PURPOSE, INC.

Michael Young:

Welcome to the Purpose, Inc., the podcast where we discuss corporate purpose and stakeholder capitalism. I'm your host, Michael Young.

My guest today is Stacey Kline, the CEO and Co-Founder of Otto Intelligence. Otto Intelligence is focused on the future of purpose-driven finance and a very appropriate guest for the podcast. Stacey, thank you so much for coming on today.

Stacey Kline:

Yeah, it's really a pleasure to be here. Thanks for having me.

Michael Young:

Fantastic. Thank you. So calling in from Canada, are you at the lake house or where are you today?

Stacey Kline:

I wish. I am in a little studio office in my backyard, my little pandemic.

Michael Young:

Oh, right. Yes, that's right. We discussed this. We shared that we have little outbuildings in our backyards.

Stacey Kline:

Yeah.

Michael Young:

All right. So let's get into it. So and please for the benefit of our listeners, let's get into what Otto's about and what your mission and your vision and your purpose is. So please.

Stacey Kline:

Yeah, absolutely. I mean, I think that this is a good starting point to say that at Otto, we're really focused on making finance a bit more personal and that the starting point of someone building wealth over time and their financial future and financial wellness should really start with them, who they are, what they care most about, and that should really inform their investment strategy and how they think about allocating wealth. And the way that Otto's going about that is really equipping advisors to build deeper, stickier relationships with their clients built off of that exact premise, that knowing your clients really means knowing so much more about them than their appetite for risk and what they're looking for on the returns side. It really means understanding what drives them, what are their values, what are their goals, and how do they want to achieve them over time? What's their mindset, their attitude towards money, and how do all of those things inform their financial decision making?

And that really sort of stemmed from my own personal journey in trying to think about how I wanted to allocate my wealth and building a financial future that I can feel good about. So that's really what we're working on enabling at Otto. And it's really important to us to be serving this group of wealth managers who we really think are really bullish on wealth management as an industry and as wealth transitions to a next generation, we think that the value of advice only strengthens. And you can see it right now, especially in turbulent times, people want to talk to people. And so we’re really trying to be a tool to enable advisors to bring that to their clients in a way that they're really already working to do.

Michael Young:

Totally. And I think you said something right there at the end, which is people want to talk to people, right? They don't want to necessarily do this via just technology, right? And I think that's interesting. And that really is that it's a preference shift in a way, right? That even people who are very comfortable with technology often don't want to just leave it to technology.

Stacey Kline:

Yeah. I mean, I really think what we're seeing now is more of a hybrid approach. I think that we are so digitally enabled in our everyday lives right now that that is sort of the base assumption is that there will be some technological intervention or that part of the experience will be digital forward. And what we're finding now in wealth advisory is that, you can see there is one stat that pointed to 77% of advisors losing business over the pandemic because they didn't have the tools to interface digitally with their clients. And what we're really trying to do is bridge the gap because you think about our day-to-day experiences that are all mediated by technology, clients, especially next gen clients, are expecting that ease of communication, that kind of effortless understanding of who they are. But at the same time, they want human interactions, and they want them to be efficient and effective and personalized. And you can liken it to really anything you experience on the day to day for someone who jumps on to Spotify to listen to music. Well, that's easy, but it's also personalized. There are your recommendations. If you're picking a show on Netflix or turning on Netflix, they recommend what you should watch. Jump on your Peloton at any minute of the day. And so I think the base expectation when you're interacting with a wealth manager is that they're coming to the table with the tools to be able to give you that kind of experience with this added layer of now that I know your preferences, I can build trust with you in a way that is enabled by technology but not replaced by technology.

Michael Young:

Right, right. And I think one of the preferences that everyone is looking at are, let's call them ESG or sustainable fund or sustainable investing. And the fund flows have certainly increased dramatically. I was just reading a stat, I saw something on LinkedIn this morning from McKinsey that in ’18, it was $5 billion, in 2020, it was $50, $70 billion in ‘21 and $87 billion sort of as of the first quarter of ‘22. So how do you kind of think about that and what's unique in terms of how Otto approaches those investment preferences?

Stacey Kline:

Yeah, I mean, I think that is definitely where things are headed. And I think there are many who look at sustainable investing as something that we will just call investing. And of course, there's been a lot in the news lately that pokes holes a little bit at what we really view as ESG and what is greenwashing or what is happening on the metrics and standardization side that is telling us that Tesla doesn't count and oil and gas companies do. So a lot of confusion happening there. And I think that really there is a ways to go for the industry to really get consensus on what these things mean. But I think what we can take away from this is that there is really a strong inclination for more purpose focused investing. And what I mean by that is really just taking these other considerations into account when making decisions. So how does a company that you're investing in think about their impact on the environment? How do they take care of the people that they employ or that their supply chain impacts? And what are the governance strategies that they have in place to address those kinds of things?

