Animal Spirits Podcast - Talk Your Book: Interest Rates and Volatility

Episode Date: September 5, 2022

On today's show, we spoke with Jason Barsema about the ins and outs of structured notes, how downside protection works, when it makes sense to use structured notes, and much more.   Find complete shownotes on our blogs...  Ben Carlson’s A Wealth of Common Sense  Michael Batnick’s The Irrelevant Investor  Like us on Facebook  And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation.  Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits is brought to you by Halo. Go to Haloinvesting.com if you're an advisor and want to learn more about their structured products, annuities, insurance products, all that good stuff. Haloinvesting.com. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. Michael Battenick and Ben Carlson work for Ritt Holtz Wealth Management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritthold's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Rithold's wealth management may

maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits, Michael and Ben. Michael, we've talked structured products a little bit on here before we've had Jason Barsonema from Halo. I think this is his third or fourth time on the show. And I was get some things from him when he comes on because we're using these products now. We've mentioned this in the past. One of the things he said, I thought was interesting, he said, if you're going to buy these equity links products that are going to be paying income and they have some downside protection, you think of them like an insurance on your equity, but he also said, don't buy these products if you wouldn't own the underlying securities. And I thought that was interesting

to say, because these things still have some risk then. Even though you have these more defined outcomes, and I think this stuff is only going to grow in the years ahead, that idea of thinking through the risk and saying, don't own this if you wouldn't own the actual underlying S&P 500 or also 2000 or I thought was interesting. And it makes sense. That's a good point. What I have enjoyed so much about working with Halo is maybe this is an overuse cliche, but it is a technology platform. And they're not selling anything. We have as advisors the power to go on and play around and move the dials and turn on soft protection, hard protection, guaranteed coupons, contingent coupons, set the maturity, dial it up or down. It really is

fully customizable, and you have the option as you're working with your clients to say, hey, the return here for this level of risk makes sense, given what we're trying to accomplish, or it doesn't. And I love the fact that it's personalizable, and it changes with marketing conditions. We talk all about the structure of the structural product, the zero coupon, the options, what makes returns go up, what makes returns less attractive. And so we get into all of that. We should mention that when we first got it as structured products, we were very skeptical. We had to be sold in this idea because I have experience with structured notes in the past where we were sold them from banks and the experience was not great, frankly.

The banks were selling you these products. You weren't going to them saying, I want this. They were creating them. They were coming out. I used these in my institutional days. And frankly, I was very skeptical. It did take us a while. Yes.

Once we learned their platform, I got to see how it all works. Right when we signed up with them, we didn't do anything for a long time. There was months and months where we just did nothing. We got the prices from them. we got the yields. We looked at it, but we didn't do anything. We didn't just jump right in. We waited until things made sense for us and for our clients. I think that's the good thing about it is they weren't pressuring us to saying, hey, you guys are on the platform now, start using it. They kind of let us come to them, which is nice. Yeah, as we discussed, like these things

are a function of interest rates and volatility. And I guess when we first started probably sometime, I don't know if it was early 21 or whenever it was, you remember what the market was like. There was no volatility. Rates were low and there was no fall. And so returns were just not attractive at all. And so every couple of weeks, we would hop back in and see where it was at. And at some point, it made sense to bring this to our clients. And so we did. So anyway, it's been a wonderful experience working with Halo and their team. So with no further ado, here is our conversation with Jason Barcema. We're joined today by Jason Barcema. Jason is the co-founder and president of Halo. Thank you for coming back on today, Jason. Thanks for having me.

You got it. All right. So let's start here. Jason has been on several times. But for those who haven't heard the previous episodes, we're going to start like this. Halo is a platform that is I don't know of disrupting the structure note marketplace is too ambitious, but I guess that's how I would describe it. For those who are unfamiliar with structure notes in general, why don't you just re-describe or reintroduce the concept in the product for the audience? A structure note at the end of the day is an investment that gives investors a level of downside investment protection against market declines, obviously very helpful on certain times like these. So the way that I was explain them as think of it as insurance around your investment. So if you buy a product that's linked to

the S&P 500, just as you normally would say SPY, you can actually have 30% downside protection on the S&P. And while you have that protection on the flip side is you might get 95% of the upside. So just like insurance, there's a cost to it. You're not going to get all of the upside, but you have that comfort of a cushion on the downside. One of the things that we talk about with our clients, because we use these products is the difference between the hard and soft protection. And that's probably where we get the most questions, at least from the calls that I've been on. And so I'll explain it. You can tell me if I'm explaining this again, right?

