One could not have faulted Alain Karaoglan for wondering during his early years if he and his family had been dealt a bad karmic hand (assuming he believed in such things). Born in Aleppo, Syria, right about the time the notorious and brutal dictator Hafez al-Assad took control of the country, Karaoglan’s parents fled for Beirut, Lebanon, which was considered the Paris of the Middle East at the time. But brutality followed them when a horrific civil war erupted there in 1975. The Karaoglans were on the move again, this time to France in search of peace and new opportunities.
Alain Karaoglan would take full advantage of his westernization, eventually moving to the United States for a university education, after which he stayed on the move — though this time for prosperity rather than safety. In time, his pedigree would include tenures at Banc of America Securities (managing director of equity research), Deutsche Bank Securities (managing director of North American equity research), Donaldson Lufkin & Jenrette (equity research analyst), First Boston Corp. and Bear Stearns, (where, at both organizations, he advised companies in corporate finance and M&A transactions).
He also joined AIG during the critical aftermath of the 2007–2008 global recession, spearheading its divestiture team and negotiating more than 40 transactions that raised $50 billion for repayment of U.S. government bailout funds. The debt was paid ahead of schedule.
Today, as COO of Voya Financial with more than $500 billion in total AUM and assets under advisement from 13.6 million individual and institutional customers, Karaoglan is responsible for all five segments of Voya’s business operations — retirement, investment management, annuities, individual life, and employee benefits — as well as being responsible for the profitability and growth of the company. He and his fellow executives are working to live up to the organization’s vision to be America’s retirement company. Indeed, they are in the third year of a $100 million advertising campaign to ensure Americans know the Voya name and brand.
Give us a sketch of your background.
You can probably tell from my accent that I have a multi-cultural background. I am originally from Lebanon; my mother’s side of the family had Italian origins, my father’s side had some Greek and Turkish origins.
If you could go back in time, what would you tell a 25-year-old Alain Karaoglan?
In the end, everything will be okay. If things are not okay, it is because it is not the end.
How did your parents influence you?
My father had a very profound influence in one way in particular — he had a tremendous respect for the individual. It didn’t matter who you were or what you did, he treated everybody with respect. He instilled that value in me and I have followed his example throughout my life, career and personal relationships. It’s about accepting people for who they are.
What attracted you to a career in financial wealth management?
Growing up in Lebanon, the key industry, other than tourism, was commerce. It’s a very small country of only 6 million; therefore, to survive commerce was quite important. I’ve always wanted to be in business, and went to school to study economics and business administration, and considered finance and investment banking quite interesting and important because financial security is so critical.
What is the Voya brand?
The Voya brand is a promise to help people achieve financial security. The oldest customer in our 401(k) plan is a man named Fred and he’s 101 years old; and Connor is our youngest 401(k) participant, at 15 years old. We have provided unique solutions for both of them — though clearly what they face is different at 101 versus 15 years old. Our vision is to be America’s retirement company, and what we’re trying to do is help people with both the reality and the anxiety of achieving financial security. We created the Voya brand from zero after being spun-off from ING Group. Since then, our brand awareness has increased significantly and our association with retirement is the second highest in the U.S. — and that happened in the span of just three years. Each year, we have a National Day of Service during which our employees contribute around 13,400 hours of community service. We also provide our employees with 40 paid-hours per year to volunteer in the community or with a charitable cause of their choice. As a company, donations from our foundation and our people are quite significant. During our Employee Giving Campaign, our employees raised $2.4 million, which together with matching gifts from the Voya Foundation, means nearly $5 million was contributed to nonprofits across the country, in just one month. More impressive is that the average donation per Voya employee was $240, exceeding the national average for financial services industry employees, which is $141 per employee, and the overall U.S. corporation average of $71 during an employee giving campaign.
What are you aiming to accomplish at Voya?
