equity.

Jack Sharry: Gotcha. We’ll talk some more about that. Want to get into that a little bit more? Yeah. How did Halo get started? I know I’ve talked to some of your founders. And it’s a fascinating story. So if you would remember their audience of this whole thing could kick off.

Joanna Kanakis: I’d love that. So you got two guys in Chicago that ran into each other at I think a benefit dinner. In fact, one serial tech entrepreneur started several options, startup technologies in Chicago. And then another is recovering private banker from Credit suites who used structured notes specifically in client portfolios really effectively through the 2008 financial crisis. These guys get together and say, We want to help actually optionality improve, and client portfolios, same kind of way of saying we want defined outcome or protective investing to be more accessible. They looked across the marketplace and looked at structured notes, looked in OCIO business looked at all of these different potential mechanisms to deliver that result for the client, and landed on structured notes, quite frankly, it’s the most clunky hardest to access product, historically speaking in the United States. They said, Let’s tackle that one first, and then keep replicating off of that. So we started in 2017, came to market with two RAs and two issuing banks on our platform, have just had an incredible run since then, yeah. That’s how it started.

Jack Sharry: So we’ll get into more of that more of the detail of what you’re doing and how that applies. Because I think it’s all part of the larger picture of putting together portfolios where this plays an important role. But I get ahead of ourselves with that Alaska. Coming back a little bit. So let’s, let’s back it up a little bit further and talk about how you got into this business where what’s your origin story? How did you wind up sitting on a podcast called wealth deck on deck? Where did that all come from?

Joanna Kanakis: I asked myself the same question over my coffee this morning, Jack as I was looking through my day schedule, how did I land here? So I started straight out of school. I was a philosophy major in undergrad.

Jack Sharry: Really, by the way, I was a philosophy minor.

Joanna Kanakis: Are you? Excellent. Let’s talk Heidegger after this won’t bore the podcasters

Jack Sharry: After doing it in my senior excuse me, my sophomore year I realized, one I didn’t know what they were talking about and to factor in it, but did you have a particular area of philosophy that you enjoyed? I know this is way off the beaten path. But I’m curious.

Joanna Kanakis: It’s totally fine. I was originally international business and flipped to philosophy because I thought if I, I would like to learn how to think and how to write and how to speak more effectively and efficiently, and I’ll figure out an industry that interests me and that I want to get into, I was the little girl who’s pretending she was an international business woman at 10 years old. And so I knew that was what I wanted to be.

Jack Sharry: I’ve done a few of those.

Joanna Kanakis: Yeah. But then I’m gonna study what I’m going to study and just make it work out. And somehow it did. I landed on a derivatives trading desk, straight out of school, and then was structuring multi legged option strategies for pensions, insurance companies and hedge funds through the financial crisis. You could spend a whole podcast talking about that experience, and then kind of moved my way into institutional sales, selling derivatives, clearing, execution and financing on those assets, ended up at Societe Generale large French investment bank and was celebrating my promotion at work with a friend over lunch and she said, You should go talk to Biju Kulathakal, the CEO of Halo. And I said why I’m doing great, I’m on this trajectory. I’m know where I’m going. And I came in to Halo when we were kind of two guys in a pizza box era was just before our series B round. There were 15 employees at Halo at that point. And I heard the story and sitting where I sat in the investment bank, I saw what technology did to other financial products and how that really scaled out the access and the efficiency of the product itself. And I thought this would be an interesting opportunity to sit on the other side of the table instead of the impacted I can be the impactor and do this for the greater good of what now how Americans can invest. So that’s how I joined.

