2023

What Gen X Women Need To Know To Get Ready for Retirement

April 10, 2023 2023, Media, Paul Tyler No comments

Gen X women are now between the ages of 43 and 58, which means retirement is on the not-too-distant horizon for some of them. However, instead of looking forward to this phase of life, many women in this generation dread it.

A 2019 study conducted by the Employee Benefit Research Institute found that members of Generation X feel less confident about retirement than millennials and baby boomers. The study found that over half of Gen Xers don’t believe their current financial circumstances will allow them to live comfortably throughout retirement, afford the same lifestyle in retirement, have enough money to last their entire life or cover basic expenses in retirement.

So why is this generation, in particular, feeling so anxious about retirement? And why could women be more at risk for feeling this way? Here’s a look at why Gen X women may feel less prepared for retirement than boomer or millennial women, and what they can do to feel more ready.

Reasons Gen X Women Don’t Feel Ready for Retirement

Several factors could lead Gen X women to feel they are not prepared for their retirement years. Here’s a look at some of the hurdles women of this generation could be facing.

Debt

Student loan debt could take more of a toll on the finances of Gen X women than women of other generations.

“Gen X is the first generation of women for whom student loans are a significant financial burden,” said Melissa Mabley Martin, wealth advisor at Bartlett Wealth Management. “The oldest baby boomers paid an average of $243 per year for tuition at a public college and $1,088 for a private college. It was possible to ‘work your way through school.’ By the time Gen X entered university, costs had skyrocketed at a rate well above general inflation, and it was no longer financially feasible for the average person without significant savings to get through school without loans.”

Although millennials are also burdened with student loan debt, Mabley Martin believes a lack of financial literacy may play a role in why Gen X could have taken on more debt than the next generation.

“The difference between Gen X and millennials is that millennials are likely better educated about the consequences of taking out excessive student loans,” she said. “Gen X was sold hard on the importance of getting a good education so that you could get a higher-paying job — in essence, that the degree would pay for itself with a higher salary. Millennials went in with their eyes wide open, and also benefitted from lower rates on fixed federal student loans.”

The Economy

While every generation has had to weather certain economic storms, the state of the economy has taken a toll on Gen X in particular.

“When the ‘tech wreck’ and September 11th happened, Gen X was in their early 20s to mid-30s — peak years to save for retirement,” Mabley Martin said. “When the financial crisis hit, most women in Gen X were mid-career. Unemployment skyrocketed and savings stalled during those prime earning years. The COVID recession a little more than 10 years later was short, but the fallout from the pandemic forced many women to leave the workforce altogether either to supervise remote learning or to care for aging parents.”

The Caregiving Conundrum

Gen X women have had to bear the brunt of caregiving — times two. This can take a major hit on their ability to save for retirement.

“Generation X is commonly referred to as the ‘Sandwich Generation,’ saddled with providing care and financial support to both their parents and their children,” Mabley Martin said. “According to the AARP, the average caregiver in America is a 49-year-old woman. These caregiving responsibilities are unpaid and, unsurprisingly, are reported to be affecting a woman’s ability to save for retirement. And it doesn’t end when those children reach adulthood. More than half of adults ages 18 to 29 reported being supported financially by their parents.”

Changing Retirement Income Options

“Defined benefit programs, [aka] pensions, were common for baby boomers — not just for government employees but at the corporate level,” Mabley Martin said. “These are virtually nonexistent today.”

In addition to not having the same access to pensions as their predecessors, the Social Security program may look different by the time Gen X reaches their retirement years.

“Social Security, which is a primary source of retirement income for the majority of Americans, is projected to have a shortfall beginning in 2035,” Mabley Martin said. “For beneficiaries 60 and younger, the Social Security statements now contain what is essentially a warning that they will be able to pay out approximately $800 of every $1,000 in current benefits given current laws. Millennials should have enough time to pivot and make plans to supplement any potential shortfall in Social Security benefits, but the oldest Gen X women are now rapidly approaching 60. It may be too late to do anything other than push out your retirement date and continue to work.”

What Gen X Women Can Do To Prepare for Retirement

Although it may seem like the deck is stacked against them, there are still levers Gen X women can pull to increase their retirement readiness. The No. 1 thing to do is create a solid financial plan, Mabley Martin said.

