In a new episode of the Financial Planning Podcast, Adam Green explains why the dated approach to fixed income investing won’t make it in the modern world.
Green, co-founder and CEO at YieldX, launched the tech-powered platform designed to democratize fixed income investing 2019. But YieldX isn’t his first entrepreneurial endeavor. That honor goes to his involvement as one of the key minds that took Insomnia Cookies from a friend’s dorm room at the University of Pennsylvania to a national brand while he was still a student at Syracuse.
From milk and cookies to modern investing, Green has always focused on meeting the needs of clients. Before YeildX, he was chief strategy officer at MoneyLion, a fintech in the lending and wealth management space he co-founded in 2013. He also has 15 years of experience in high-yield and leveraged finance at Wall Street firms including Bear Stearns and Citadel.
As the CEO of YieldX, which recently joined the Schwab Advisor Center Technology Integration marketplace, he leads a team that wants to simplify the complexities of fixed income investing for advisors by blending human know-how with powerful AI.
During his conversation with FP Podcast host and lead editorial producer Justin L. Mack, Green talks about how he got his start in fintech, discusses fixed income trends he sees on the horizon and offers some advice to budding entrepreneurs working in wealth management.
Listen to the new episode — as well as all future and past episodes — by subscribing to the FP Podcast on Apple, Spotify or wherever you get podcasts.
Transcription:
Justin L. Mack: (00:02)
Good morning. Good afternoon. And good evening. Welcome to the Financial Planning podcast. I’m your host, Justin L. Mack WealthTech reporter with financial planning. And it’s my pleasure to introduce this. Week’s guest Adam Green, co-founder and CEO at YieldX Adam. Thanks so much for joining us this week.
Adam Green: (00:18)
Thanks a lot, Justin. Thanks for having me and looking forward to chatting.
Justin L. Mack: (00:22)
All right, now, Adam launched YieldX in 2019 with a mission to reimagine fixed income, but he’s been bringing to this week’s episode, decades of entrepreneurial experience. That first began with milk and cookies. I promise that’ll make sense later, before YieldX, he was chief strategy officer at money lion, a FinTech in the lending and wealth management space. He co-founded back in 2013. He also has 15 years of experience in high yield and leverage finance at wall street firms, including bear Stearns in Citadel as the CEO of YieldX, which recently joined the Schwab advisor center technology integration marketplace. He leads a team that says it wants to change the data approach to the world of income investing with a platform that leverages human know-how and AI to optimize yield driven investments for advisors, the platform simplifies the traditional complexities of fixed income investing, but there’s a lot more that he has in plan for YieldX and its future. But before we get to the future, I want to take it back to the past and get back to those milk and cookies. I referenced at the top of the show. Tell me about your first entrepreneurial venture and what that was all about.
Adam Green: (01:25)
Absolutely. Well, it’s, uh, always good to start in a place like milk and cookies and really capture. Justin. I appreciate the opportunity, but, uh, this is a pretty simple investment thesis, really, which is that when I was, uh, in college at Syracuse university and shout out to all my orange people out there, um, I saw a really amazing opportunity to bring a, uh, delicious, uh, business to the Syracuse university campus and then eventually to many college campuses and cities around the country. And it was actually pretty simple. Uh, the long story short is I was visiting friends of my university of Pennsylvania. We were, uh, let’s just say coming back from a late night out and as people do it that hour, we were looking for something to eat and they had brought up that, uh, some of their friends were making homemade cookies with his grandmother’s recipe and a dorm room down the hall, which was a, uh, pretty, uh, innovative deviation from the typical pizza and, uh, Philly cheese steaks that, uh, were on tap at that point in time.