Jack Sharry: That’s great. I’m gonna dig in a little bit deeper here. So you got two guys in a pizza box. And then they collect another 13 or 14 or 15 folks around him. And you’re kind of getting this thing gone. And I don’t recall exactly, but you were among the first if not the first, you were early in this whole game. Describe that because you’re really kind of a new product type product category. And also, we’ll get into it a little bit. But how that fits into putting together portfolios for that role plays because it’s not a the way I look at our industry for decades, we just it’s kind of product in the month one and done you buy it, you sell something because it has hot thought to it or whatever. But increasingly, it’s around how do you put portfolios together? So I get ahead of myself, but describe how you guys emerged from that 15 person to pizza box start? And how did that evolve? And I know you’re doing a lot more I want to get into that too. I know you’re doing it’s expanding as you go. So just talking about this whole notion of protected investing, and where does that fit? And how does that work and all that kind of stuff.

Joanna Kanakis: So what we did in the beginning, was we said the way that historically structured notes had been disseminated into the marketplace, again, very difficult to find was a Wall Street manufacturer would design a set of solutions, that hot product of the month exactly what you said Jack, and that then would be pushed down into the financial community, that process would happen again and again, every single month. In stride wires, you would only get the home bank product that was available to you. When Halo came into the marketplace in 2017. We wanted to really flip that on its head. So serving fiduciaries, first and foremost, we thought the way that we get this out into the market is not to have a top down approach where somebody else designs this and then the advisors just consume it. What if we flipped that ecosystem on its head and had the advisor design and then have the manufacturers create on behalf of those financial advisors, we realized that technology needed to help in the designing of it, and in the manufacturing. So we have technology that does both. And really that was the impetus of how this started, we thought let’s take a commission heavy, traditionally opaque, traditionally, one to $3 million minimum investment size product, let’s bring it down to fiduciaries who are in the market looking for customized solutions for their clients. And let’s create this in a fee only model where you actually have competition. Now you have better transparency into what exact product you’re buying and what those terms are. And really again, putting that power back into the head of the financial advisor. That’s where we started way, way back.

Jack Sharry: Yeah. And one of these I noticed you do a lot of work with insurance covers, I just saw something on LinkedIn, we work with Jackson and enter your work with Allianz and others. Describe what that connection is. Is that parallel is that they distributors to talk a little bit about what you deal with in the insurance space because you seem to be a bridge between the equity world the debt world and in the insurance world.

Joanna Kanakis: Yeah, so I mean, an annuity is a very similar kind of payoff and product as a structure note, rather than that corporate debt wrapper as an overlay, you’re getting an insurance wrapper as an overlay so you’re taking on the credit risk of the insurance company itself. Halo entered into the world of annuities because we said we think we can learn from other rappers in the way that these products are distributed in the way that advisors use them in portfolio. Helios, and it follows a similar sort of story exactly to your point of that protected equity sleeve. Right. What we do for annuity products today is this exact very similar thing as what we do for structured notes. So think you’ve got Citibank JP Morgan, Morgan Stanley. On one side, you also have Allianz Jackson, global Atlantic, right on as product manufacturers. Halo is a conduit through to the financial advisor that doesn’t have access to these products. So specifically in the RAA community, we have an insurance agency that acts as Agent of record on those products. So what does that mean? A financial advisor that is not licensed for insurance products and not registered that with Jackson or Allianz can actually offer their client a fee only annuity via Halo through the same mechanisms as which they would offer a structured note.

Jack Sharry: So are you effectively a platform.

Joanna Kanakis: We’re a marketplace, right? We’re a place where advisors to research and then select the product, you can also transact directly on the platform itself. And the last piece is within structured notes, and annuities, both the reporting is piss poor across all of it, right. If it’s an annuity, you have to go on to the annuity carriers website, if you have one, Jackson, one, Allianz one, global Atlantic, you’re going all these different places. In order to get that access the information within the world of structured notes, you would have been managing that an Excel spreadsheet all by yourself, that probably one of your summer juniors had created. Our technology holds all of that information for the financial advisor, and then helps that reporting on a regular basis out to the financial advisor in their client.

Jack Sharry: So I’m assuming that this platform marketplace has expanded seems like you’re adding additional products and imagined different additional distribution partners. So talk about how that started with structured notes. How is that expanding? How is that continuing in terms of your growth trajectory?