“Careful financial planning is essential to a successful financial future,” she said. “This isn’t just true for Gen X women, but it’s going to be particularly important [for them] because, unlike members of younger generations, their savings don’t have the benefit of a long time horizon. They may need to save more or work longer or both in order to ensure they have sufficient resources to fund their retirement.”

Paul Tyler of Nassau Financial Group in Hartford, Connecticut, notes that it’s important for women of this generation to have their own retirement savings, independent of their spouses.

“Women in particular need to recognize they will likely outlive their spouse or partner, and actively plan to build predictable income for later in retirement,” he said, “whether through an IRA, 401(k) or annuity.”

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The discussion is not meant to provide any legal, tax, or investment advice with respect to the purchase of an insurance product. A comprehensive evaluation of a consumer’s needs and financial situation should always occur in order to help determine if an insurance product may be appropriate for each unique situation.

Episode 184: The Next Steps In FIA Index Recommendations with Branislav Nikolic and Jay Watson

April 6, 2023 2023, Branislav Nikolic, Jay Watson, Podcast, Retirement, The Index Standard No comments

In a turbulent economic time, recommending client allocations in FIA indices has never been harder. Our friends at The Index Standard, Branislav Nikolic and Jay Watson join us today to talk about the latest iterations on their rating models.

Links mentioned in the show:

https://www.theindexstandard.com

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Episode Transcript

paul_tyler:
This is Paul Tyler, and welcome to another episode of that annuity show and I’m glad to join everybody back. I safely made it back from Toby in Egypt for a two weeks trip, and in Bruno, I didn’t tell you this before, but I actually found out there was an ancient Egyptian prince who apparently had an annuity way back

bruno_caron:
Uh,

paul_tyler:
in Mesopotamia,

bruno_caron:
uh,

paul_tyler:
and was given almost like a cup on payment every year. But You found some interesting news that we probably should have high lighted earlier around the Nobel Prize in winter. and uh, uh, One more reason why annuities should be looked at by a lot of people.

bruno_caron:
Right, well, not that much of a recent news than the Egyptians having annuities,

paul_tyler:
Yeah,

bruno_caron:
but indeed, indeed, Benbernatki, who won the Noble prize winner, not not that long ago, joined a long list of noble prize winners who at the very least have you know, push forward the concept and the implementation of annuities. So I think that’s a that. That’s another step step forward and step in the right direction.

paul_tyler:
Yeah, he, tsa, How are you Good this morning?

tisa_rabun_marshall:
I’m good this morning. I’m just slow to get off a mute in case there’s you know, some noise distractions,

paul_tyler:
All right?

tisa_rabun_marshall:
but great to be here this morning

paul_tyler:
Okay, well, Ramsey, let’s see. can you connect the dots between Nobel prize winners and Egypt, Shan, nobles, perhaps, and annuities and the topic

ramsey_d_smith:
Well,

paul_tyler:
we’re going to cover today.

ramsey_d_smith:
the only thing I can say is that that at one point my freshmen are sophomore year in college. Ben Bernanki was teaching me beginning beginning economics. I forget it was introductory macro, introductory micro, so always very very happy to see him doing well out in the world, And it’s interesting. So you mentioned that there was an. I think you just mentioned there was an Egyptian Egyptian annuity. My wife handed me in art. All about a perpetual bond owned by Yale, as it happens from Holland, that dates back to the fifteen hundreds. they’re still collecting. Literally, they’re still collecting a handful of uros every year on the back of that. So

paul_tyler:
Uh, uh,

ramsey_d_smith:
the there there a number there, a number of really phenomenal examples. But listen, The most important thing we have going on today is that we are joined by two special people from our lead sponsor. The Index standard. They’ve been our lead sponde For a year now, and for those of you listen to the show and at the beginning I believe we’ve got a. We’ve got a one minute intro. We talk about what they do is they bring clarity to the growing and inherently complex world of industies that are part of the fixindexinuities that so many people that listen to our show are probably involved in selling. So we think it’s a very important service and they are. They’re launching some some new initiative As we speak, and that’s what we’re going to talk about today. So first, I’m gonna introduce Bronislav Nicolitch, who is head of insurance at At Index Standard Brneslov recently joined from from Chanic, Let him talk a little bit about his his new role in his transition and we’re also joined by J. Watson, who is calling from London again. Yet further proof that we are an international show. Ah, and J is head of Analytic at head of Analytic at At Index Standard, and is a long standing colleague of the founder Index Standard, Lawrence Black, who is who is a great friend of the show as well, So With that Branaslove, bring us up to speed. tell us about your latest.

