Ep. 214: Kyrill Asatur – Investing like a pro – how Centerfin brings institutional-grade service to individual investors
Centerfin CEO Kyrill Asatur joins Count Me In to discuss how his background making institutional investing and trading operations more efficient lead to founding a Fintech company that brings the same level of service and resources to individual investors.
Connect with Kyrill: https://www.linkedin.com/in/kyrill-asatur/
Full Episode Transcript:
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Full Episode Transcript:
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Adam: Welcome back to Count Me In. The podcast for accounting and finance professionals working in business. I'm Adam Larson, and today we're going to talk about something that is, no doubt, near and dear to you, namely, your money.
My guest is Kyrill Asatur, the CEO and co-founder of Centerfin. As a longtime advisor to hedge funds and other large institutional investors, Kyrill was often asked by friends and relatives for advice on how they could better manage their money. How the big shots on Wall Street do it? And for a long time, he didn't have a good answer for them because that institutional level of service and expertise, simply did not exist for individual investors.
This is the story of how he decided to correct that inefficiency, in the investment and management ecosystem through the power of fintech. This podcast is a must listen for anyone with a 401K and IRA, or any other investment accounts, which means it's pretty much for everyone. So let's get started.
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So, Kyrill, thank you so much for coming on the podcast. I'm really excited to have you on. And I figured we could start off by just introducing you to our audience, and just so you can give us a little bit of background and your story.
Kyrill: Sure, thanks for having me on, Adam. So my background is about 20 years ago, well, a little over 20 years ago now. Out of undergrad, I joined, at the time it was called the Global Operations Division at Goldman Sachs. And it was an analyst program, three-year program, where I got to rotate through several different roles. And, so, I did that. I was in foreign exchange for a little bit. Then equities, and then decided to find an area of the firm that aligned itself with the hedge fund industry.
So I got, personally, very interested in the hedge fund industry, just always been reading about hedge fund managers. And at Goldman Sachs there's many different ways, as you can imagine, you can interact with hedge funds.
But the one business that was directly correlated, so to speak, with the hedge fund industry, was the prime brokerage business, which is basically serving all hedge fund needs. And Goldman had, and still does have, the kind of premier prime brokerage business, top three prime brokerage business in the country.
And, so, I was able to get myself a role in that business. So I was there for another six years, five, six years after that, after my first three-year rotation. And then I joined a hedge fund that I covered, they were actually ex-Goldman guys, too, and I was with them for another five years.
Ultimately, I got recruited into a couple of different roles with other firms, and decided in 2016, so now about six years ago, to start my own advisory practice.
And initially focused on working with hedge funds and other alternative investment managers, very organically and really through, as they say, necessity is the mother of all invention.
I decided to start what is now Centerfin. And the idea was really because over the two decades or so that I've been working on Wall Street, I've always struggled to help friends and family that will come to me and ask me about what to do with their money. So they might have a retirement account, or a 401K, or just savings that they've saved up, that they would like to invest. And, frankly, I just never saw any great options out there that I can point them to.
And having spent my whole career, or at least the biggest part of my career, interacting with large, sophisticated, institutional investors like pension funds, endowments, foundations, family offices. I, basically, learned the way that they invest their money, and it was very different than the options that were available for if you're an average Joe or Jane, so to speak.
And, so, Centerfin was founded to address that need, in my mind. And we're basically two years into it, a little or two years into it. We went live at the beginning of this year. We have a tech-enabled, kind of tech-forward service. And, so, we spent a bunch of time building it, but we went live at the beginning of this year and growing nicely in these crazy markets.
Adam: Yes, the markets are very crazy with everything that's happening, the inflation. And in the past three years with the market, the way it's going, I know it's been really crazy for everybody. And I know organizations, and our focus will probably be more on organizations and people within those organizations.
