How Innovation and Disruptive Technology Is Reshaping Asset and Wealth Management with Sandy Kaul

Jack Sharry: Hello, everyone. Thanks for joining us on this week’s edition of WealthTech on Deck. We appreciate you tuning in. I had the opportunity to participate as a panelist at the Franklin Templeton Innovation Summit a few months ago. It was really interesting collection of thinkers and doers around where our industry is headed. And as our listeners know, I try to pay close attention to smart, innovative things happening in our industry. And I was quite impressed with the work there and overall with Franklin Templeton. They really have been doing some, I think just industry leading stuff. So we’ll talk about that, I’m sure, today. Between their asset management acquisitions, their tech investments and development, the development of the Franklin Templeton Institute, which we’re gonna talk a little bit about today, they’ve become much more than another asset manager. So, so I’m looking forward to our discussion today with our guest, Sandy Kaul, who is very much on the cutting edge of our industry and at Franklin Templeton. Sandy is the senior vice president and part of the Franklin Templeton Institute, delivering actionable intelligence and insights on the future of the investment and wealth management industry for the firm and their clients. So she has spent her career building a macro level understanding of how the financial services industry evolves and how this evolution affects investor allocations, specific trading strategies, products, operational practices, and supporting technologies. Sandy, welcome to WealthTech on Deck.

Sandy Kaul: Hey, thank you so much, Jack. I’m thrilled to be here with you today.

Jack Sharry: So Sandy, let’s start with you sharing with our audience about your role at Franklin Templeton, what do you do? Who do you do it for? Please tell us.

Sandy Kaul: Great. Well, I kind of wear two hats here. On one of my hats, I am continuing to do thought leadership about how the investment in the wealth management industries are evolving and changing. And I’ve been doing this for about 14 years now, which is quite a long time. So I’ve seen a lot of the evolution and the change. And I look at two timeframes, I look at what we call evolution, the next 12 to 36 months, so things that are already very clear on the horizon, and that there’s a very high probability that they’re happening. And then we also look out and we try and think about where is disruption in the industry potentially coming? And we try and look out 5, 10, 15 years, which is more speculative, but you can kind of extrapolate from some of the trends. So that’s one part of my job. And that is very much survey based. I talk to great folks all over the industry, all over the world, from asset owners, to intermediaries, to other asset managers and private investment firms, to a whole collection of fintechs and wealth tech and crypto players that are really bringing new capabilities to market. My first report on where disruption could be coming from, I did back in 2017. And it was very much about tokenization, how tokenization and these new capabilities being developed and delivered out of the crypto domain, were really creating a new foundation, that we could rethink investment products around. And you can imagine in 2017, that wasn’t the most popular view in the world.

Jack Sharry: Sure.

Sandy Kaul: I mean, it’s becoming more popular. But to her credit, one of the most visionary people who really grasped the potential right away was Jenny Johnson, who is the CEO of Franklin Templeton. And Jenny had built out her digital asset team that I was well familiar with. And after five years of kind of watching what they had been doing, Jack, and seeing their progress that they had been making, I decided I had to jump ship and actually go and join them. And so my other hat that I’m doing at Franklin Templeton is I am the head of strategy for our digital asset unit. So kind of wear both hats right now.

Jack Sharry: Great. Well, I want to hear some more about what you’re doing day to day, but it sounds like you’ve got a deep and rich history. I know we’ve chatted a little bit about that. But why don’t you fill our audience in on, on your background that led up to all this, then we’ll get back to the business at hand.

Sandy Kaul: Sometimes now when I talk about my background, I think I sound kind of like very indecisive.

Jack Sharry: Not at all.