branislav_nikolic:
Thank you, Ramsey, it’s my absolute pleasure to be here. Actually, last time I was in the show was actually my day two or day three after joining the Index standard, So I was really fresh fresh of the boat. So yeah, as you said, like, I’ve joined Fromchanics, where I was leading research and everything that focused about retiring, complaning and anuities, and inclusion of annuities, whether it’s a retail or or in plan, and making making a shift index Standard where I really am looking into index solutions in either of the settings, But it’s insurance. It’s a annuities, index index, life insurance, and starting to look into in plan solutions, they are more and more willing to look and adopt index indexanuities, So a pleasure to be here and looking forward to our chat.

ramsey_d_smith:
J. Tell us a little bit more about yourself. Yeah,

jay_watson:
Thanks for that, my name is J. Watson. I joined the next standard just under two years ago, and prior to that, for best part of two decades, I worked in investment banking. most of that at Barkley’s capital, and most of that time was spent designing the industies that we’re talking about today, so across the different asset classes on a global basis, So based in London. That accounts for my accent, And I’ve known Lawrence for very many years. We were colleagues over the years, and I joined when Lawrence founded the Index standard. I joined him quite soon afterwards, and I’m very happy to be part of our mission, which is to help people better understand these industries and how they can work well for individuals and retires.

ramsey_d_smith:
All right, so why don’t we get into it And by the way, I neglected to acknowledge that, So Bruno is calling from Montreal, and Branaslavis is normally in Toronto. Don’t know where you are today. So Canada is also very important part of our national presence. So Bronaslav, tell us about. Tell us about this this latest initiative that that you’re undertaking with the Index standard.

branislav_nikolic:
So what we have done it in the standard and again, even before I joined. I know what what a core mission was, as Ja said to help teople understand Complex in this is better understand how the impact the insurance solutions, and more important how to impact the retail products to end up in the in the hands of moms and pomps, So what we do is kind of like multimultilayered, so just to kind of remind those who ve heard of us are kind, introduced it to those who haven’t we, For ratings and forecasts for for industies, and with our ratings, we’re trying to show how well designed or how robust. industisare and talk about there. Overall design can bring those in common language, simple to understand, and with a forecast, we are trying to rely on what we call the wisdom of Wall Street, and basically try and see how these are gonna perform Over next next little while, in other words will take, an index will do a v n analysis on it. See how it relates to the capital, malice assumptions that are coming from Um. insurance, big insurance companies, banks as managers, and see how the industries themselves would react Going forward. Now that’s all good. But the main question, the even we’ve been asked was around. How do I apply that in inanuities and we, There was a lot of work. Um, and of trying to figure out what the simplest way. what’s the way that would make sense to to to to mom and pop to my grandma That I always like to bring in in the scenario that she would understand what we are what we are talking about right. So we first wanted to put these index forecast to annuity annuity designs, and see if we can get a forecast or the annuities based on on annuity parameters that are different from different carriers, different surrender periods, and so on, Yet the forecast, or what we call Net forecast credit for for the annuities, But then soon after the question, the question really started started to be be asked is how do I know where to locate my money with inane, So we understand that these industries themselves are like many portfolios that are highly optimized to react to different market events, Um target different levels of volatility. But now that I have many of these many portfolios and many of the creating strategies with, In a new, How do I locate within the annuity and how do I word redundancies? A lot of people were saying that they are seeing either binary locations to it, say five hundred cab strategy Or if there are multiple options, they would say have five options. I split fy ways. You have three options out three ways. And what we wanted to bring some rigor is how do you? How do you do that methodically, But then still keep it. Keep it simple enough. so so so people, Or at the receiving end of this can get something. Something out of it

bruno_caron:
So if you take it, you know from from from to your point, from you your grandmother’s perspective. Now, let’s start with the first step induces. if I’m presented as a consumer between two different induces, what would be the differentiating factor between your gold rating and your neutral rating? Like, What are those those differentiating factors between those, those particular rating of those those induces.