I know organizations are looking to invest and trying to build their wealth. As well as they're trying to keep above water in this industry. What do you think the future of finance is looking at as things are, continuously, changing and the finance team has to adapt as they go along?
Kyrill: Yes, absolutely. So really technology is playing a bigger role in everything. So one of the reasons why we started our company and the way we structured it, it was because we felt like technology was something that could be used to just create more efficiency in really any process.
But, for us, it's the investment process, managing people's money. And by "Create efficiency", I just mean do things in a way that are cheaper to the end consumer. So for us it's an individual. But this works all the way up and down the chain internally at an organization or externally depending on we all have clients we serve.
And, so, I think technology is a major, and you've heard about it, people have referred to it as fintech. It's finance and technology combining, and the interesting thing is that it's still early, quite frankly. Because I do think that technology is making its headway in helping create efficiencies in organizations, and processes, and procedures. But, quite frankly, most of the financial world infrastructure is still what existed 20, 30, 40, 50 years ago, in some cases. And, so, there's just a lot of opportunity.
Adam: There is a lot of opportunity. And as you mentioned there, a lot of the systems that are in place, are still the same things that were built years ago.
Now, is it more advantageous to go with a solution that may be more digitally native, that doesn't have the backbone of the original structures, but it's trying to be more agile and adaptive with technology advances?
Kyrill: Yes, I think it's absolutely advantageous. So I actually was having a conversation with a former colleague this morning. And what struck me is that even when you try, and this is somewhat by design.
But even when you try to structure your business in a way that's very customer-driven. And that's really our ethos, is that we really want to focus on the customer. What's the right thing for the customer, for the client, for the investor? And even if you try to do that it's hard, oftentimes, when you have legacy partnerships.
And, so, our perspective was always find the right partners that have the technology and we spend a bunch of time, obviously, finding them. And then build our own technology, that's completely new.
So it's not building on top of something that is maybe legacy 20 or 30 years ago. Which is what often happens in bigger firms, bigger incumbent firms. But build something completely de novo, as they say. And by doing that, and by focusing on, like I said, efficiency, cost, I mean, you're able to pass that through to the client.
Adam: That makes a lot of sense, and you're able to kind of, in a sense, be more agile. Which is what you're looking for, especially in fintech, you need it to be agile because you have to adapt as you're going along, right?
Kyrill: A hundred percent, yes, a hundred percent. I mean, any kind of new firm you have to be agile, but in fintech, it's very important.
Adam: So can we talk a little bit about how this type of software, these type of solutions, will affect the accounting and finance team. As they're trying to adapt within their organization.
Kyrill: Yes, so I think that accounting and finance folks, it depends on at what angle you're looking at it through. I think just on a personal level, so every professional, or non-professional, but accounting and finance professionals, have their own retirement savings accounts.
They have their own taxable savings accounts that they've been able to accumulate. Using technology, using software, to help things will just make those solutions better, just solutions that are available to them better.
And within their roles, the use of technology, kind of, more broadly speaking, should also make their jobs less labor-oriented, so to speak. So when you can use technology, and, actually, as now I'm reflecting on this. My early days at Goldman Sachs, I was in operations, it was referred to as the back office, so it was everything that wasn't the front office.
So once a trade gets done, it comes down to us and we handle it. And we were very encouraged to develop processes and procedures to make what was, at that point, referred to straight-through processing. So that there's very little manual intervention.
And, I think, fast-forward two decades, again, for a long time lots of things were being cobbled together. But technology just makes that trend so much more powerful today.
And that's going to have a real ability for folks in those seats, to do higher value type work. So to do less stuff that's a little bit more manual and labor intensive, and focus on things that are potentially higher value.
Adam: Yes, definitely, and I was reading some stats. There's hundreds of billions of dollars going through fintech every year. Do you think that that's going to continue to grow as more and more people move in that direction, especially as the technology grows?
Kyrill: I think so. I mean, obviously, we're going through a period of time, right now, where we went through a period of time, not to take too much of a step back. But we went through a period of time where money was abundant, to put it pretty simply.