Sandy Kaul: But it’s actually a lot more deliberate than it sounds. But I spent the first 15 years of my career in the commodity markets, specifically in the soft commodities: coffee, sugar, cocoa, cotton, and frozen concentrate orange juice, it really is a thing. And I was an analyst in those markets, then I was a portfolio manager in those markets and was really investing as part of a commodity pool for several years. And then I just really had decided that I wanted to broaden my focus around more products and the broader picture of what was happening in the investment industry. And so I moved out of the commodity sphere, I started doing consulting around the new technologies that were emerging. This was right around when the internet was coming out, I joined one of the big internet consulting firms of the time that had been founded by Bob Howe out of IBM, it was called Scient. And I was able to do a lot of the strategy for our financial services unit at Scient and helped to launch a lot of the first generation websites and portals and trading applications that really took advantage of internet technologies. And I learned a lot about technology. And then I did more consulting around management consulting and program management, before finally really landing at Citi where I joined the hedge fund prime brokerage unit, and was really leading our charge around hedge fund consulting, and thinking about how do large and institutionally focused hedge funds create more professional operations and really grow to compete, which led me into thinking about their expansion strategies into both long-only strategies and private strategies. So I got that full picture of the financial ecosystem that I was really looking for. And then that’s when I really started doing the thought leadership around how the overall industry was evolving and changing.

Jack Sharry: I love it.

Sandy Kaul: So that’s kind of my crazy career, buy side, sell side, consulting.

Jack Sharry: Yeah, love it. It sounds perfect for what you’re doing now, in terms of background. So one of things we talk a lot about on this show is the confluence of digital and human advice. And clearly that is underway. In fact, we started this podcast three years ago. That’s kind of what we focused on, who’s getting it? And clearly now everyone at least kind of gets it, not everyone’s executing as well as some others. Clearly, Franklin Templeton is executing, I think, masterfully. Lots of work to do still, I’m sure, but, and I know, because that’s just the nature of where we’re at. So talk a little bit about what you’re working on. Because it’s really interesting how it’s coming together. Franklin Templeton, I, again, I’m a real student and a huge fan of Jenny Johnson, student, you know, of Franklin Templeton, and huge fan of Jenny. She’s just, I think, just way out in front of others and she’s someone who grew up in the business, she grew up in operations, she grew up in sales, she’s been all over Franklin Templeton in terms of her prior roles, but now leading the organization, just so many smart acquisitions, so many, not only in terms of businesses, or assets, or what have you, but also people. She’s brought together people like yourself, and many others. Another good friend in common is Roger Paradiso. So, lots of folks are coming together, and many more that I’m leaving out, I apologize. But many more folks coming together to do what you all are doing. So talk a little bit about your role in terms of what you’re doing with Franklin Institute, Franklin Templeton Institute, of what you’re doing in terms of the work you do day to day, the research. It’s really fascinating, because it’s really about understanding where the world’s going and then how you can have an impact on that.

Sandy Kaul: Yeah. So in terms of my work with the Institute, we really are thinking about how are technologies coming in and disrupting and changing the delivery of services, right. And when it comes to the wealth space, I think that there’s, there’s two sides to the story of what’s happening right now. Within the wealth advisors themselves, you’ve seen this interesting pivot in the role of the advisor within their organization, right? It started with the advisors really being the investment experts able to select the securities that they were going to pick for their clients. And we’ve been slowly moving away from that idea of them being the investment expert to at first being more of a fiduciary, really helping the client think about their overall financial life, think about their overall set of goals and responsibilities, and thinking about a financial plan that was going to help them get there, one piece of which would be their investment portfolio. Now we’ve even seen that progress further, where they’re really thinking holistically about a client’s entire financial life, including things like their health, their wealth, their enjoyment, their aging, their retirement, right, there’s like a lot of challenges. And to really have that right level of engagement, what we’ve seen is the wealth platforms have really moved to taking this lifecycle and journey based approach to how they think about their client base. They’re using data, they’re using analytics, and they’re creating cohorts that really can inform different life stages of a client and think about what is the right set of content, analytics, tools, investment products, insurance products, advisory products… What can you bring together for a cohort around what life stage they’re at? And then how do you help them transition from one life stage to the next?