jay_watson:
Okay, I’ll try and answer this, Bruno. The first thing to say is that our rating system is entirely analytical, Is no subjectivity. It’s objective, so we look at a very large number of different aspects of the index design its performance. It’s the way it’s desined, How many parameters it uses what underlings. It has, a very, very large number of considerations On Consideration we score. We then add up that score to get a grand total score for a particular index, and then once we’ve got that number and number out of a hundred, we compare it with all of the similar induces, So for example, the dividend index we compare with another dividend index or a multi asset index, We compare with another multiaset, a set of multi acid indusies, So we compare like with like apples with apples. So there’s an analytic score And then with that Score we compare that score with the other similar indusies, and then we produce we bucket those scores. The top ones get platinum, the next group get gold, and so on, and so on. So it’s an analytical process that takes into account a great many different aspects of the index design. And then we rate that index versus

paul_tyler:
How does

jay_watson:
it pears.

paul_tyler:
the how does time factor into your analysis and particularly my time? You know, if I plan to retire, Say twenty years from now versus ten years. Uh, one index may be gold, I would presume and please tell me this. I would think one index maybe goal, because it consistently returns a sort of narrow range of fairly good outcomes or has in the past, and we project it for Or another, one may actually produce some really incredible outcomes if you look over a period of say ten years, but if we start to narrow down that range of time and say well, Paul, you know, you might be starting to think about retirement sooner rather than later. I’m taking a little bit of a risk that I’m not going to get appear at a time where this particular industry has generated very high returns.

jay_watson:
That’s a very good question. We don’t have a crystal ball we’d love to have, but we don’t. What we’re trying to do with our index ratings is figure out which industries are well engineered and therefore more likely to do well over the long term, versus those of perhaps less well engineered that may look good in their back testing phase when they were designed, but may perform less well to the future And they go live. So that’s the first thing. It’s not a crystal ball, but it’s a A figure of measure of quality. The second thing is to say we always advocate this and it’s nothing new. Diversification Very simply, do not put all of your eggs in one basket. There are great many industries out there that I’m happy to say are very well designed these days, but even so it makes sense to diversify so there are some industries that may have a hard time in certain environments. Many industries have had a hard time in the last year, with both equities and bonds selling off a very unusual circumstance, so it’s very difficult to. It’s almost impossible to predict what’s going to happen in the future. The best thing you can do is to be diversified Now, that’s exactly the approach that we advocate in our model applications for the fixing, fixed indexed annuities. There are many now that offer multiple In This is, and at first sight, that becomes bewildering. I can imagine if I shown this to my mother, Bless her, she would say, I simply, I’ve never heard of most of these industries. Yes and yes, the Blomberg aggregate. Yes, the rest know, so people are stuck Th. they’re presented with often very good choices, but don’t have an informed viewpoint on what to do. So that’s where we aim to help.

ramsey_d_smith:
So I would just this comment that that one of the toughest things we do in the world of industies is actually really truly understand. You know, when things are redundant and not, it’s really very difficult to do without looking under the hood. One of the examples I remember from my old days was Ou know. there’s the S. P. five hundred, And then there was the five hundred value index and there was the five hundred growth index. Five hundred has five hundred ish stocks, It. but each of those industies had three hundred and some odd stocks in each. So if you added them together, it didn’t actually equal the five hundred, because there are a lot of stocks that were actually in both industies. Right So you know that’s why. Now that is precisely why know the work that you’re doing is so important. Because it’s really. It’s really hard to do that without without really being able to look under the hood. So Brontaslav wanted to get your thoughts on on Or get get your insights on on some of the tools you use. So we, we had a. We had a discussion off line where we talked a little bit about different thoughts and some of the analytical tools that are used in this in this space, Monte Carlo, being one of them. So maybe tell us a little bit about sort of the tools you use to do this work, this important work. and and maybe what, some of the pros and cons are that emerging in the intellectual debate in the financial services industry?