So hard protection means if you say I want 30% heart protection, that means you're protected up to 30%. And if the market goes down 35%, you lose five. Correct. Add maturity. Yeah, at maturity. So whatever the, if it's a 12, 24 month, 36, whatever it is at maturity, if the market is down that much, that's how much you have. But if you use soft protection, you say, I have soft protection down 30%. You're protected up to 30%.

But if the market at maturity is below 30%, you eat the whole loss. Correct. Just as you would, if you bought that underlying outright excluding dividends. Yeah, you're one to one over that level, which is basically, I guess, bad luck if that happens. But so one of the things that we've tried to talk through is obviously with hard protection, you're going to get a lower yield. Soft protection, you're going to get a higher yield because with hard protection, you're getting more bang for your buck there.

Absolutely. So one of the things we've talked with clients about is what is the strategy in the worst case tail scenario. I don't know what it is. We have the number somewhere. I don't know off the top of my head, but it's whatever, 2% or 5% of the time you're going to be in one of those if you do this. What do you think about in terms of a strategy if that happens and you beat the loss?

Is it just that you, at that point, because you're sitting on such big losses, you're going to see huge yields and you roll it over into products, or is it just you put it back into the market because the market is down so much? How do you think about a strategy of if you just happen to have bad luck? in that situation. What do you do? That's a great question and a question that we get asked a lot as well. And so I'll answer in a couple different ways. Number one, what is the difference between soft and hard and when you use it? And Ben, you hit the nail on the head. Hard protection is you're buffered for that first amount of protection. And soft protection acts like a barrier.

Once you puncture it, you're fully exposed. Now, when to use hard or soft protection all depends on what you're trying to accomplish within the portfolio. For example, when the market, it gets pummeled like it did in the first six months, you'll see a lot of people have soft protection, because as you said, Ben, you get a lot more upside with soft protection than you do hard protection. They're just trying to protect against further uncertainty, say another 20% or 30% of losses. And so, for example, about a month ago when the S&P was down 22%, I actually bought a five-year note linked to the S&P 500. It had 40% soft protection. So another 40% down, after the 22, that would have been 60% off its highs. And I was getting 120% uncapped upside.

I used the soft protection because I'm going to basically get more protection. Yes, I'm taking risk that it could puncture it, but 40% is a lot of protection. If you would have used hard protection to get the same upside, that would have been about 25%. So that's always kind of the rule of thumb is subtract 15% from the soft protection level. And that's kind of the equivalent of heart protection that you'd have getting the exact same upside. Jason, I want to let you answer the question about what do we do in the event of the unfortunate scenario where you're below the floor. But just before we get there and we'll return to this, there are different types of

structure notes. There are income notes. There are upside notes. So what we're describing in terms of the income note is different than the structure note that you implement it for yourself, where you're trying to get upside of an index. Absolutely. And income notes do play a very important role in my own personal portfolio. I usually have 5 to 10% of my entire portfolio allocated at income notes

because I like the income stream and I like the defined outcome. The protection usually works the same. That rule of thumb of 15% difference usually works the same, whether it's income or growth. But again, getting back to what I was saying earlier is the hard protection versus soft protection that's all dependent upon what you want to achieve in your portfolio. If you just can't stomach the losses and you want to know that you're buffered

for that first X percent of protection, then use hard protection. That's the most conservative. If you just want some extra protection in case the market decline is not over, use soft protection because, again, just kind of gives you that little bit of insurance on the downside. Now, getting to your question, Ben, it's a very informative question because the way I look at it is if you do in the rare event that you breach the protection level, if you do on maturity, because these terms only matter of maturity, what I do is I like to roll it into a new note because remember, what is the composition of a structure note? It's a zero coupon bond and a derivative. So obviously, as the market is down, volatility is high