We had, in response to Covid, the Federal Reserve and other global central banks printed a lot of money. You've seen this in the press over the years, it was there. It was done to stabilize the economy. It was done to stabilize markets, so that we wouldn't go into some version of a depression.
And that money, eventually, finds its way into speculative ventures like startup fintech companies. And, usually, what happens is that, the more speculative the more you'll see capital flow into that stuff.
So you saw it in crypto, in NFTs, and advertisements. I'm sure you've seen advertisements for investing in art, as an investment, or wine, or things of that nature. That's very typical of late-stage behavior in a market cycle, and we just went through that and now the air is coming out, so to speak.
But that being said, as it relates to fintech specifically, I do think, well, it's probably healthy to have some decline and growth in the capital that flows into the industry. I do think it'll continue to be an important area of focus, simply because it is really hard.
Not impossible, but it's really hard, internally, at least in some of the big banks that's, kind of, where I grew up to innovate that much. You can make adjustments on the margin, but if you want to take a very different approach, it's hard to do so. And, so, for that reason, I think, that money will continue to flow into fintech.
Adam: Yes, so thinking about individual employees within organizations. What role do you think that employers should play in helping with their employees' personal health, financial health, because you want to keep your top talent. You have to connect with a good fintech company to make sure your investments are good, to make sure all that stuff's flowing. What role do you think that they can play in that?
Kyrill: Yes, it's a great question. We actually think they should be playing a bigger role. So most companies, most larger companies, offer retirement services. So they'll have a 401K plan and they'll do a matching grant up to a certain percentage of what you put in, or of your salary, and whatnot, and it basically stops there.
I mean, at least, I've seen some of this, recently, I think some larger companies and corporations are embracing a more holistic approach. So offering their employees, whether it be managing their student debt, or their credit card debt, or thinking about not just their retirement assets. But if thinking about how to plan to save for a home or to make other investments outside of their retirement world.
So I think that that should be something that big companies and corporations are offering their employees. And it's not very typical right now, as you probably imagine. So what about the small to medium-sized business? Who doesn't have the big resources, that the big corporations, that the examples you just gave. What options do they have for helping regain top talent, when they're small, trying to get themselves or they're just not a large business, but they're trying to get good people?
Kyrill: I think they're a great candidate to work with fintech firms, relatively younger firms like ourselves. I actually, in a very early deck for Centerfin, I put something at the end that said something like, "Eventually, we will hope to be a perk a company can talk about, to prospective employees or existing employees."
And the reason I say that is because what we do is very technology enabled. Again, we can do it fairly quickly and we can do it at a cost that is a fraction of a traditional provider. And it's, solely, because when we were founded, how we were founded, what our goals were, and we're not the only one. I mean, there's folks out there that are talking to, it's becoming more common, but it's still very early.
Adam: Yes, that's great. It's great that they have an option because sometimes these great options are available. But the small and medium-sized businesses are overlooked because they may not have the immediate capital to invest in something like that.
Kyrill: Yes, absolutely, and I think it is a big, again, if you're taking on something like a 401K, it's not an easy thing to set up. We do manage retirement money; we don't necessarily manage 401K accounts. It doesn't mean we can't, but I bet if that's something that somebody, a smaller business wanted for us to do, we can probably get it done fairly cheaply.
Adam: So when thinking about just personal finances, everybody has their own struggles. There's, obviously, issues in the United States. There's issues all over the world with different personal and financial problems. Do you think that the emerging fintech technology can help solve some of those problems, that people are running into? Especially, thinking about different types of investments, and building that wealth that everybody desires?
Kyrill: Yes, a hundred percent. So it's why we started what we started, when we started it. Because, especially, today the investment approach of the last couple of decades, let's just take that timeframe. Because that's the timeframe I've been working in, where most of my contemporaries, as they develop wealth, have been managing their money.
