Registered Investment Advisors (RIAs) are growing. According to FINRA’s 2022 Industry Snapshot, there were 3,394 broker-dealers in 2021, down 41 from 2020, while the number of RIAs grew 7% from 2017. Free from often restrictive rules and product lists, today’s RIAs seek new offerings to serve their client niches. That’s where Halo Investing comes in.
What is Halo Investing?
Headquartered in Chicago, Halo is a rising fintech firm focused on helping advisors grow their businesses. Through the Halo platform, advisors and investors can easily access structured notes, market-linked CDs, buffered ETFs, and annuities as well as a whole suite of tools to analyze, customize, execute, and maintain the most suitable protective investment product for their portfolios.
Halo also has offices in Zurich, Dubai, and Singapore. The company was co-founded by Biju Kulathakal and Jason Barsema in 2015 with a mission to provide access to impactful investment opportunities previously unavailable to most investors. The firm’s motto is “impact before profits.” It’s all about giving advisors the tools necessary to access the right products for their clients’ portfolio objectives. Halo believes in transparent, democratized access to structured notes and other protective investing solutions—all made possible with today’s technology.
Structured Notes
Halo’s competitive structured note platform is its signature. Unlike other companies offering notes, Halo is independent—not owned by a major bank. That independence assures the most transparent market-based pricing. For years in the U.S., structured notes featured opaque costs and poor liquidity. Halo changed that. Notes are popular globally at more than $3 trillion of market value, and adoption is finally on the rise domestically. One of Halo’s goals is to help independent advisors learn about notes so they can be appropriately included in client portfolios.
A structured note is a straightforward product. It’s simply a zero-coupon bond issued by a bank with a derivatives package. It features both capital protection and upside potential. There are four components of structured notes: maturity, an underlying asset, the protection amount, and a return/payoff amount based on market conditions. Halo offers both income and growth notes based on clients’ risk and return objectives.
Amid today’s investment landscape of uncertain stock market investments and still historically-low bond yields, structured notes help add a risk-defined income stream. The notes are best used to complement a portfolio of low-cost traditional assets. Halo does not push these products to be the only investment product for clients.
Buffered ETFs
Another protective investment RIAs access through Halo are buffered ETFs. Buffered ETFs offer protection from stock market volatility. Using FLEX options that trade through an exchange, the product has four main components: a market index, an upside cap, a downside buffer, and an outcome period. The beauty of buffered ETFs is that they can help investors weather troubled markets. Often the biggest investing risk is not found on a company’s balance sheet or when a recession might strike—it’s how the client behaves during inevitable volatility. Buffered ETFs, like the other protective investments, help people sleep at night and not panic when stocks drop.
Halo recognizes that these investment solutions might not be the easiest products to know and explain to their clients. RIAs have access to Halo’s subject-matter experts and online resources to know all the ins and outs of buffered ETFs and other products. Halo also handles many of the back-end tasks so advisors can focus on building and cultivating client relationships. It’s all about making client experiences better through technology and transparency.
Annuities
The third protective investment solution offered through Halo are annuities. Halo operates as an outsourced insurance desk (OID). An RIA does not have to go through the rigamarole of acquiring and maintaining licenses—Halo’s OID is all they need.
Annuities catch a bad rap these days. Notorious for high and non-transparent fee structures, there is good reason retail investors and many financial planners have grown weary of the product type. Halo is changing that. Annuities can be effective tools for the right client—so long as the price is right. Technology and competition bring lower costs. Cost also includes time. An RIA only has so many hours in a week, and Halo’s simplified approach uncomplicates annuities and saves time. Halo also offers full-service support and review of in-force contracts.
The Rise in Alternative Investments and Platforms
Halo’s protective investment solutions are part of a growing interest away from conventional equity and fixed-income funds. Reducing volatility, increasing an income stream, and holding uncorrelated assets are all strategies that continue to gain steam. Just look at where money is going in the coming years: Research company Preqin forecasts that alternatives AUM will cross $23 trillion in the next four years, nearly doubling from 2021 levels, according to S&P Global. Moreover, according to Cerulli Associates, wealth managers are expected to increase allocations to alt allocations from 10.5% to 11.8% over the next two years. With that kind of demand growth, technology and subject-matter experts are needed to help advisors navigate a quickly evolving landscape. Halo Investing has emerged as a solution for today’s RIA.
Advisors recognize the need to monitor and aggregate their clients’ investments on something much more robust than Excel. Demand is in fact so strong that there’s now a resource, AltExchange, designed specifically to help RIAs track alternative investments. The growing fintech solution houses 50 alternative platforms. Advisors ignoring this increasingly popular niche of the investment universe might be missing out on effective solutions for their clients.
The Bottom Line
Wealth managers are busier than ever. Navigating the complexities of retirement planning, tax changes, and investments are not easy tasks. Moreover, cultivating client relationships while building a business leaves little spare time in the life of an advisor. Halo Investing eases the burden through technology, competition, and transparency, fueling RIAs to grow their business and improve client experiences. Halo’s platform of structured notes, defined-outcome ETFs, and annuities are used by independent advisors to offer clients low-cost and straightforward protective investment solutions.
Frequently Asked Questions
What does Halo Investing do?
Halo Investing is a Chicago-based fintech platform, founded in 2015, that helps financial professionals research, compare, buy and manage protective investments. Its marketplace covers structured notes, market-linked CDs, buffered ETFs and annuities, along with analytics and portfolio tools for monitoring those positions. The goal is to give advisors access to products that were historically harder to source outside large wirehouses.
Can individual investors use Halo Investing directly?
Halo’s platform is built for financial advisors and institutions rather than do-it-yourself investors. Individuals typically gain access to Halo-sourced structured notes or annuities through an advisor who uses the platform. If you are interested in these products, ask your advisor whether they work with Halo or a similar platform and how they are compensated.
How does Halo Investing make money?
According to the company’s leadership, Halo earns revenue when advisors use its products: fees are built into the structure of the notes it facilitates, and for annuities it is paid in a way similar to advisor compensation. Because these costs are embedded rather than billed separately, investors should ask their advisor to explain all fees, including any built into a note’s pricing.
What are the risks of structured notes?
Structured notes are unsecured debt of the issuing bank, so if the issuer fails you could lose principal even if the note promised protection. They can also be hard to sell before maturity, may cap your upside, and often have complex payoff terms and tax treatment. Downside protection usually applies only if you hold to maturity and only within the stated buffer or barrier.
What is the difference between a structured note and a buffered ETF?
Both aim to deliver a defined range of outcomes, such as limiting losses in exchange for capping gains. A structured note is a debt instrument issued by a bank, carries that bank’s credit risk and is usually held to a set maturity date. A buffered ETF uses options inside an exchange-traded fund, trades daily on an exchange and resets its buffer and cap at the end of each outcome period, but it does not carry a single bank’s credit risk in the same way.
About the author
Contributing Writer, Wealthtender
Mike is a freelance writer for financial advisors and investment firms. He’s a CFA® charterholder and Chartered Market Technician®, and has passed the coursework for the Certified Financial Planner program.