Adam Green: (02:26)
And so suffice it to say my interest was peaked. We took a March down the hall. I had the best fresh baked cookie I had ever had and, uh, saw that the line was literally all the way down the hall and around the corner. And, uh, given the pretty simple thesis of, uh, extreme demand for these cookies. I said, this would be a great business, uh, knowing actually very little about the cookie business at the time, other than, um, I was a fan of them and ultimately, uh, marched back up to Syracuse after that trip met, uh, one of the real estate owners on Marshall street, which is the main street in Syracuse and told him, uh, I need a space for a new restaurant concept. We’re gonna open up at 9:00 PM and close at 5:00 AM. Uh, he looked at me sideways and then after giving him a sample of the cookies, uh, he said done,
Justin L. Mack: (03:18)
There you go, you got a product, you got the space. So, but shows that, you know, inspiration can go anywhere and odd places. And it isn’t always a straight line to where you end up from where you are. You walk down the street, uh, hall for cookies, rather you end up launching a business. So I wanna talk about your transition into FinTech specifically. Of course you have years of experience in the industry. We mentioned your time with bear Stearns and Citadel, but was it always FinTech from the jump or when you first got into the industry, what was your focus? And did you think you would be sitting here now as the CEO of a indexing platform FinTech?
Adam Green: (03:52)
Well, I, I think I am an, uh, a unique generation insofar as I remember the world before the proliferation of technology. And so I kind of joke with some of my peers from time to time, especially having, uh, a six and eight year old at home and seeing how adept they are at using te technology and reminiscing about the days when you would, uh, cherish that one minute you got between the time you hit enter and the dialup modem connecting. And so, uh, , you know, the, the, the first AOL instant messenger screen name you had to come up with and, you know, how did I want to be perceived by my friend at school? And I ended up with, uh, some snowboard based name, which was my interest at the time, but very nice. There was really, uh, goofy ones out there. But, um, I think I’ve always been extremely, uh, interested in and intrigued by technology.
Adam Green: (04:47)
And after we had, uh, sort of expanded into Somnia cookies and throughout the last three years of my, uh, college experience having, um, gone through that entrepreneurial sort of path and really, um, the fulfillment that it brought to me, I thought that going into, uh, the investment banking track, which was something that had always been a focus and interest of mine as well, would help me really understand how to look at a business, how to understand financials, uh, and really how to leverage the capital markets. Um, and it was an invaluable experience, but one of the things that, uh, struck me as I went through the different, uh, the different stops at different, uh, organizations throughout my wall street career was that technology was changing the markets in real time. And I was fortunate enough to be at some of the world’s largest financial institutions and having exposure to other groups outside of the fixed income desks that I sat on just by nature of whether it was the layout of trading floors or the way the organizations were set up and, um, leveraged finance where I was focused, uh, is structured differently depending on the organization.
Adam Green: (06:00)
Sometimes it it’s more on the banking side, sometimes it’s on the capital market side. So I got to see how other groups across the investment banks and the trading organizations leverage different aspects of technology to create automation, create AU, uh, efficiency, gain an edge. And, um, I just paid a lot of attention to it. And, uh, I thought that there was, um, an insufficient amount of technology being applied in the fixed income markets. And there’s a whole host of reasons that we can go into of why that was at that time. But, um, you know, I did experience, uh, that need myself and as is the case, whether it’s with cookies or FinTech, when you have a need, you tend to want to create a solution. If entrepreneurship is sort of in your DNA
Justin L. Mack: (06:48)
And speaking of finding solutions to problems, which you just went over. If you have that entrepreneurial spirit, you see a problem, you wanna fix it, the original mission of yield X set now to reimagined fixed income, in your opinion, what was wrong with the way fixed income has been handled and how did yield X set out to fix it in the first place? What’s that exactly mean to you as far as reimagining fixed income?
Adam Green: (07:09)
Sure. Well, there’s a couple things that I would say to that. Number one is that fixed income is one part of what we do. We think of the world in terms of yield, uh, hence the name yield X, um, and you know, there are dividend equities, there are BDCs, there are all sorts of private credit assets that, that generate a yield. And so fixed income, uh, is what my, my professional background was in at, at large wall street institutions. But just more holistically, right. Is how do advisors, how do wealth managers, how do institutional investors engage in the process of constructing portfolios of optimizing portfolios that are relevant for the objective they’re trying to achieve? Mm-hmm . And I think that was really the, um, sort of objective that we were trying to solve when we started the company back in April of 2019, and specifically around the fixed income markets, there are so many different asset classes to that point that generate yield that in order to really get the best outcome that’s right for you or right for your client, you have to go through, you know, really, as we think about it, and we talk about four key pillars and the, the key pillars are one is accessing the data on all of those individual securities.