Joanna Kanakis: Yeah, so we added we started instruction notes, like I said, in 2017, with two RAs, we added buffered ETFs. In was like thick pandemic. So timing kind of escapes me, but I’m thinking that around July of 2020, we added annuities in April of 2021. And then from there, our distribution has expanded pretty significantly as well. So like I said, Two RIAS that we started with today, we are over 40% of Schwab’s entire book of structured notes, pretty significant without a strategic relationship with Schwab. And which is awesome, considering we started with zero in 2017.

Jack Sharry: So the marketplace found you?

Joanna Kanakis: Yes, they did. Yes, they did. And then we’ve been expanding on the enterprise side as well. So that’s actually the team that I started and then have been overseeing and growing, we landed an integration deal with purging where we are the integrated structured notes solution inside of Pershing’s ecosystem, and are starting in this last year have started winning mandates and implementing into larger wealth management firms, like broker dealers and large RAS across the ecosystem.

Jack Sharry: So expanding by the day, as you go forward, are you talking about, obviously more partners and so on, but also more products? Where’s this marketplace? Go? Where do you take it?

Joanna Kanakis: The great question, and we wrestle with this a lot, there are so many shiny new toys that we could go after, right? There are tons of investment solutions that are seeking distribution. So there’s a lot of incoming people because you guys built out this ecosystem of distribution mechanism, could we help partner? To be really honest, the answer for us is that financial advisors still 3% of the market is using structured notes. A very limited subset is using fee based annuities, we still see so much market saturation opportunity for us in the space, where we are really well specialized and have the technology built to scale this thing up. So for now, the innovation will come not in a diversified product, but in the delivery of that product.

Jack Sharry: So let’s talk a little bit about portfolio construction. Because it sounds like this is an ideal tool to build a household level portfolio in terms of equity, fixed income, and I would assume structured has a special place in such a portfolio. So talking about a little bit about how it gets applied, how it gets used in the construction of a portfolio.

Joanna Kanakis: So the beauty and pain of structured notes specifically is that they’re infinitely customizable, which means when fixed income rates were super low. Let’s rewind to about a year ago, financial advisors that we’re partnering with Halo, we’re using them as actually a fixed income replacement in the portfolio, you do have corporate debt exposure, so it can look like a fixed income asset, you can construct them to spit a coupon off like a fixed income asset. Fast forward to today. Interest rates are coming up a little bit right people are not as concerned about that fixed income portion lagging in their portfolio. The concern today is the equity part of the portfolio and this is traditionally more where structured notes are used. We see financial advisors layering structured notes next to or alongside I’d have the equity part of their portfolio. And just taking a small sleeve, say three to 5% of the equity part of the portfolio and saying, you’re always going to be exposed to spy, say, take a piece of that spy exposure and put it in a structure note. So now you have spy with downside protection. That’s the basic gist of the way that portfolio advisors use these portfolios. Halo is not an RIA and portfolio strategist. So we really partner alongside the financial advisor to understand the models that they use to help them identify where is the client pain that can be solved with the right investment thesis, and then help them design the right product to achieve those goals.

Jack Sharry: So talk a little bit more of that, because it would seem that given the sophistication and the complexity of the product itself, and then also in different market scenarios that it’d be plays different roles sounds like, yeah, how do you work with advisors to make sure they’re using it well, and to the full advantage of what they’re seeking to achieve?

Joanna Kanakis: Yeah, so it’s interesting, we were the only technology solution around structured notes that said, we need technology and humans as well. In fact, same thing on the fee-based annuity side, we’re the only company that has technology, and this human distribution layer. So field engagement, because of the complexity of the solutions. And because of the need for net new users of these, we were getting incoming requests for net new users of these products, we decided from the very beginning of Halo that we need to technology and this field engagement team. So when a financial advisor comes to Halo, or they find Halo, they are assigned territory, field support person, that then helps them understand the way that technology works, and how to actually transact on the technology, and also how to translate kind of Wall Street or insurance jargon into main street that somebody like my mom who’s a public health nurse can understand. That field engagement piece is absolutely critical for our success and the conversion rate. So 40% of the financial advisors that use Hallo for structured notes have never used a note before in their portfolio 40%. But that conversion rate is so high because of that field engagement.