Quite a few things. I’ve been at Voya for six-and-a-half years working with great people to help Americans plan, invest and protect their savings and get ready to retire. We want to be the industry leader in understanding our customers’ lifetime needs. Voya was a business that was punching below its weight class in terms of financial results, so we developed a plan to improve our return on equity and have done that every year — improving it by 600 basis points since the end of 2012, from 8 percent to more than 14 percent. Our investors provide us with capital, and if we are going to compete for capital, we need to provide an attractive return, so it was critical that we improve the profitability of the business.
What are some of the principles of effectively preparing for retirement?
When people think about retirement or financial security, they often think only about accumulation, but they also have to focus on protection — in case of an accident or illness, for example — as well as distribution and decumulation at some point in time. We are currently seeing that there is a need for retirement income particularly with baby boomers, to make sure they don’t outlive their savings and income.
What has been the most formative experience of your career?
I would say both professionally and personally it’s the ability to deal with change. I was born in Aleppo, Syria, when Hafez al-Assad, the father of the current dictator in Syria, came to power, and my family moved back to Lebanon. In Lebanon, the civil war started in 1975 and my family moved to France. I’ve been subject to changes throughout my life, and what I’ve learned is the ability to cope with them. Professionally, I started at a company called E.F. Hutton in 1987 right when the stock market crashed in October of that year. I had to look for another job quickly. You learn to persevere and increase your tenacity.
Whom do you model yourself after?
My father. He was so instrumental in terms of inculcating in me important values. He wasn’t teaching; I learned by observation. He is 88 years old today, and I can see the caring, the kindness and the love that people have for him.
Did you have to compete for the COO post or were you promoted?
You always have to compete. You’re always competing. Every day is an audition, and my experiences and background culminated in the opportunity to become COO of Voya.
Voya calls itself “customer-centric.” Please elaborate.
It’s about putting customers first and thinking about their needs and experiences as opposed to pushing products. We have approximately 13.6 million customers, and we have a very noble purpose — to serve the financial needs of each of them at every stage of their lives. We have to make that process easy for the customer. We’re not completely there yet, but we aspire to make the customer experience effortless.
How did you choose Pepperdine University for your undergraduate studies?
It’s a funny story. I was in high school in France and didn’t know much about the United States education system, but I knew that I didn’t want to continue in the French education system because it required you to specialize very early. At that time, UCLA was very popular. In Paris, you would see many people wearing UCLA sweaters. I realized that UCLA was in Los Angeles, and going back to the sun seemed like a great idea, but UCLA did not have a business program. A friend told me about Pepperdine University, not far from UCLA, and it had the business program that I was looking for — as well as sunshine. I graduated with degrees in economics and business administration.
How did you decide on the Tuck School of Business at Dartmouth for your graduate studies?
Although my decision to go to Pepperdine wasn’t very scientific, for my graduate degree, I researched the best business schools in the country because I wanted to go to a top-10 school with a student population on the smaller side. My plan was to go into investment banking. If you looked at the percentage of students that had successfully gone into investment banking from Tuck, it was quite significant. I was fortunate to get accepted at Tuck, where I earned an MBA with a concentration in finance.
Walk us through the major steps of your career, starting with First Boston.
After the stock market crashed in 1987, when I was at E.F. Hutton, I was looking for job opportunities and I joined the First Boston investment banking team, focusing on insurance and asset management companies. I learned key skills there, particularly relating to interpersonal interactions.
What stands out about your tenure at Donaldson, Lufkin & Jenrette?
The culture. Talk to any ex-DLJer about the collaboration. People were happy to be at DLJ and to work together to achieve a common goal.
You spent seven years at Deutsche Bank. Tell us about that experience.
During my time at Deutsche Bank, my career as an equity research analyst continued to grow, and I began to be recognized. My strength was analysis; taking the facts into account and being fair and balanced with my judgments. I learned that to be successful, you have to do what you think is right, for yourself and your brand.
You joined AIG after the 2007–2008 financial calamity.
As an analyst, I had been a critic of AIG because some of the things they were doing didn’t make sense. But, to be honest, I wasn’t aware of the extent of their problems. I didn’t see it coming to that degree, and I actually thought that AIG could withstand the financial crisis because its solvency was fine. It was more of a liquidity issue of an entity outside the insurance company, which was not that visible to everyone else.