Adam Green: (08:33)
So, uh, I, we have about 5 million different securities, uh, in our database that we get real time pricing and liquidity profiles on. That’s just not a number that a human being can possibly sift through. Mm-hmm , um, no matter how good your Excel skills are and get, get a reasonable outcome. And so, as you think through the access to those underlying securities, those are across corporate bonds, munies, treasuries, ETFs closed in funds, mutual funds. The list goes on and on and on, and really to look at everything on a, like for like basis, you have to have access to everything, right. And the way that a lot of these organizations are still set up to this day is that you have your investment grade bond traders on one desk, you have your high yield traders on another desk, you have your ETF folks in another area of the organization.
Adam Green: (09:25)
And also those, the, the, the data for those securities, if you’re an advisor is just so much to sift through, and it’s so much to wrap your head around and they’re not all unified like a, like a, a common stock security would be, and they don’t trade on an exchange except obviously for ETFs, but for the most part, just understanding the data, getting access to that is a Herculean task. The second pillar is the analytics layer. So once you have access to those securities, what do you do about it? How can I really look at the world, uh, you know, in a unified way to figure out if I were to put together all a bucket of these different securities, maybe I want some corporate bonds, maybe I want a few munies, some ETFs and a mutual fund. So what does that look like in terms of my yield, my risk profile, the cost that it’s going to, to incur et cetera.
Adam Green: (10:19)
And that’s something that you can only do if you have deep modeling experience, quantitative experience, um, you know, in, in this day and age programming experience to actually write those models. And so that’s not something that most of our client base has, uh, significant experience with internally mm-hmm . And so they oftentimes end up looking elsewhere for solutions to that, but those solutions are limited, um, relative to having this whole end-to-end experience, which I’ll get through in a minute, the third power is connection to the execution in custody. So to be able to really understand a client’s full financial profile, you have to be connected to the custodians. You have to see the cost basis. You have to see the waitings, you have to see the, the, the, uh, the price that, those, uh, that, those, that those investors paid for the securities. And, um, that’s something that, you know, requires engineering capabilities.
Adam Green: (11:18)
You have to right APIs and ingest them. Um, and then you have to be able to push those out to an execution platform, whether it’s at the broker dealer or whether it’s, uh, through a connection an RA has with one of the main custodians or execution desks. And then lastly is the core operating systems across your order management, your position management, mm-hmm, compliance, post-trade analytics rebalancing. So all of those, uh, four key pillars are things that we’ve unified on Yieldex to create this connective tissue between all the different aspects of the market that we just talked about. And nobody else is doing that. Nobody has those capabilities around the fixed income part of the world, and, uh, people’s exposures and their portfolios. And so that’s where we started. But once we built that technology and we’ve created that connective tissue, now we think about things in terms of different investible universes. And so what’s coming up next is, you know, expanding into other types of asset classes that, uh, you know, that are either yield focused or in some cases not
Justin L. Mack: (12:19)
Mm-hmm . And with those four pillars in mind, everything you’ve mentioned that kind of encompassed with yield X is all about in the value is trying to deliver overall on a day to day basis. How does that make life easier for advisors? Because that’s always the, the end result. Of course, we wanna serve the clients to the best, uh, of abilities and make sure everyone’s hitting their goals, but adding this kind of technology to your arsenal as an advisor, how is this gonna make your life simpler? If it can?