Jack Sharry: Sure.

Sandy Kaul: So this has been a whole new set of technologies that the wealth advisory firms have been building. They’ve been moving away from the investment side and moving more towards the client centric understanding and profiling side, focusing in a lot on this behavioral profiling, right. At the same time, they have relied increasingly on firms like Franklin Templeton to not just be the manufacturer of investment products for them, but to actually be a service partner. And so you’ve seen asset managers like Franklin Templeton really step in and start to provide not just investment funds, but investment intellectual property through model portfolios, through being able to align those model portfolios and tailor them to individual clients, and what those individual client needs are. And to be able to do that, we’ve really seen a migration away from fund wrappers to more separately managed accounts. And so this has been an overarching trend in the industry. And Franklin Templeton has really been at the forefront of this through a couple of the capabilities that we’ve created. We have created, number one, an ability to do this customization of portfolios and deliver them in separately managed accounts and run multiple mandates in this way for our different wealth advisory partners. Number two, we’ve developed a goals optimization engine that can really work and ingest the profile of the wealth client and really begin to model their needs and model what the portfolio that will optimally deliver those needs will look like. And help to construct that in a way that it remains dynamic and relevant and changes as market conditions change, as the client moves from one stage of life to another. So we’re trying to bring that tool together with our manufacturing platform. And the analytics that come with that tool really look at tax optimization, they look at optimizations around where there might be concentration risk in a wealth client’s portfolio because of their career, or because of their family’s wealth. And we’re really looking to create that experience where when you go into your advisor, you feel like they are really thinking about you and dealing with you as a unique individual, not just as one of a cohort. So I think that that’s been a very exciting advancement.

Jack Sharry: And so in the research that you’re doing is, are you informing the businesses around what you’re seeing coming down the pike, what you see… how those trends manifest or play out?

Sandy Kaul: Yeah, so it’s super interesting, because that’s kind of where we are today, Jack. And so what I help with is, because Franklin’s already doing a great job at servicing where we are today, I help bring in where might it be headed, right. And so from a retirement perspective, we’re starting to see much more emphasis on kind of these lifetime income products. And this ability to almost move the dial around a multi factor portfolio, looking at income needs as a factor, looking at liability matching as a factor, looking at the need for capital protection as a factor. And then balancing all that with a need for ongoing investment returns. And so we’re really working on these types of solutions that are almost like individually structured portfolios that are a little bit beyond even just tailoring, they’re really almost meant to deliver a multi outcome portfolio. So that’s what we’re doing in retirement. And we’re working a lot with embedded products like annuities within that. And then what we’re seeing for the younger generations is that the pathway towards accumulation is starting to change because younger generations have a different work pattern, they’re not spending as much time in a job. We’ve set up most retirement savings programs in the United States around an occupational retirement savings plan. And so this shift in the work pattern is creating new challenges. And we’re seeing new products that younger generations are more attracted to, particularly digital products and digital engagement models. So we’re really thinking about things that these new neo-brokers, platforms like Robin Hood, platforms like Public, platforms like Stash, and Acorns, what are they introducing in terms of community functions, participation, gamification, rewards, and benefits? These are all the new dynamics that younger generations respond to, so how do we incorporate that into our investment offerings to really engage a younger consumer over the course of their lifetime and serve their different needs around accumulation? And then finally, the third area that I do a lot of work is in thinking about how do we use new technologies like AI? The generative AI is the latest example in the toolkit, but AI has been an expanding toolkit since about 2011. How do we use AI? How do we use blockchain? How do we use smart contracts to really enhance the way that we create and deliver products and improve the industry? And a super simple example there is with blockchain, you can integrate your cash and your investment products on the same ledger. And therefore you can swap assets instantaneously rather than having to wait 72 hours to get an ACH payment through. So that’s just like an example of one type of improvement that we’re already starting to think about and work on for our next generation of technology and tools.