and you're going to get exponentially higher pricing on these notes. So if I had a product that was linked to the S&P, the S&P breached the protection, say 30% on maturity, well, VAL is naturally going to be really, really high. So the silver lining of that is you're going to take and recognize the loss in your portfolio that you can chalk up to other gains within the portfolio. So it's almost like a tax loss harvesting strategy. And you can roll those proceeds into a new note to get exponentially higher upside. Does that make sense? Yeah.

That makes a lot of sense. But how would you explain it to a client? I know you know this. This is your platform who just said, you know what? I just got really badly burned like in Austin Powers. I don't want to do another structure note. I just want to put my money back into the S&P 500 or whatever market it is because the market's already down 35%. I think that now it's a good buy an opportunity later for the

structure note thing. I just want to get back into the market. And so the way that I always explain it is when you buy a structured note in the first place, you should be willing to buy that reference asset or that underlying asset, whatever the structure note is linked to, you should be willing to buy that law. The reason why you're buying the structure note is just to be able to derive a level of income as you do on the income notes or have that downside protection. So if in the event that it breaches, Michael, I would explain to the same way as a client. Well, we would have owned SPY anyways and SPY would have been down 30% within your portfolio. Now, and this is a conversation that we're having a lot right now,

is let's roll that into an equity repair strategy. So if you have a client that says, no, I want to wait on the structured notes. I just want to buy SPY and try to capture the upside. That client may want to consider what I call an equity repair strategy, a growth note, because they can actually get enhanced upside on the S&P, just as that example that I just gave you of what I bought in my personal portfolio a month ago. Consider this. If the S&P is down 20%, the S&P needs to rally 25% to get back to par because you're starting from a lower base. If I would have just bought SPY, I'm one for one on the up versus if I would have bought this structured note that I just bought a month ago, I'm getting 120% of the upside of the S&P. So I can make up for those losses a lot

faster than I would be if I bought a passive index fund. Does that make sense? Have you noticed more action at Halo in these past couple of months? Because the way that we've looked at this is that the time you want to put them on is during a correction when volatility is higher because you're going to get higher rates. That's the whole idea. Obviously, you could say I'm going to put them on when the market is really high because that way I can provide some downside protection. But our view is it makes more sense to put them when market is lower because that's when you have volatility. Like you said, the yields are going to be higher. So have you seen more people coming in? Are there people on your platform that are thinking about this in the sort of

contrarian way? We certainly have seen a significant amount of activity in the last two months that people have been trying to pick the bottom. But the way that I always advise financial advisors is use structured notes in two ways. Number one is the core part of your portfolio. If you're going to buy SPY, buy it with protection. Just as you wouldn't own a home without insurance, just as you wouldn't drive a car without insurance, don't invest without insurance because it's not prudent. We can't afford, most Americans cannot afford to lose their money. So always have that insurance in your portfolio because when the unforeseen happens, you have that comfort of the downside protection. Use that, always have that in your portfolio because

you want to protect against the unforeseen. And I call that the core part of the portfolio. Now, what you're talking about, Ben, that's more of the opportunistic or tactical part, which I also do, as I just mentioned with my own personal investment, is when volatility is high, take advantage of that because you're going to get really, really good terms. When vol is high, you can get anywhere from 40 to 50 to 60 percent better terms than you would be if volatility is low. Case in point is on an income note, as I just mentioned, 5 to 10 percent of my own portfolios in these income notes.

A standard product that I buy is a three-year note linked to the S&P, the Russell, and the Eurostocks 50. It's global equity in my portfolio. So I'm selling U.S. equity exposure, international equity exposure as well, and I'm funding this note. With 30 percent soft protection, my yield is. typically 9 to 10%, which I like, because find me a long-only manager that can offer me that type of risk and reward.