And for Otto, what we're trying to do is highlight that your preferences when it comes to certain themes can be considered. And while the industry is evolving, this should be a conversation that should inform your overall strategy. And we do have as part of what Otto offers essentially an optimization feature, an alignment tool that looks at what are people's preferences when it comes to environmental, social, and governance factors? And how can we build a bridge between what those preferences are and companies scoring on these ESG metrics? So we do have the ability for advisors to essentially audit portfolios and surface next steps conversations with their clients on that exact topic. But I think that where we really see this coming in and adding value in addition to really creating alignment over time, what we want to be able to do is say if you really as an investor are invested in companies that you believe in, then you know where you are. What I mean is there's sort of more bandwidth to weather the storm of market volatility. So having a purpose aligned portfolio really means, in essence, you can take a longer-term approach. You're not looking at this one factor returns and basing everything off of that was kind of more at play.

So right now, when you wake up in the morning and see that the DOW is down, you know how many base points you're looking at your portfolio in the red and you're more likely to have the ability to weather the storm and see this maybe is just a bump along much longer road than a valley. And so you don't need to panic or sell irrationally. And so that's sort of just one example of how thinking about these additional factors can help inform just a different kind of confidence in in your investment decision making.

Michael Young:

Yeah. And as you were talking, I was thinking about some of the other alternatives, right? Let's just call it Robin Hood for a minute. And some of the other approaches, if you will, that are not maybe as long term. And so what role do you think financial literacy plays in creating a long term and more enlightened or evolved mindset as it relates to investing?

Stacey Kline:

Yeah, I think it plays a really big role. I think that right now what we have is an abundance of information and advice on how to invest. And you have to be choosy as to the source. So right now, you can go on Reddit and get your investing advice there or you can be influenced by the latest meme stock. You can look to what Beyonce is investing in or whoever else or your friends and make decisions that are rooted in that. Or you can make decisions that are rooted in your own personal preferences and use yourself as a starting point for what you really care about. And I think that we really are seeing an onslaught of uptake in retail platforms and a do-it-yourself mentality that's so enabled by technology. But I think this is really where we see wealth advisory coming in, is the fundamental difference between an advisor and a robo platform is values. This is sort of, for an advisor, they can confuse the decision making, not compete with an algorithm. And so I think that when we think about the literacy of the next generation of investors in general, there's so much access to information that being able to surface relevant bytes and things that will actually help people to become more confident investors is really where we see the value of the wealth manager coming in. And that ultimately is I think for us at Otto where we see the starting point of knowing yourself as being a catalyst to financial literacy.

Because if you are engaged in something that you can connect to, if you know that you're trying to make decisions about allocating your wealth, not just from the perspective of risk and return, but also from the perspective of how you think about the impact of companies or that you're working towards achieving a goal or that this aligns with your mindset, then that's just a starting point really of a longer journey that helps you really go deeper on a whole bunch of other topics and gives you a starting point for really a knowing that I think is really where we're seeing investors going in general. Because I think it's in line with what they experience in their every day. So there's I think much less of a set it and forget it mentality, and that's why we're seeing more of a trend towards the do it yourselfers because the information is there and the access to it is there. It's about helping to facilitate sort of a funneling of that into pieces of information that can actually help move the dial and help build investor confidence.

Michael Young:

Yeah. And it's sort of the continuum between set it and forget it, throw it in a 401k, and the high volatility. Well, I'm on Reddit and I'm getting advice from Twitter. And it's interesting. As an observer, not as an investor, but I look very closely at the communication that's going on, particularly in meme stocks and in some of the crypto spaces. And it's surprising to me, and I'm certainly not the target audience for a lot of that, at least the coins. But it is interesting to me how short term a lot of those cycles are. And it is a testimony I think, as you were talking about, between set it and forget it, between robo advisory. Pulling back to real advice and maybe let's call it expert advice, for lack of a better term, just seems like there's never been a more important time in our sort of investing careers to see the need for structured, independent advice. Because what's going by in Twitter and in Reddit and Discord and some of these other platforms just seems so almost dangerous and irresponsible. I mean, I'll just call it that. You don't have to agree with me. But some of it is just shocking in what are the motivations behind the advice that are being given.

Stacey Kline:

Yeah, I mean, I think that on the one hand, I think it's brilliant that we have tools and platforms that enable people to have a voice and enable a kind of exchange of information that we have today. And I don't discount the value that can add. And I know that there are platforms that are working on solutions with verified participants so that people can exchange ideas and share perspectives on investment related decision making and trying to add a little bit of rigor into who's participating in those conversations and highlight whether there's the sort of reputational value behind those. I think that there is something to be said for showing up in those spaces and being part of a conversation and building a shared community. But I also think that in the mix, we really need people who can help us figure out what's hype and what's not and be a touchpoint for true decision making that isn't just a knee jerk reaction or extremely short term and stick.

And I think that demographically speaking too, there are I think times and places for people to have a certain percentage of their capital that they can deploy to different strategies. But to have someone who can help you really understand your long-term objectives and how to get there and what percentage of your capital you can deploy to some higher risk strategies or where you're really getting your advice and having someone to turn to is I think—I agree with you—even more highlighted by the fact that there is just so much access to information and advice out there. Having someone who you have a really trusted relationship with who understands you is really of immense value.