Jack Sharry: So talk about that translation, because if 40% have used that they must have heard about is that just word of mouth?

Joanna Kanakis: No. So well started off that way. We have significantly come into the marketplace with different conferences and with speaking engagements around. So we spoke at future proofing Riskalyze. And, you know, what am I thinking wealth, edge, Wealth Management Edge, like all of those kinds of conferences. So there’s a ton of engagement there. We also have strategic partnerships with other tech platforms, in the wealth tech industry, that recognized structured notes are important, but it’s a gap for us. So say Riskalyze, for example, Riskalyze approached us and said, We think we have structured notes in the portfolio, we’re not sure we see these cue sips, and we think they’re corporate bonds, maybe they’re structured notes, but we can’t value them. So Halo formed a strategic partnership with Riskalyze in 2018. Whereby they ping us to say, check your database. Is this a note? Or is it a CUSIP? Or is it a corporate bond? And if it’s a structured note, send us back calculations to calculate the risk score on those. So there are more and more third party technology relationships like this where we can be additive to the existing wealth tech infrastructure, and support the product as it lives a breeze and the rest of the portfolio because today, it’s pretty lacking.

Jack Sharry: One of the questions I like to ask right around now it’s perfect time to ask this one. Where do you see things going? And here’s how I want to frame it a little bit. It’s one thing to come up with a whiz bang product that you’ve come up with, that’s all great, but unless there’s a human being to educate, support, help people through the use of them. And then as markets, you know, do what markets do. There’s lots of education along what that means and how that plays out. I’m sure that’s all part of it. And then our the eye ova is the no fee annuities that has its own complexity, because it’s built for RIAs and RIAs don’t do annuities. And lots of ways that that has been solved through sort of concierge type services, which sounds like is what you do. Yeah. So given all that, it sounds like you’re in a position to kind of help people through figuring out how to incorporate these more esoteric or complex or different kinds of products in a way that will support the portfolio construction through protection through with the annuity with tax advantages is that where you guys are going is that become more and more about what you do is support advisors and building portfolios.

Joanna Kanakis: That’s exactly where we’re at today, Jack. So that is the service that we provide to the market today. It’s that concierge service helping a financial advisor that wants to decide their asset allocation, helping them define the product, identify it transact and then implemented in a client portfolio and then manage that through its lifecycle. where we’re going next is we solved for the rep SPM right, like let’s zoom this back out to wealth management from a higher level. We’ve solved really beautifully rep. SPM we’ve created a competitive ecosystem. We’ve created a solid for non licensed advisors, right? And their insurance place where we need to go to is the rest of the managed money bucket. So how do you create an ecosystem? Where non regular tradable assets or financial products that have historically been one for one, here’s the finished product, and here’s the client, how do you put them into you MA, SMA, that ecosystem, that’s where we’re going next. And that’s where then the conversation is not client by client, financial advisor, understanding notes, understand the implementation, et cetera. It’s a conversation from an asset manager out to their whole ecosystem of here’s a new protected equity sleeve within our model that we can provide and give access to, which is pretty exciting.

Jack Sharry: Well, as we like to say here in Boston, where I’m speaking from today, wicked piss off this. That’s right. And I would add one initial that you didn’t include this time around. So yet SMA, UEMA. Maybe you have portfolios, the UMH, the unified managed household? In other words, you it seems to me that you played a port role, and we’re going to talk about that after our podcast is that I got an idea that some further.

Joanna Kanakis: Pursue intrigue.

Jack Sharry: Yay. But that’s why we do this podcast, we learn all sorts of stuff. That’s, it’s a lot of fun. So our time goes on, I will try to keep these to a half an hour. I’m not sure if there’s such a word as nigh, maybe my grandmother used it. But in any event,

Joanna Kanakis: It’s in Shakespeare.