branislav_nikolic:
Would be glad to Hanks for that. So so I

ramsey_d_smith:
Yeah,

branislav_nikolic:
think that the ties to pulls pulls question as well into What happens if we want to retire in five years? What it will happen if you want to retire in ten fifteen? You got to have the way to test this out. So you know little framework that exists that has been In question over over last last one or two of your episode was Is Monte Carlo a good approach, and I’ll go straight to say that like all models are wrong, some are useful and there are tools that can do certain things, or tools that can not do certain things, but we waste the test. So the question that Paul asked is like What if I want to can retire in five or just ten years? I think our general approach to forecasting is that you have to take a long term view, because the capital of market assumptions Coming from investment banks or asset managers are ten year capital market assumptions. So if you do our d n analysis and an index apply capital markets assumptions to it, you get ten year forecast for an index. So it’s important to understand that this is not Co. Index will do tomorrow six months from now, two years from now. That this is a relatively long view on an index. Part of what goes into into our process is simulating the out, Basically taking the capital of market assumptions allying than with our, with our index in the d, n A. and kind of seeing what what a future holds. now, I would think that that’s appropriate and good use of simulation framework. I think more importantly is how you present your results. I think that every every and any tool is very dangerous. It could become very dangerous if you either unknowingly or got for deliberately misrepresent Results out of a two. or, or, even if you, if you as a user don’t understand, Um, So so the analogy that what? what you’re referring to, couple of episodes back was that what came out on Lee linked in was. Oh, let’s ban Monte Carlo, you, Ben Monte Carlo. Like three quarters of finance will help Um next day, and people say you, while like

ramsey_d_smith:
Hm,

branislav_nikolic:
this worked for a long time, worked in so many contexts that it’s working very well. Now there is that there’s the aspect where we say Oh advice. There’s usually use these to convey the message. Advisors misinterpret the results. And to me that’s like saying car is a bad idea because you give car to my toddler. Oh, that can be dangerous, but it’s very useful otherwise so so that’s that’s That’s where here we stand. So what we do is we take capital market assumptions from the market, what we call the wisdom of the Wall Street. We apply this to the set of analytical tools to identify Um. exposures of the industries, then simulate based on a couple of market assumptions and those exposures to get the index forecast, and the lastly, we have to what was saying, fully algorithmic way of locating within within anuitysbasically, using the results in a proper way to come up with the with starting locations for for these products,

jay_watson:
If I can just jump in here. It’s perhaps worth saying that

branislav_nikolic:
M,

jay_watson:
we’ve been producing these raw forecasts for industies for a couple of years now, and people in general very interested in them, as as a counter to simply looking backwards. It’s always interesting to look at history to have a field for things, but we try and look forward as well, and that’s what our forecast do for industries. But what we found was people who say. Yeah, Well, Great, but what’s it going to do when it’s in an index when it’s in an annuity, when it’s in a crediting strategy, and in particular people we spoke to clients, and they say, Look, I’m being presented. My clients are being presented with a choice of forty percent of the s. n P over a year or a hundred and seventy five percent participation in this bank index. I’ve never heard of How do I choose How where do I start? So what we did builds on what brands Lave explained. We took our role index forecasts, and we simulate what an index will do in a particular crediting strategy. So we take into account the participation

branislav_nikolic:
M

jay_watson:
we take into account fees. we take into account the crediting frequency, et cetera, et Cetera, All of the aspects that are required, we account for all of those on We, And a simulation out over ten years. When this goes back to Paul’s question, to try and get a field, an understanding of what a given crediting strategy might do, and the results are very striking. There’s a big variation in the results depending on the industies depending on the crediting strategies. So this is, we think this is very useful information, and it’s the basis Of these are our forecast, net forecast credits, and we use that, as Brandes pointed out, as the basis for our model applications, among those crediting strategies

paul_tyler:
Yeah, it’s

jay_watson:
in a

paul_tyler:
up.

jay_watson:
given

branislav_nikolic:
And

jay_watson:
F.

branislav_nikolic:
Ramsey,

jay_watson:
A

branislav_nikolic:
one thing,

ramsey_d_smith:
Go ahead on left.