So I like that for my own personal portfolio. When VAL was high during the summer, that 10% actually turned into a 21% per annum coupon. Jeez. Wait, Jason, question, do you use guaranteed coupons or no? I do. It all depends on the market conditions that I'm in. For me, I typically use contingent coupons. Why?

Because you get higher rates? significantly. So I'm willing to sacrifice potentially missing one or two coupons to be able to get significantly higher yields over the life of my note. And when I have that coupon protection, I also have an investment thesis that the market is not going to be down by more than my coupon protection amount. So I feel comfortable with that. So this is what I like. This is what attracts me to structure notes. I generally have an aversion to mixing investments with insurance. I generally do not. believe that investments should be insured because if you cut off the downside, by definition, you will cap the upside. However, what I find attractive about these structure notes is that with the insurance that you're putting on, it is a defined outcome. So you could say to a client, hey, listen, these are the deals. You can either, I'm making this up, in exchange for 30% soft downside protection, you can get 5% per year for the next three years. However, if you the market is down 31% at maturity, you are down 31%. Again, I'm making up those specific numbers,

but the point that I'm making is that there's no ambiguity. The client could say, hey, actually, that does match my risk return profile. That does sound attractive for me. Or, hey, wait a minute, why the heck would I take 5% income a year for the chance to have equity downside exposure? No, that doesn't sound good to me. But the point is that you just made with turning on guaranteed income or not having more. I like that it's very personalizable. And it's to the client's specific risk tolerance. In my humble opinion, and you're absolutely right, Michael, in my humble opinion, the future of investing is really three things. Number one is I do believe that the future investing is protective investing because whether you have 5% downside protection or 50, to your

point, that's your prerogative, but it's prudent to have a level of downside protection to protect against the unforeseen. I'll expand upon that point in a second. But number two, everything in our life is customizable. We were just talking about Netflix and HBO that's customizable to what we watch. Our Amazon's customizable, but our investments aren't. You're Delta one, meaning you're long or you're short. And what's so elegant about the structure note, when used correctly, with the right transparency and with the right technology like Halo provides, is that they can be whatever you want them to be. Perhaps that I want 40% protection, you'd say, Jason, that's a bad investment for you because the market's not going to be off 60% from its highs and not

going to be down 40% in five years. You're paying for that insurance. And I would tell you, Michael, I absolutely agree with you, but it makes me feel comfortable. And so portfolio management is just as much as an art than it is a science. And the art part of it is when volatility picks up, no matter how season of an investor you are, you start to question yourself. And especially as the end investor, we work darn hard for our money. I don't want to lose my money. And I am willing to sacrifice a little bit of the upside.

And actually in the note that I bought because of volatility, I'm not. I'm actually getting enhanced uncapped upside. But in general, I'm willing to sacrifice a little bit of the upside to make me sleep better at night. And so that is why I think structured notes are so important because part of being a financial advisor is, yes, providing return on your client's investments, absolutely. But it's also being a psychologist. And part of that psychology is making me feel comfortable when the markets are getting its teeth kicked in. We've never had a demographic as big as the baby boomers that are going to live as long as they do. And we hear all the from people who are concerned because their human capital is depleting and now they're worried

about financial capital. So I have to imagine that has to be the biggest growth area here. That has to be the biggest boom for you for business-wise in the coming years is just these types of products just make a lot of sense to people who are retired and don't have income coming in anymore, correct? Absolutely. But not just the boomers. It's actually also millennials. There's a lot of case studies out there that the millennial generation is more risk-averse than even the boomers. And it kind of makes sense. With many millennials, they were going into high school when the tech rec happened, when we all started learning about investments.

