Robin Kollannur, CIO, Goodman Financial

In an interview with Invest:, Robin Kollannur, CIO of Goodman Financial, discussed investment strategy, AI-driven market trends, energy opportunities, and Houston’s talent pipeline. “We always say the first job is to do no harm,” Kollannur said.

What trends are having the biggest impact on your investment strategy today?

The largest shift we have seen over the last few years has been the growth of passive assets. There are a lot of investments that are on autopilot and growing every year without necessarily needing a human being to help manage them.

As a result, we think the current environment is quite high risk. We have seen what is happening with geopolitics, energy prices, interest rates, and the housing market, and that autopilot feature may not help investors manage these risks. There has to be more of a focus on risk than returns. Everyone who has invested in the markets over the last few years has done well. Now, we think it is time to move the needle more toward risk management.

How are you advising clients to navigate inflation, interest rates, and market volatility?

We always say our first job is to do no harm. Be safe with clients’ assets and make sure to protect the principal. Growth will come, but we are more worried about safety. A lot of our clients are high-net-worth individuals who have already made a good amount of money, so the protection aspect during a potential crisis is what we try to educate people on. With our 36-year operating history, we have had a long track record of navigating market volatility.

We have gone through the dot-com boom and bust, the global financial crisis, and COVID so a crisis is not new for us. One thing we bring to clients is a steady hand when it seems like the world is falling apart around them.The current environment of higher-than-expected inflation and interest rates is causing dislocations in the market, but this may also be an opportunity for long-term investors.  

 What sectors do you believe are best positioned for long-term growth right now?

What has worked over the last few years has been the technology sector, especially anything tied to artificial intelligence. The growth of artificial intelligence has done really well, while every other part of the economy has not.

We are seeing a two-tiered market, with technology dominating the markets while other sectors have lagged. That technology growth has already happened, and we think it is already priced into the markets and fairly overvalued. It is the other areas where we think there are interesting long-term opportunities. Those areas can also benefit from AI and the productivity enhancements that come from AI.

For example, you can still buy a healthcare company where the R&D for the next drug is going to be more efficient because it is using AI. We are seeing the next stage of that evolution in many other sectors as well.

Currently, we do like the energy markets. That is one area where we are overweight. It is a volatile time, and we think geopolitical volatility is here to stay. That means energy prices will probably stay elevated for a while, so we are positioning clients accordingly.

Where are investors concerned when it comes to AI and new technologies?

Some concerns are tied to overvaluation and overspending. We are seeing large capital expenditures to build out data centers and AI infrastructure. That comes at a price because you need more electricity and water for the buildout.

There is going to be conflict between residential needs and natural growth, including in Texas, where more people are moving in while data centers also need power and water. That is something we need to solve as a society, but it is also causing investors to be concerned about potential bottlenecks.

Another concern is valuation, which we believe is excessive in some areas. These are the types of dislocations we are seeing because everyone is so excited about AI that they want to get in “at any cost.”

I went through the dot-com boom and bust, and it was only in hindsight that people saw internet stocks were overvalued. I am seeing a lot of the same parallels here. AI is absolutely going to change a lot of things and make us more productive, but the prices being paid in the stock market are excessive.

Where do you see the most opportunity in Texas and the broader Sunbelt?

The best opportunity during an energy crisis is going to be in renewable energy or new sources of energy. Texas is a leader in renewable energy. Wind energy is extremely strong in Texas, and solar energy is growing fast for industrial applications such as powering data centers.

A lot of states and countries are rethinking their energy infrastructure and their dependence on long-haul oil supply due to the Iran crisis. We saw an increase in renewable sources after Ukraine, including wind and solar growth in Europe. There is also discussion around nuclear energy returning, and geothermal energy can also grow at the margin.

The innovation around the current crisis is a great investment opportunity. We will eventually find a way around the problem, and I would not bet against the Texas economy or the U.S. economy to figure it out. We are interested in renewable sources as well as traditional energy sources such as natural gas, so we would espouse an “all-of-the-above” investment strategy.

How do you see the wealth management industry evolving, and how does Goodman Financial stay competitive?

We would say we are not just independent; we are fiercely independent. We think there is a value-add for the client there.

We are seeing a lot of private equity money come into wealth management, and the wealth management space makes sense for them because it is fragmented. There are many independent advisers, and firms can usually cut costs in areas such as IT, trading, and back office.

Where our independent streak comes in is that we want to make sure there is no impact on the client. The level of servicing and hand-holding clients have had over the years should not change.

We think we can have more of a say in that equation if we remain fiercely independent. If anything, we hope to be a consolidator in the future and be a good place for people to come to and feel good about the value offering we are giving clients.

How are you attracting and retaining talent in Houston?

That is one of the best things about being in Houston. The economy is doing well, and we have a great in-house talent pool from diverse areas.

I am involved with my alma mater, the University of Houston, and the talent I see from that school and the homegrown talent in Houston has been amazing. We have hired a lot of people from that school, and many of us are former Cougars.

We do not necessarily have to go outside Houston to find talent. It is also easier to retain somebody because they are already here, grew up here, or have roots here. Those employees usually stay longer because they are part of the community and want to help their city and community.

What are your top priorities for Goodman Financial over the next few years?

From an investment standpoint, our top priority is to do no harm. We do a lot of communication and outreach with our clients, so if our clients are happy, then we have done our No. 1 job.

That focus on the client is going to be our No. 1 goal over the next three years. As an independent RIA, we do our own research, pick our own securities, and do our own allocations. We do not like to outsource that, so we will continue to grow that in-house capability.

We would also like to keep all of our employees happy. This is a people-driven firm. If everyone here today is happy and growing with the company over the next few years, then that is a win. The clients grow, the employees grow, and the firm will do well as a result.

What is your outlook for the broader economy?

The No. 1 worry clients have is interest rates and inflation. That is the question I am getting most: how high is inflation going to go? We are seeing it in gas prices and grocery prices. The big question is how this plays out and whether there will be a major move in interest rates that changes borrowing costs for cars, homes, and small businesses.

I think you will see some inflation movement over the next few months, but I think it will eventually be tempered. I do not think you will see a significant increase in interest rates from here going into year-end.

The artificial intelligence boom is causing a manufacturing renaissance in the U.S. It is creating jobs and helping GDP growth. We also have lower tax rates for corporations and individuals, which spur investment.

Even if things may look bleak in the short term, the economy keeps doing well and keeps chugging along. Do not lose that long-term investment opportunity just because of the short-term fear from all the recent headlines.