Adam Green: (12:45)
Well, think about the before and after. So before yield X, each of those four pillars, you had to manage through different data subscriptions, different computer programs or software programs, different counterparties, um, that was a very, uh, manual process. Mm-hmm , it often took a lot of people to do very basic functionality that wasn’t, uh, very high value to the end investor or to the client. And so by having that now on one digital end to end infrastructure, you can unify all of those different work streams into one very simple platform. And that’s really what we’ve created. We’ve created a platform that’s workflow automation based. And I think everyone these days is looking to, to the greatest extent possible unify these different services into a single pane of glass is the term that a lot of people use. But I think it, what that ultimately means is we don’t wanna log into 20 different platforms.
Adam Green: (13:44)
We wanna have integrations. We want everything to be sort of centralized in a snapshot that can give us the most operating efficiency, leverage in full, comprehensive picture of what we are doing and what we need to accomplish for the client. Um, but also the reality is that, you know, advisors, our people and people want ease of use and people want efficiency, and they wanna get the most bang for their buck outta their time. And so everything that we do at yield X has user experience at the front of mind. And that’s a really important differentiator when you think about the wealth tech and FinTech landscape holistically, um, you know, a lot of the focus over the past sort of, uh, five or so years has been personalization at scale. And, and it, the only way you can do that is with a really intuitive, engaging and seamless user interface.
Adam Green: (14:35)
And so we’ve kind of rethought the whole experience around what analytics are we showing. Are we gonna show 200 different little modules that have every single possible bell and whistle analytic out there? We have the data on the back end, we can expose it. And we have this open data architecture that if a client wants to see a lot more information, they can do that. But the, the out of the box sort of, um, framework that we are encouraging people to think about is what is the yield you’re looking for? What securities are you comfortable pulling from in terms of universe, to be able to achieve that yield, and how can you do that for the least risk and the lowest cost possible? Everything else is nice. We have, you know, historical track record on the funds. We have look backs, we have all sorts of scenario AEs. We have ESG so on and so forth, but at the end of the day, you can often get drowned in the data. And we want to do, we’re trying to
Justin L. Mack: (15:33)
Absolutely trying to keep your head above ground, uh, to keep from drowning in that data. Always something that should be prioritized in simplifying the life and work of an advisor, and yet mentioned, uh, three things that we’re gonna get into in the second part of our conversation, integration automation and people, all important points for not just YieldX, but as in the industry that I definitely wanna get your insight on first, we’re gonna take a quick break. We’re talking again to Adam Green co-founder and CEO of YieldX on the financial planning podcast. Let’s take a moment and hear a quick word from our sponsors.
Justin L. Mack: (16:07)
And we are back on the financial planning podcast. I am your host, Justin Omack, and I’m chatting this week with Adam Green co-founder and CEO at yield X. Now, Adam, right before we got into the break, we kind of talked about that overall question. How does what you’re offering through yield X or what you’re trying to achieve as far as reimagining fixed income, make life simpler for advisors, and two things you mentioned, uh, in your last answer were related to automation and integration, um, integration in particular, uh, uh, a topic I want to get your thoughts on. We just did our latest editorial research report here at horizon focused on future proofing the industry. It’s all about how firms and individuals are leveraging tech to come up with digital transformation strategies that keep them where they need to be 5, 10, 15 years in the future. So you, don’t gotta worry about tearing up your stack and starting from square.
Justin L. Mack: (16:57)
One. Number one issue in that survey we did was related to integration advisors, finding what they need, but realizing that they’re not set up to actually leverage it from day one there’s issues with old software there’s issues, with knowledge among themselves, or staff or customers integration on a human level. So when you were crafting yield X and everything that it’s trying to account for and achieve, how was integration, I guess, part of your strategy, was that something you thought of that if an advisor were to come to you for these answers, would it play nicely with what they have? Was that something that was, you know, top of mind when you were launching yield X in 2019?