Jack Sharry: Definitely listen to her and Shakespeare and her philosophy. And I listen to you. That’s great. I love it. By the way I have to insert when I was in college, I was an English major and a philosophy minor because I wanted to do exactly what you said. Same words, by the way, just about, I wanted to be able to think and read and write and talk. And guess what I do for a living?

Joanna Kanakis: Turns out serves us all well.

Jack Sharry: No complaints for a liberal arts degree. But in any event, you’ve covered a lot of ground. This has really been a wonderful conversation, what are three key takeaways you’d like to leave with our audiences, we look to bid farewell a little bit.

Joanna Kanakis: So first and foremost, I recognize fully that technology, wealth tech in general is such a buzzy word. And people are talking about tech and ChatGPT. Coming out three weeks ago. Now it feels like there’s this recoil of like, how good is tech? And how scary is this? There? I truly believe especially in the wealth management industry, considering how much human connectivity there is needed in terms of forming a trust relationship with your end client, the imperative of embracing technology to scale, whether that’s in your back office, in your middle office, you yourself as BFA thinking, giant, large scale wealth management firms that are trying to find efficiency through outsource compliance or whatever technology is at the heart of that success story. And I truly believe that the well firms that survive this explosion of innovation in the wealth management ecosystem will be those that have solved the tech Rubik’s cube the most efficiently. Secondly, I really believe that equities are also your best friend, there is still and will continue to be the right place for equities and portfolios. But we no longer have to cross our fingers and hope that you’re not starting to enter retirement in the middle of March 2020, or July of 2008. So there are solutions that are available and out in the ecosystem, where you can have the managing your client fears, still exposed to equities, but have that level of protection and safety on the downside. And truly, I think that the kind of the kind of investment solution that solves for the relationship problem. And the stress is why I’m so compelled and why I joined Halo, right, like that’s the gist of it. And third thing is, there’s never been a better time to be in the wealth management space. I came from the institutional side, I had not been in this ecosystem until three and a half years ago. And having sat on within finance in different kind of realms than this wealth management ecosystem. It is shocking to me to see how much tech innovation human capital P E capital, everything being deployed into this space tells me that I mean, if I’m what I’m telling the juniors that are coming into Halo, I’m saying this is an absolutely critical time of rejuvenation, rebirth and innovation in this space. And it is thrilling to be here, right?

Jack Sharry: I’m inspired. I like it. So Joanna, we’re gonna bring this on home. It’s been a real pleasure to spend some time with you. We bumped into each other at conferences over the past year or two. And or at least since we started returning to conferences, and expected we’d have a wonderful conversation and he exceeded my expectations. So thank you for that. And now my favorite question that we ask each of our guests What is something you do outside of work that you’re excited about or passionate about that people might find interesting or surprising,

Joanna Kanakis: I believe in balance in my life. So in 2009 as the financial crisis was waning, and I was getting very bored on my trading desk, I put myself through culinary school at night. It was a bit chaotic of a period of my life, as you can imagine treating 12 hours a day and then going to culinary school for four or five hours at night. So I cook well, and that is my creative outlet. So I’m a terrible drawer, I can’t color or whatever, I can’t paint. But I love creating food and delivering my love for my community through food. But then I also in the balance scheme of things I also really love running. So last night, I ran home from my office, I packed up my clothes, work clothes, put on work clothes, and then ran three and a half miles to my house in Chicago as a way to balance that love for foods.

Jack Sharry: That’s great. That’s great. Good for you. Well, this has been a total blast. I’ve enjoyed it immensely, as I indicated and love the conversation. So for our audience, if you’ve enjoyed our podcast, please rate review, subscribe and share what we’re doing here at Wealthtech on Deck. We’re available wherever you get your podcasts. Thank you again, Joanna. It’s been a real pleasure.

Joanna Kanakis: Thank you very much for having me Jack. It was a pleasure.