There was a fairly, not easy, but a choice of using a very low-cost index fund, obviously, pioneered 40 years ago by Vanguard. It became a very easily to implement and accept strategy for lots of individuals, for their personal finance. And it makes all the sense in the world, except it made sense in the market environment, that we were living in post-financial crisis up until Covid.
And the reason I say that, is that you mentioned problems, and problems not just here but globally. Well, there are a lot of problems, and I mean, there's always a lot of problems. But the world is always changing, but the difference between now and the prior, call it 12, 13, 14 years. Is that we are seeing things that we haven't seen in 40 or 50 years, and by that I mean things like inflation.
I think before we started recording we touched on it briefly. But inflation is not something, at least, in the U.S. that we've seen since the 1970s. So nobody of our age or younger has any direct knowledge or experience with inflation, and how markets work with inflation. And even the professionals, obviously, that are managing money don't have experience with inflation.
But one of the things that we do, given our background is in the hedge fund industry, we're still pretty plugged in to that world. And there is a whole slew of hedge funds whose role is to manage money on a global macro basis. So all they do is try to interpret these things, where, "Is inflation a problem? And if inflation is a problem what do you do and what does that mean for traditional investing?"
And, so, I think in today's environment, and it's very recent, and potentially has staying power, you really need to be cognizant of inflation and the effect it has on traditional investing strategies.
And, so, that's one of the things we talk to our clients about, we write about, is that the low-cost ETF approach made all the sense in the world, from, call it 2009, even if you want to fast-forward to 2021, at the end of last year. There are some real scenarios out there, and smarter people than I have talked about this. But there were some real probabilistic scenarios out there that, that approach, just buying a very cheap Vanguard equity index fund could yield no to negative results over some foreseeable future.
So what's not often talked about is that that approach from 2000 to 2010, a whole decade, yielded no return, you actually lost a little bit of money. And it's not widely talked about because it's not convenient to talk about it.
But the truth is that if you tell somebody today, "Hey, listen, if you start investing and in 10 years you're not going to have any more money than you started with. You might have, on a real basis, less money because of inflation." They're probably going to be surprised by that. But that's really the world we're living in right now.
Adam: So, basically, what I'm hearing you say is that if you're going to start investing, if you are investing, if you have investments right now. As we look at the inflation that's happening, start educating yourself. Start having conversations with whatever company you're using to invest because we need to talk about this.
We need to learn from history because the people who were working at that time, when the inflation was hitting, they're probably retired or they're doing all that stuff, are retiring now. And, so, we need to find that balance because we need to get that education out there.
Kyrill: Yes, 100%, that's what we would recommend is talk to a professional, bring it up. All these big organizations have economists and they all have opinions on this, that, and the other.
However, again, none of them, maybe very few, but none of the ones that I see on TV, every day, were actually alive, or adults, when the last time we had this kind of environment. And not that we were, but what we try to do is educate ourselves so we can help our clients navigate this environment better than just what has been working in the recent past.
Adam: Now, do you think it's up to the employer, who is providing this to their employee to provide that education? Or do you think, as individual people, we should be researching that ourselves, or is it kind of like a dual?
Kyrill: I think it's in line with what I said earlier about employers providing their employees with resources, that are above and beyond, what historically, was thought to be enough. More so today than in recent past, that advice is really valuable to individuals. And I'll give you another example, so cryptocurrency, a very popular topic. It has been around for just over a decade, but really has gotten mainstream attention, probably, over the last five or six years.
And I, like everybody else, heard of it when it first became more popular. I started to research it myself, or myself started to think about, "If it makes sense?" Came to the conclusion that, "I think, there's something there, but it's still early, it's risky."
And, so, when I think about how much money to put in it, it has to be small. In my opinion, especially, five years ago when I first got involved. It's not any different than gambling with potentially huge returns, but also potentially huge losses.