Adam Green: (17:35)
Absolutely. And I think that given my experience at a lot of these, uh, legacy institutions, I had a unique perspective on the technology capabilities that we would run into, uh, with some of the architecture and how we need to create our tech stack to be able to accommodate systems that may not be completely API driven or may not have a cloud based architecture. And so when we set out to create Yieldex, we, we deliberately went after what we call an open data architecture. And what that means is that we are product and issue agnostic, which gives us a really interesting competitive advantage in the market. We’re not pushing anyone to a specific product or an outcome we’re facilitating integration into all of the existing players that are out there, whether it’s custodians reporting systems, CRMs, what have you, because we want to get the biggest profile of data that we possibly can to give our users and have them understand in a very simple, intuitive, and engaging user interface, how they should be thinking about their overall risk exposures, their clients’ investment objectives, what products are right, and what are the trade offs. If I make certain decisions on the fly and the ability to click a button and see different scenarios, or to click a button and pull in a client’s entire portfolio and holdings across all asset classes and see what certain decisions the advisor may wanna make, um, and then be able to push that out in a very customizable proposal to the end client, which, which generates further engagement, which is something that everyone’s looking for these days that was critical for us from day one
Justin L. Mack: (19:17)
And the in turning also to what, uh, U X is looking to deliver. And I don’t have the tech know how, or know what goes into it for you to come up with what you need to optimize yields for your clients, but how difficult is it to optimize yields for your clients when the market is doing what it’s doing right now, just to be completely, you know, everyone knows what’s happening. Everyone knows that volatility is the word of the, uh, quarter and probably will be with us all year when you’re optimizing yields for clients and trying to do it through technology, through automation, through something that can provide maybe a little bit of, of peace in mind or, or stability by being able to look at the different scenarios. Is it tougher to do that in this environment?
Adam Green: (19:53)
No, I think this is, this is a great time to be looking at, uh, fixed income in particular because of the opportunities across the different markets. And so, um, you know, we started the company back in April of 2019. We went to market, uh, last year with, uh, sort of a, a core user base to get some early feedback and then sort of iterate on version one. And the timing couldn’t be better. I mean, if you look at the opportunities across the credit markets today, there are some really, uh, great areas to focus on to get very safe yields mm-hmm , um, across a very diversified portfolio securities. And so I think now more than ever, you need a platform like yield X to be able to interpret, uh, exactly what that means in the context of the risk that you are willing to take, or the yield that you’re looking to achieve.
Adam Green: (20:44)
Um, but these markets are tough to understand because there’s incredible correlation across asset classes, and there’s a lot of noise out there, but at the end of the day, you have to be invested in something right with inflation at the levels that it’s at right now, you can’t afford to be in cash because you’re guaranteed to lose money. And so the question then is what are you going to do either for yourself or on behalf of your clients to make sure that you’re not, uh, sort of locking in those inflation based losses. And most importantly, that you’re allocating assets in an area of the market that makes the most sense given sort of the volatility that we’re seeing. And we’ve got some great solutions for that. We have model portfolios that we’re able to build dynamically every time a new inflation print comes in, where advisors can literally click to allocate to a beat inflation or match inflation type of, uh, investment profile. And again, because we’re not an asset manager, we are not sort of evangelical about which specific securities or which allocation you take. And that’s a really important part of our value proposition. And therefore once you’ve made a decision that where you wanna be on that risk return spectrum, you have millions of securities to choose from with intra day pricing and liquidity to make that portfolio construction or optimization actionable. And that’s, that’s another really big differentiator.
Justin L. Mack: (22:13)
Definitely, definitely. And with this, you know, investment strategy, any, I guess, common mistakes you see, or, or advice this could be either for advisors or for clients. And if there’s nothing, that’s a good thing, but is there something you’re seeing as far as maybe a common mistake misunderstanding related to getting the most out of, you know, a fixed income strategy? What are you seeing now and what help can you give to advisors or clients who, who might just be making the same mistake over and over again?
Adam Green: (22:40)
Yeah, well, I, I think one misperception, I would say, I don’t know if it’s the, a mistake or a misperception is, uh, the, the concept of risk mm-hmm in, in the fixed income markets. I think even if you looked at historical, uh, cycles where there’s been extreme, uh, pressure on the credit markets, the actual percentage of fixed income securities, that default is ex exceptionally low. And so when people talk about risk, it’s a much different concept than risk inequities or risk in other asset classes. And so what we try to do is we try to show graphically and educate advisors, planners, family offices, institutional investors, anyone that’s using our platform. We try to show them what happened in past cycles. What happened in the depths of COVID, what happened in 2008 and 2009. And if you put together a portfolio of, you know, people, people mistakenly call high yield junk bonds, right?