We're like, wow, that hurt. That was really interesting. And maybe our personal lives were impacted by that. Then you're graduating college in 2008 rolls around and 2009 rolls around and you're trying to get a job. And you're in the midst of the worst financial crisis we've seen since the Great Depression. And then you've seen all of these other macro events. People tend to become very risk-averse at a time when they're trying to save,

for buying that first house, trying to get married, trying to have kids. And that's the importance of, yeah, the media talks a lot about Robin Hood and, yeah, we're going to have the meme stocks and how much money can we make on the meme stocks. But there's also a big segment of their wealth. That's just a small part of their wealth that they're putting on Robin Hood. The largest part of their wealth is in more traditional assets, and those are typically more risk-averse. So I think that these types of products give millennials the confidence to not only stay invested

in the market and not day trade, but more importantly, these structured notes, give the confidence to people to get invested. Because talking to your client right now, even though we've had this rally, is very difficult to put cash to work because I'm sure they're asking you guys at Ridholtz of saying, well, geez, is this a sucker's rally or is it not? And that's the point of structured notes. You could come back and say, I don't know. I don't have a crystal ball. If I'm early or wrong, heaven forbid, we've got the protection. If this rally sustains, we've got the nice yield that we've got in the portfolio or we've got the enhanced upside on a growth note. And that's what one of these tools powerful. Let's say you created a meme stock

structured note. What's the cost of that right now? We've seen it. And so the cost on Halo is the same whether you buy a meme stock note or you buy an index based note. I mean like the cost of the options. Cost of the options would have to be really high for those stocks, right? It depends on the strategy that you're doing, when these meme stocks got absolutely crushed during the summer in the first six months of the year, VAL was really high. So when we had a lot of people that were buying growth notes, whether it was on AMC or whether it was on Peloton and all of these others where these notes were Coinbase down 80% with some of these names, VAL is really high. So when you're using soft protection, what are you doing? You're selling puts and you're selling binary puts.

that premium that you're collecting is paying for that upside or paying for that yield. So the terms could be very attractive. So those yields must have been really high. Oh, my gosh. There was some on some of these, not even mean stocks, but just even some of the chips and some really good names just got thrown out with the bathwater. As we know, we had one client that put on an income note, similar to what you guys do at Ridholz.

It was linked to three names that they really liked. One was a chipmaker. One was a staple. And one was a bank name. actually. And it was a basket of these three. It was a two-year note, had 40% soft protection, so 40% soft, and it provided a yield of 42% per annum. But it was 40% of the worst of the three or average or what? Correct. It was 40% of the worst of those three. Now, you could say, well, those names aren't correlated, so that could be higher risk. And I would say, yes,

statistically it could be. The advisor argued saying, well, I like all three of those names. I'm actually long all three of those names. So why wouldn't I take a portion of that and put that into an income note where I'm getting over a 40% per annum yield in a name that I'm going to own long anyways? Here's what I like about this, getting back to being able to define the risk and reward. Let's say that you have a note tied to the major indexes and you're a 6040 investor. You could say, okay, I'm going to get a cumulative guaranteed 20% income over the next three years to maturity from this structure note. And then let's say I've got 40% soft downside protection and the market's down 41% on maturity. You game it out. So you say, okay, my principal's down

41%. I've already collected 20% in coupon payments. I'm down 21%, which is basically where I would be with a 6040 portfolio, but with a structure note, I'm turning on guaranteed income. And let's just assume that the worst doesn't come to pass. That's pretty attractive. Exactly. And that's getting back to your early question, Michael and Ben, about guarantee. coupons versus contingent coupons, number one, that's the elegance of structured notes. They can be whatever you want them to be. They're tailored to you. But it also depends when you use that feature as depending on where you're at in the market

and what your thesis is. Under your thesis, that 41% per annum coupon that I just referenced was a contingent coupon. If you were to do a guaranteed coupon, that would have probably been around 30% per annum. Under your thesis, that makes a lot of sense to me. a lot of sense to me. And so it all depends on the context. And that's the power of Halo, is that, as you guys know at Ritholtz, when you use Halo, you can price out any combination that you want. And you can compare and you can contrast of what is the most appropriate for you. Let's talk specifically about Halo, the platform, the service versus how structure notes are

marketed, sold, packaged at traditional wirehouses. What is the experience like from the advise this point of you from the client's point of view. Talk about the differences. My problem with the structure note industry is that structure notes have always been sold and not bought. It's always been the wholesaler hawking you in an email of saying can't miss opportunity, buy this product. Many times on these income notes, they're telling you to sell corporate bonds and buy this product because you're getting a higher yield. No, you're taking equity risk. These should be equities in the portfolio. And that's what I say when used appropriately, they can be one of the most elegant products that you can have. And what I love about