And, so, any friends and family, and again, going back to my motivation for starting Centerfin. Any friends and family that would come to me, over the years, before we started Centerfin, and say, "What do you think about Bitcoin? What do you think about Ethereum? There's this other token that I heard about?"
I tell them all the same thing, "I think Bitcoin and Ethereum are kind of interesting, but make a small allocation. Call it one to 3% of your overall assets that you invest and see how it goes, and keep yourself educated, but don't over risk it."
And then you hear, in the press, as crypto went boom and bust, a lot of other speculative assets in the last cycle. You hear stories that make me really sad, and it's not because people are stupid by any means, it's just they're just not educated on it.
But you hear professionals, in various different fields, that put 90% of their savings into a token that then went to zero. Or put it in a platform that wasn't researched well and it went bankrupt. And you hear these stories time and time again, and I think it affects hundreds of thousands if not millions of people.
And if that person's employer gave them a resource, where they can go and ask that question, and get professional advice, maybe they would've avoided that. But now they're potentially in a catastrophic situation for themselves and potentially their families.
Adam: Yes, I can see how that could happen. So, anyway, as we wrap up the conversation, I just wanted to kind of get your view, Wall Street looks one way right now. We have a number of exchanges, and we've got stuff in Congress for possible other exchanges, for smaller companies that could be going through. What's your view on Wall Street right now, and how do you think it'll look as we go into the future? As things are constantly changing?
Kyrill: Yes, it's a great question. I think there's a movement, and to your point about exchanges for smaller companies. I think there's a movement to make the products that Wall Street generally pedals in more available.
So that you hear, and I don't like this term, but you hear a lot about democratization of certain things. And it's meant to mean that you're leveling the playing field. Allowing a wider audience of companies and individuals to access certain products and services.
And, so, I think that that trend has been going on for a long time, that will continue. I think, to speak of crypto, actually, I think there are a lot of folks in the crypto, blockchain space, that think that the technology of blockchain will play a big role in, which is really just a technology, but it will play a big role in the rewiring of some of the guts of Wall Street. And that could mean really good things for the end consumers of their products.
And there's lots of folks in crypto who think that crypto is the parallel Wall Street, a parallel financial system. I'm a little less inclined to believe that, although, I do think there's some elements that make sense. But it's just very hard to get your arms around it given, it's a highly regulated space, it's global, and it's just hard to get there.
But I do think that there will continue to be a trend and it'll be good for everybody involved. In creating, more efficient, more widely available products and services on Wall Street. And, so, yes, I think that that's going to continue and I think it's going to be good for everybody involved.
Adam: Yes, and maybe even something that could help distribute the wealth a little bit more. As opposed to just elite few who make small moves and it moves the market in a crazy way as opposed to allowing for others to get involved, as well.
Kyrill: Yes, a hundred percent, I think that that's part of it. I think the other part of it is, I'm a big, you've heard me talk about it now the whole time. The way I see the world, and I don't know if this is too simplified, but the way I see the world is that, at least, let's focus on the U.S., the reason the U.S. is so special is because we have this free market system. We have capitalism. If you wanted to start a business, you can go and find capital and use that capital to build your business.
The capital markets, the access to that capital, is what Wall Street largely controls. And I do think Wall Street as it looks like today, is just a very big, to your point, about distributing the wealth. It's a very big drain of, generally, expenses that take a big bite out of those capital markets.
But the basis of those capital markets is actually our money. So it's your retirement funds that are in a pension account. It's your savings that you've put in the bank, even the endowment, wherever you went to school. Let's say you contributed to the endowment to help out. That's your money that you've just given to your endowment.
And, so, the basis is the capital that runs the capital markets is all of ours. And Wall Street is really just a machine that helps create efficiency in those capital markets. And I think that that can be done in a much better way. And we're addressing it in one little small niche, but I think that trend will continue as well, and that's a big part of fintech.
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