But you joined the company nonetheless.
It was a bit risky because I was giving up an established and successful role to be part of an extraordinarily large and complex restructuring and, therefore, it offered a tremendous learning experience. I joined AIG in June of 2009 and, if you recall, at that time you didn’t know if the world was going to end. We accomplished all that we did by being open and transparent. That allowed us to execute 40 transactions, raise $50 billion and repay the U.S. government in the span of a year-and-a-half.
Voya Financial was spun off from ING Group. Why? And what role did you play?
When the financial crisis hit, ING Group received funds from the Dutch government. ING subsequently decided to divest its insurance assets and — in the United States — they needed to either sell the U.S. businesses or do an IPO. They chose the latter, and I was responsible for organizing the IPO, establishing the strategic direction of the company, and putting the business plan together. When I was interviewing for this role with the CEO and chairman of ING Group, he asked, “What are you going to do first?” My answer was, “I am going to build trust — trust with you and ING Group, trust with the Dutch and U.S. regulators, and trust with the employees, because if we don’t have trust we’re not going to be able to execute.”
What is the Voya investment strategy?
We don’t swing for the fences. We want consistent performance so that, over time, we are outperforming. We call it reliable investing. Obviously, if you’re just starting out in life you can take more risks and focus more on growth. But as you get older, your risk profile needs to decrease and focus more on fixed income and shorter-term security to address the fact that you may need access to these funds.
What mistakes do you see investors making?
The biggest mistakes are looking at their accounts constantly and reacting to price movements. Emotions are the biggest risk. The pain of a stock going down is two-and-a-half-times the pleasure you get from a stock going up. When things are good, people tend to buy at the top. There are studies that show, over long periods of time, a 60/40 allocation portfolio of stocks and bonds gives investors a 9 percent to 9.5 percent return, but when investors’ emotions convince them to move in and out of the market, their return is around 2.5 percent over the same period. It’s very, very difficult to time the market. The key is making sure you’re invested in an asset allocation that is diversified, then stick with it over time.
How committed is Voya to alternatives and real assets?
They are very much a part of our general account portfolio. They serve as an important inflation hedge in a multi-asset portfolio, and they are utilized in most of our asset allocation funds as well. These may include allocations to commodities, Treasuries, inflation-protected securities, senior bank loans and REITs. Inflation, as you know, has run below expectations for some time, but that should normalize over the next few years — and these asset classes should help protect clients from rising inflation. Some alternatives and real assets may not be as liquid as other investments, but they provide some consistency.
What is the biggest issue faced by Voya clients?
We have both retail and institutional clients, and it’s all about financial security. Our clients are all facing the retirement challenge in some form, and it’s our job to help people figure out and get comfortable with saving more. Improving the participation rate ultimately improves the retirement outcomes of our clients. In order to achieve financial security, you need to focus on accumulation and protection, as well as distribution, because — as we are seeing with the baby boomers — there is a need for retirement income to make sure you don’t outlive your savings.
How do you deal with the pressure of your job?
By surrounding myself with the right people. The most important decision one can make is who they hire — and that is not just about technical skills, it’s about attitude and approach.
How do you lead change, particularly when human nature tends to resist change?
It’s all about trust. Trust is the foundation of any relationship between two individuals, between colleagues and between spouses — and to create trust you need to have transparency. It is important for everyone to understand that the only way we can all be successful is by continuing to have teams that are adaptable, nimble and trust each other.
What is the most influential book you have read?
Free to Choose by Milton Friedman. It emphasizes the importance of the individual and allowing people to make their own choices. It was the beginning of my interest in behavioral economics and behavioral finance.
How do you like to spend your time outside of work?
With my family — my wife, our two sons and our two puppies.
What is your favorite recreational pastime?
Tennis.
What is your idea of perfect happiness?
Spending time with family and friends.
How do you want to be remembered?
As a good, kind person and a family man who contributed to others’ happiness.
Mike Consol (m.consol@irei.com) is editor of Real Assets Adviser.