Jack Sharry: So, I’m going to do a little translation for our audience, which is largely made of senior level executives across our industry, competitors, and partners across the industry. So what Sandy’s describing, just give you some examples, real life with some names, because they’re all public. So on the annuity front, I observed, because… it was in a video not too long ago, that Franklin Templeton is working closely with Pac Life on the lifetime annuity concept that Sandy just described. Goals optimization engine, sometimes called GOE, actually LifeYield, our company, is the tax optimization engine within GOE. And so we’re doing… working closely there. And also another property of Franklin Templeton is Advisor Engine. And so GOE is part of Advisor Engine, LifeYield’s within that, so does the tax optimization. So there’s that that’s going on. Also, we’re having conversations, at least from our standpoint, with Roger Paradiso on work he’s doing with Canvas. So when they purchased O’Shaughnessy, there was this capability called Canvas, which is really oriented toward the higher net worth kind of client, that’s an RIA. And again, concerns around issues around taxes and risk and, and all of that. So just putting some names of those that are following all this in the news. What Sandy’s talking about is actually playing out. I don’t know if you want to add anything to this, I probably missed a couple of things that are, I know, you guys are working on, on many, many fronts. But, anything you want to add to that real world example?

Sandy Kaul: Yeah, I think you did great. Portfolio GOE, Advisor Engine, Canvas. The one I’d add in addition to that is our portfolio analysis tool that’s really allowing for on the fly comparisons. And when you put them together as a product set, what we really are trying to develop is what we call this wheel of wealth, where we can take every aspect of the relationship that a wealth advisor would have with their client, and think about how can we offer technology and tools and analytics that can help that advisor really optimize each stage of the engagement and use Franklin Templeton’s ability to spend and to really create market leading technology that they can deploy on behalf of their relationships. So, you know, this is just an example of how it’s not enough to just be a manufacturer of product anymore. It’s really about being a service partner and the way that we act as a service partner is through provision of technology.

Jack Sharry: Exactly. One other that just occurred to me is… it was all part of the panel that I was a part of at the Franklin Templeton Institute a few months ago. Brian McDonald, who heads up Morgan Stanley at Work was on the panel along with Vinay Nair, who’s the CEO of TIFIN, and a person from the GOE team at Franklin Templeton. We had a conversation about the future of advice and the application of all that we’re describing here. So yet another concept that we talk a lot… about a lot here on the WealthTech on Deck podcast is the convergence of workplace and wealth. And certainly Franklin Templeton is a player in that regard. I work closely with… who’s leading that effort. Also, part of that effort is the annuity work that’s being done. And all this is coming together, conversations are underway with our friends at Morgan Stanley and Franklin Templeton and LifeYield, in our case, is we’re working together about how can we improve outcomes for clients, how to make it more accessible, easier to operate, all the rest? So I don’t know if, Sandy, you want to add anything to that. But that’s all part of pulling all those threads together and, and weaving a pretty powerful story.

Sandy Kaul: Yeah, I mean, I’ll throw one for the future, Jack, that probably is going to be coming up soon. Which is when you think about these new token wrappers, which are based on smart contracts, which is just programmable code that self executes, it’s a bunch of if-then statements, if this happens, then take this action. And the if this happens will have some sort of database trigger. People are using that ability to program those if-thens and to use that wrapper of the token that sits on the blockchain, to be able to start to add new sorts of rewards and benefits to your portfolio. And I think this is going to become a big trend in the future, where I might get special discounts at companies that I own in my portfolio, or I might get special abilities to use, to access stadiums that my portfolio may have helped to invest in or to build, to get special access to shows or early access to tickets, or even access to just communities of like minded investors. So I think you’re going to see this experiential component begin to work its way into the investment portfolio. And we’re going to have these new wrappers of tokens that sit on blockchain that are going to make that very easy, particularly when you put it together with AI that can monitor these contracts and alert you that you’re now near a store that’s in your portfolio. And here’s a special discount coupon for you. Right, they can use your geolocation tagging. And so you know, your investment portfolio, which throughout our lifetimes has been something that kind of sat off to the side is increasingly going to become at the center of our life, and it’s going to enable us to get more and to do more than we would have been able to otherwise. And that might even keep us from needing to spend money in the short term, you get some of this as just the perks and benefits of being invested. So I think that’s an exciting change that we see coming on the horizon. And that’s probably something that people will start to see showing up in the technology we’re talking about in another three or four years.