Michael Young:

Yeah. And no one's saying don't risk your capital in any way you choose, right? But just be clear eyed about where you're taking your informational inputs. I think you may have seen it. There was an article about a lot of the crypto investing advice came from friends and family. I don't know if you saw that. It makes then whatever Thanksgiving dinner or the barbecue, the Sunday barbecue a little more challenging. It was like, oh, you told me to mortgage the house and put $100,000 into X, Y and Z. And that didn’t work so well.

Stacey Kline:

Yeah. That's very complicated now that so much of decision making around investing has moved out of the realm of professional investing and into this, again, sort of a do-it-yourself mentality. It's easier to be in those situations. I think about it a bit more, if you're familiar with Daniel Kahneman and how he's about System 1 and System 2 thinking. And there's that System 1 thinking, which is quick and automatic and not a lot of control and System 2, which is more time and intention and complexity. And I think the former is where we get into those tricky situations where maybe you go off of someone's advice and it can lead to one place or another. And the System 2 thinking, I think, is really where advisory comes in. But these are the waters that we have to navigate now. I'm a big proponent of a hybrid approach, both in our earlier conversation around technology and human advice, but also in the context of where advisory can sit alongside the do-it-yourself strategies or the robo advisor platforms because I don't think that those are going away. It's really just how can a wealth advisor come in and add value and perspective in the context of the ability to really participate on those platforms?

Michael Young:

Yeah, absolutely. And Stacey maybe as we wrap up here, what's going to happen next with Otto? Like give us a quick rundown of your journey. We met at one of the most interesting startup conferences I go to, Collision. And just maybe tell us where you are in your journey and what's coming from Otto.

Stacey Kline:

Yeah. I mean, thanks for the opportunity to share that. With Otto, we are really just working on sharing our platform with more wealth managers who really want to differentiate by more deeply understanding their clients and who they are and what they care about. And so what we're working on is just continuing to constantly improve our product so that it does that, get it into the hands of more people. And then ultimately, over time, our objective is for advisors to be able to deliver really, truly personalized advice that reflects what their clients care most about and help them build wealth over time that they can feel really good about.

Michael Young:

Yeah. And I think the thing that I saw in your product demo was the kind of personality test you almost did. Yeah. Which is really cool and really fun. And you're going to continue on that, in that direction?

Stacey Kline:

Yes. So we do. We have a really fun and engaging series of digital interactions and surveys that really help you get to the core of exactly what I mentioned, who someone is, what they care about. It’s enabling an advisor and their client to go through this discovery that really highlights underlying motivations and values. So our purpose survey is one of the core experiences that you try it out and what it results in is some learning about you. We reveal your preferences in that particular survey when it comes to some of the sustainable investing themes and your underlying values, and ultimately to be able to link them to investment priorities. So it's about understanding yourself as an investor. Are you a change maker really focused on the world around you? Are you curious? Are you a responsible investor? And what are some of the themes and causes that you care most about? So that experience will absolutely continue to be central to the Otto experience and helping advisors really have a conversation about their client’s priorities. It's easy for clients to come to the table and say, I care about the world and I care about people and I have values and preferences. It's a lot harder to pinpoint what those are. So those are the kinds of experiences that we have at Otto. We have a bunch of others. One is a mindset. You can uncover your mindset. Essentially, are you a saver, spender, or sharer? We have a whole bunch of really fun, knee jerk, what's your knee jerk reaction to how you think about money and all very scenario based and meant to be easy to get through, engaging, and at the end of the day, give some learning to the client as well as insights to the advisor.

Michael Young:

Yeah. And we've all taken surveys, and I thought the way your questions or the Otto questions were formulated and just the whole kind of the mindset, if you will, behind the questions, they were very, very different. And it was fun to go through. I thought insightful. And I came out as a changemaker. So I hope that, I mean, I feel like that's a good thing, Right?

Stacey Kline:

Well, I mean, the important thing is that you resonate with it.

Michael Young:

Yeah, yeah.

Stacey Kline:

Exactly. Yeah. Well, and I appreciate that. And we really have rooted our approach to these experiences in behavioral finance. So there is some science and rigor behind how we’ve asked the questions and, and how we reveal the results. And I'm glad that you found that experience engaging and one that you would recommend.

Michael Young:

Absolutely, absolutely. Well, as I said, the half hour was going to go by in the blink of an eye, and it has. And so we are at a time, Stacey. But I really, really appreciate you coming on the podcast and talking about Otto Intelligence today. Thank you so much.

Stacey Kline:

It's such a pleasure. Great to have a conversation with you.

Michael Young:

All right. We'll leave it there. Thank you, Stacey.

Stacey Kline:

Thank you.

Conclusion:

The Purpose, Inc. Podcast is a production of Actual Agency, helping innovators communicate in a changing world. More at www.Actual.Agency.

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