Adam Green: (23:41)
That’s the sort of, of a colloquial firm that, that has sort of been around the market over the years, but at the end of the day, you know, there’s some really interesting yields in there in the individual QIPs that are out there in the market if, uh, you know, if you’re willing to and able to hold those to maturity. And I think that’s really the power of the analytics layer of our platform is to be able to create portfolios where other people may not be paying attention to either because of a limitation on sort of their investment thesis, or just sort of a misunderstanding of how these securities ultimately work. But if you can use data, you can use historical lessons from cycles to really see what would’ve happened to this exact portfolio in the past. And then of course you can make your own assessments about, could it get materially worse than that and what that would mean for the portfolio then, um, you know, I think it’s really a function of just visualizing that and helping people understand that there are a lot of opportunities on the flip side, there’s some great opportunities and really high quality, uh, fixed income names as well.
Adam Green: (24:45)
And I think the biggest mistake that people could make right now is just sitting in cash and doing nothing because we kind of have this perfect storm of inflation. Um, you know, that, that will absolutely mean you’re losing money.
Justin L. Mack: (24:58)
Absolutely. So yeah, people find a way to make that inflation work for you. You know, why not? Uh, final thing. I wanna thank you again for joining us this week. I, I wanna kind of wrap up with words of wisdom to the next generation. So you’ve been, we we’ve went over your experience, the work you put in to getting yield X to the spot. It is today. A lot of work, a lot of experience goes into it. And we know that there’s always that, that next idea in FinTech, in particular with whoever might be working on something that we’ve not heard yet, that we’ll see announced that might blow all of our minds, but we know it’s not an easy road. Uh, any advice you have for people who are maybe early in the stage of, of working on their version of fixing something, they see wrong with the industry, similar to what you did with YieldX, um, to keep going when it gets tough. Cuz I don’t imagine it was the smoothest road of to launch, especially when you’re coming from a fresh idea and, and just a means to get it going.
Adam Green: (25:50)
Yeah, sure. So I, I mean, one thing that I always tell, uh, folks that are starting out in their entrepreneurial path specifically in anything capital markets related and, and I kind of learned this, I don’t wanna say the hard way, but having started off in sort of a front office role on some of these, uh, fixed income desks is really learn the market infrastructure, right? Learn all of the nuts and bolts about how the middle and back office works. There’s incredible inefficiencies still in terms of how you can create solutions to very, very large total addressable market type problems in capital markets. Um, and really do a lot of research, do talk to the clients, right? One of the major things that we did early on was we went out to the firms that we thought would be natural users of our product. If we built it the right way and we asked them point blank, where are your pain points? What are your problems? How can we solve, what’s bothering you right now. And then when you get those answers, they’re often times similar to what you had thought, but they’re often times also much different and that’ll help guide, uh, sort of how you allocate resources at the early stage, which will dictate product market fit, which will dictate traction, dictate reputation and adoption.
Justin L. Mack: (27:06)
Well, that is, uh, something good to go out on, keep that in mind. And remember it may start in milk and cookies. It might end in fixed income who knows what’s next? I know Adam will be busy and I know we’ll be catching up with you again in the future. So thank you again for taking the time and joining us this week on the financial planning podcast.
Adam Green: (27:25)
Thank you.
Justin L. Mack: (27:25)
All right. And I wanna thank all the listeners for tuning into the Financial Planning podcast. The episode this week was produced by Arizent with audio prediction by Kevin Parise. Special thanks again to Adam Green CEO and co-founder of YieldX. Rate us, review us and subscribe to all of our content at www.financial-planning.com/subscribe. From Financial Planning, I’m Justin Mack. Thanks for listening.