Jack Sharry: Let’s talk a little bit more about where we’re headed, just did a podcast recording yesterday, with a strategic partnership person from Microsoft, and describing what they’re putting together, in fact, I got to connect you, you and her. And they’re really doing some exciting stuff. And she was, her name is Amy Young, and will be on a podcast, around the time of this podcast, down the road. But it was fascinating. She was talking about real life examples, they’re working with a number of leading asset management firms, wealth management firms, and where they’re going with AI. And just as an example, I’d love to have your thoughts on this and how you see it playing out in terms of the role that Franklin Templeton is playing, will play. And that is that there’s, they’re looking to put all of their interactions, the interaction between an advisor and a client, on Teams. And Teams will be the gatherer of AI and… information informed by AI. And so that basically, you have a, you can put… It’s not all done yet but it’s in motion, where you can have a conversation with a client about the issues that they’re grappling with. And in so doing, it’s all on this sort of presentation platform. But it’s all the information that you need is brought together… she was using an example of partnering with Zillow, if you need information on the house and the taxes that might be paid. It’s all part of a planning process. So talk a little bit, I’m sure you’re thinking along the same lines, where do you see AI playing out, we’re hearing a lot of noise about AI and trying to get people to talk about what’s it gonna actually do.

Sandy Kaul: Yeah, I think that’s very, I think, likely and relevant example. Don’t forget, if you if you’re interacting via a platform like Teams, you’re collecting all of that data, because they’re able to process natural language, so they don’t actually have to input anything, they’re gonna be able to take the conversation that you and I are having, and parse that and really pull out of that the key information nuggets. And we’re already fairly close to that even today. Where I think it could go even further, and it’s funny, you talked about Microsoft, because one of the quotes that I put into the recent work I put out was from Bill Gates, right. And he had famously talked about every home having a desktop computer back in the late 1980s, which was very, very, late 1970s, actually, which was very forward looking at the time when hardly anyone in the world had a personal computer. He’s now predicting, similarly, that within five years, we’re all going to have a personal agent that’s actually handling our life for us. And so if you think about your phone today, or your car, I can talk to my car too, I can ask Siri or I can ask Alexa to help me with something. But that’s very generic. And you and I would both be accessing the same virtual digital assistant. What we’re talking about with this new generation of AI is that I will have my Sandy assistant, who knows my patterns and my preferences and what I like to do and where I like to eat, and you’ll have your Jack assistant that knows your preferences and what you like to do. And they’ll not only help us by making reservations, booking dinners, booking cars, helping us buy tickets, keeping track of where things are, helping us make sure we pay our bills on time, etc. They’re going to be collecting all our data. And data is really going to become a key resource in the emerging economy because of all the needs for AI to ingest data, and we’re probably going to be able to start selling our data through data brokers. And I think that these AIs, these personal agentic technologies are going to be able to be our intermediary and really negotiate the sale of our personal data and create passive revenue for us simply by managing that data well.

Jack Sharry: Interesting. I’ve always wanted to have a personal assistant, I didn’t know it was going to be digital. Makes sense, it makes sense. All this, Amy talked about just the digital footprint we all leave in all that we do. She actually wrote an article she was telling me, four or five years ago, where it was titled, how my, my vacuum cleaner knows more about me than my advisor. She had a vacuum cleaner robot, and it knew every inch of her house and her situation, yet the advisor… back then didn’t have anywhere near the same level of information. But that’s where the world’s going, we leave a digital footprint with all that we do. And that’s where we live. That’s how we transact. That’s how we think. That’s how we operate.