Halo is that we have turned this market from being sold and not bought into being bought and not sold. The follow question that you might have is how and why. And it goes back to our technology that we've given financial advisors now across five continents, as Halo is a global company with offices in Chicago, Zurich, Abu Dhabi, and Singapore is that 90% of the structure note volume that we trade are financial advisors like yourselves that go on and customize what you want. It's not Halo trying to sell you on anything. We just give you the tools to give these institutional tools that were once only available to the big Wall Street banks and now putting them in the hands and giving that to the power to the people and allowing you to price what you

want. And that's what I really like about our platform, number one. Number two is the technology allows you to have the analytics. So fiduciaries can be fiduciaries. Again, as you guys can tell, there's analytics on the platform to show you what is the probability of it breaching. You can do rolling returns analysis. You can see how structured notes fit in the portfolio and impact that. And there's even more tools that we're rolling out over the next three months that are going to be even more powerful for you to take an agnostic lens of, is this product good for me or not?

Not every structure note is good for you. Not every stock is good for you either. That was my problem with the structure note industry is that it was always the structure node hawks just saying, no, Michael, Ben, it's got 40% protection. This is good for you, man. No, it's not. Jason, sorry to my thing is important, to your point about how these things work, when we first started looking at implementing this type of strategy, the specific strategy that we were looking to implement was not offering attractive terms, not even close to where we were comfortable putting client money based on where interest rates were at, which is a big component of these notes, as well as where volatility was. It just didn't make sense at the time. And so we waited. It had nothing to do with, we weren't forecasting anything. We just said that now is not the right time. The risk is not worth the return or the return is not worth the risk stated differently or the income. was not worth the risk. And the market conditions changed. And then we were able to go to our

clients when we were ready and say, now we think the terms are attractive. And so we laid the groundwork. We explained what the product was. And we said, we're waiting. I feel silly saying that we're waiting for the fat pitch, but there was no urgency. We were waiting for the market to give us what we were looking for. Well, and I think it's also important if you said about the terms weren't attractive. The terms weren't attractive prior to Halo because there was so much fat in these products. And I'm saying when we started looking at it, just to the point of being able to do what you want with it and not being sold, it being bought. Exactly. And that is a very important point, right, of again, giving the power to the people. So you can implement these strategies when you feel

comfortable. But my point, too, and the power of the technology is not just allow Michael and Ben to price out whatever they want, when they want. It's more about what goes on behind the scenes, meaning removing the middlemen, connecting you directly to the issuer. Halo allows their advisors to run a competitive auction process, which has never been done before, which the issuers compete for your business, kind of like a lending tree. That never existed before. And last but not least is that we give technology to the issuers for them to automate their issuance process, which can remove 70% of their cost to manufacture. If you looked at how these products were manufactured before Halo's like how cars were assembled before Henry Ford's assembly line.

So all of that of removing the middleman, competitive auction process and technology of the issuers allows us and the industry to pass those savings onto the customer, you, Michael and Ben, and ultimately to your end customer in better investment terms. So you don't have to have all these funky features in the product just to make the terms attractive. And now with rising interest rates, rising inflation, and rising volatility, that's the best recipe for attractive pricing. You couldn't think of a better market right now than rising rates, rising ball, and rising inflation in regards to the pricing of the structured note. One of the structured product areas that we haven't really talked to you about as much is annuities. I'm curious how much more attractive

annuities are these days when you look across your platform in a rising rate environment, how that space is looking. When you look at the annuity market, the annuity market is actually growing quite significantly this year because, again, people are looking for that protection. They're looking for that guaranteed income. People use annuities differently than they use structured notes. So a lot of questions that we get asked is, is it an either or, okay, do I buy the structure note or do I buy the annuity? And no, those are two separate parts of your portfolio. When most people buy annuities, they're looking for that guaranteed income. They're looking for that full principal protection. It's almost a bond replacement where structured notes are typically an