Sandy Kaul: But we’ve been leaving that digital footprint behind for free. And it looks like in the future people will actually, to access our digital footprint, they may actually have to start to pay us, which would be nice.

Jack Sharry: Interesting, interesting. Well, this has been fabulous, Sandy, I really enjoyed… As we look to move toward our half hour of conversation around this stuff. What are the three key takeaways or whatever the number you might have? What are some key takeaways you’d like to share with our audience?

Sandy Kaul: There’s a few key takeaways I would add. Number one, your investments should be becoming more and more personal to you, right? They should be things you care about, things that you’re invested in, that you care about. You should be getting increasingly special advantages around either special access, special discounts, special perks, and really look for that, because it’s a way to enrich your life. And that’s coming probably within the next three or four years. I’d also say, think about what are your goals, because increasingly, your goals are going to become the foundation of how your portfolio is constructed. It used to be everybody had one goal, outperform a benchmark index, that’s becoming much more personal and much more multi dimensional now. So think about what are your goals as an individual and make sure you can articulate them to your wealth advisor. And I think the third thing is understand that firms like Franklin Templeton are changing what they provide. They used to provide just investment products. But increasingly now we’re a service partner. We’re a strategic thinking partner, we provide advisory, right, so the relationship between asset managers and wealth advisors is really becoming much more intertwined. And firms like Franklin Templeton are really helping to create greater capabilities and more capabilities for everyone in the whole industry.

Jack Sharry: It’s great. Yeah, it’s exciting times. And for those who may not be paying close attention to Franklin Templeton, I suggest you do so at your peril. They’re really doing some smart stuff. It’s a challenge to pull all this stuff together as Sandy’s describing, you know, it’s like “yikes, there’s a lot going on here.” But it’s all important. It will be connected, it takes the time it takes but… And AI is gonna play a central role in that connectivity as well. So that’s just one person’s opinion. With all that said, my favorite question, as we look to close out is a more personal question, what do you do outside of work that people might, might… that you’re particularly passionate about, excited about, that people might find interesting or surprising?

Sandy Kaul: Well, for many years, I owned a comedy club in Manhattan, which was very fun. And being a small business owner while also holding down a full time job is very challenging. So I really did love that. And I love this whole scene of live entertainment, right. I think it takes such guts to get up in front of an audience and put yourself out there like the comics do. So I still enjoy that a lot. And then I really have taken up knitting as I’ve gotten older. And I just find with how much thinking we do and how much talking we do in our day to day career, sometimes it’s nice to do something that just really uses a different part of the brain and really lets you just kind of relax and see that you’re creating something tangible. So that’s been kind of my latest passion is I’ve learned to knit. Not very well yet, Jack, but I’m working on it.

Jack Sharry: That’s great. And I have to ask, do you do comedy?

Sandy Kaul: It’s so funny. I’m so comfortable getting up in front of audiences to talk about things like you know, where the industry is headed and the evolution of technology. But from an entertainment perspective, I get very shy.

Jack Sharry: Interesting. Interesting. Actually, there’s a senior executive at Morgan Stanley, he, at least as urban legend goes, his name is Jim McCarthy, won a comedy, amateur comedy joke off or whatever the term is. He’s actually a very funny guy. But by day he’s a Morgan Stanley executive and, by night, he’s done comedy, I’m not sure he does it anymore.

Sandy Kaul: Awesome.

Jack Sharry: Kind of fun.

Sandy Kaul: Love it.

Jack Sharry: So this has been great, Sandy. I really enjoyed our conversation. Thanks so much. I learned a lot and excited as ever, about our industry. 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. Sandy, thanks again. This has really been a blast.

Sandy Kaul: Great. Thank you so much, Jack. I really enjoyed our conversation.