equity replacement within the portfolio. That being said, Halo now also offers annuities from over 10 of the top carriers in the country. Again, utilizing our technology to bring more transparency, more efficiency, a better buying process, and more analysis to the annuity market, which suffered from a lot of the same problems that structured nodes did. And so in many circumstances in this market, annuities can start to be attractive, especially when you look at some of these MIGA products as cash and bond alternatives. The yields can be quite attractive right now. And what's called a RILA product, which is basically a structure note and insurance wrapper. And that can provide some tax advantages. We don't give tax advice, but that can provide some nice tax advantages over a structure

note wrapper. So Halo has really transformed from just a structure note technology platform. more into a protective investing platform. Again, we don't push any product. So we want to give Rid Holton all of the thousands and thousands of financial advisory firms that we serve all around the world. We want to give you guys the power to make the best investment decision for your client and us just be the independent agnostic platform, which is really important. We're independent.

I'm not owned by any of the structure note issuers. And that allows us to do what we do. Can you talk a little bit about, as we come to a close here, what are conversations like initially with new advisors that you're introducing the platform to because I would imagine that like myself, some advisors might recoil when they hear the words insurance and investing mixed. So talk to me, talk about that education process a little bit. Yeah, at the end of the day, what I take great pride in is that 51.4% of our customers, not to be too specific, in the United States are new to structure note. So over half of our clients

I've never bought a structure note before. And many of the reasons were not because they hadn't heard of them. They heard bad things. Exactly. Google the word structure note, and now Halo comes up. But prior to that, it was the FINRA warnings of high fees, lack of liquidity, lack of transparency, and too complex. That's everything that Halo's technology solves. And so when you look at the education of these advisors, we've reached an inflection point

within the market, which is saying, okay, the 6040 portfolio is not working right now. How are we going to get yield in the portfolio? How are we going to get protection in the portfolio? And more simplistically, how am I going to hit my client's investment objective of making 5 to 7% in the portfolio with reasonable certainty? That's becoming very difficult to do with traditional investment tools. And I think that's what's so interesting about Structure Notes and Halo in general is that this is not a new tool.

They've been around since 1976. But for many advisors, now it's a new tool that they can have in the portfolio to be able to hit their investors' objectives of generating income, growing the portfolio at a reasonable rate, and protecting the portfolio against the unforeseen. I can't think of many other products that can hit all three of those boxes. And when you need that, advisors have been more receptive to learning when it's done in a transparent and independent purview like Halo provides. Hey, I would be remiss if we didn't hit on this topic. We forgot to. I guess we take for granted because we've spoken to a few times now. But lack of liquidity, when you go into these products, you should act

as if you are holding these things for the duration. That is one of the tradeoffs, correct? So I always say by the structured note with the intent to hold it to maturity because the terms only matter at maturity, you're not going to get the full benefit of the upside or the protection unless you hold it to maturity, just to be clear. So that's why a lot of people hold them maturity. Now, what Halo has brought in is an independent secondary liquidity market for structured notes, which has never existed before, where instead of just being forced to,

to sell your structure note back to the issuer, we've got over six market makers that will make markets on most notes on our platform, which is collapse spreads in the secondary from three to four points on average, down to about 25 to 35 basis points on average, depending on the structure that you're actually selling. And so if you need that liquidity, HALO can offer you that liquidity at a reasonable price. And that was always my rubs about the structure note market is like, great, I'm going to pay issuers all this money to buy the product. And then if I want to sell early, whether to harvest gains or losses, or I just need liquidity, now I got to pay four points to get out. That's not fair. And so, yes, hold it to maturity to benefit from the

full upside and protection of the product. Absolutely. But if you want that secondary liquidity, HALO can provide that. Jason, it's always fun having you on. Thank you so much for coming back. We appreciate it. Hey, thanks for having me, guys. I really appreciate it. Okay, thanks again to Jason and Halo Investing. Remember, it's Haloinvesting.com, and send us an email Animal Spiritspod at gmail.com.