branislav_nikolic:
Ramsey, One thing that you, you asked and I think it’s worth mentioning here is that we are the guardians of assumptions, so we believe that among us, we have enough experience and hand book know how to keep the assumptions in check, so that they are aligned perfectly, and when we get a capital market assumptions, we don’t take it from a single source. We take it from over fifty sources, and we then come up with our own that can reflect, Um. all of those. So the variation there, we try to smooth it out again when we apply it into into into our process. The other one is that we use the results of Let’s a simulations. In one step. We don’t say. Oh, this is going to be a single number. We provide distributions of results, we pick out moderate, conservative and strong, and we present all the data. So I think it’s also important to talk about what goes into the model, what comes out of the model and how Interpreted. and we, Our model location says what I referred to as an ultimate Che, Cheat on how to use a fixed indexcenuity You see that All you see how you locate, you see what industries are. You see how this is rated. You see what expected forecasted performance of the industries in the raw form ice, as well as through the through the annuity land, or of Crete strategy lands. So you have a full story to tell. How does hundred seventy five percent Partipation, Or nowadays, numbers that are like in two, three or four hundred, there are starting to sound like very odd to again, some one like my gramma. You ould say. Oh, you’ll get three times the performance of an index. Are you sure you can do that for me? Like that sounds fishy. I’ll go with a one that gives me up to a hundred percent. So all of that and mix together presented in a clear and concise way is what E are what we are advocating for. So at the end and consumer and user has has a Chan, So of a better outcome,

tisa_rabun_marshall:
A question. Congratulations on Un launching the ratings, but I have a question on design. Even behind the scenes, I sit in a marketing seat, so I imagine there’s several hours sitting in a room, brain storming and thinking through what you rolled out the decisions around are. The psychology may be around six levels versus eight or six levels versus three ratings, and sort of using medals versus some other reference to good Our best. I’m just curious. some of the discussion may have had there, and my follow up question to that is you know, how do you get the consumer who is already skeptical to pick anything other than platinum or if something moved from watch to gold? Like, how do you make them feel like? Yeah, this is actually going to you know, be beneficial to you. It’s like it’s if it’s watch. it’s always watched forever. In all ways, I’m never going to trust that it moved up. Just really curious. Some of the psychology as you thought through the ratings in and on the scale.

jay_watson:
Okay. That’s a great question. You are absolutely right. We did scratch our heads for a long time on this and we came up with our rating Platinum, gold, silver, copper, Neutral, and watch. We wanted something that immediately conveyed better or less good. We thought about lots of different possibilities. Stars. somebody suggested dollar signs. We thought that was not a good idea. What we wanted to convey was a sense of quality in a very simple way, So I don’t know whether we’ve got that right, but we’re going to stick with it. The other question you ask about. should someone only ever choose platinum? The answer that is, no, broadly speaking, the top three or four of our six categories. They’re all. They’re all good, But the platinum we think is the best, All of the platinum gold Silver. Those are all really well engineered industries, so you should be confident with any of those, and in particular those ratings they do move around through time of an index Is Platinum doesn’t necessarily stay platinum forever. We take into account in the the analysis of that score, that rating we take into account the Forecast performance of the index. Also, it’s live performance compared to its back tested performance. So as an index become live for a longer and longer, we give more weight to that live performance. If that’s good, then that will have a greater waiting. So if an index is rated silver, say it may go up. so the ratings do change not very much, their broadly sta, But they do change from month to month, But they do not lurch from platinum

ramsey_d_smith:
M.

jay_watson:
down to watch back up to gold again. there was no yo oing around. We were were confident when we designed the scoring structure that it would be stable, but it would move gently over time if I appropriate.

tisa_rabun_marshall:
Thanks,

paul_tyler:
I do think communicating potential outcomes is incredible, incredibly complicated. Love. the idea of an icon, M. now, I think of how we show ranges of outcomes today and it’s it’s difficult. I think our illustrations to you, so I think we show um, best, worst and last, and ironically, the last can actually be better than the best. The way the illustration rules work, and try to explain that to six year old consumer. Another one way we’ve we’ve looked at this, you know, brown, love, I think I’ve shared some of this work with you. We’ve looked at distribution outcomes. Now we’ve been doing this, you know, In a mirror looking backwards, and you start becatsome. Very interesting results. Some of these industies generate. You’re thinking of distribute normal distribution, cure very wide tails, Some very high peaks, So I’m sure there are many many covets, But you know all things being equal, you have an index. The goal of our of any type of guide is should be in my mind to help a sixty year old achieve safely achieve their retirement objective. Suppose we have fund A, that say shows, or projects that will generate, on average, say six percent return, And M with a standard deviation of say one or two per cent, so low, but very tight curve of outcomes, and we have almost same exact industy with averages nine percent, But the standard deviation is wider, meaning the chances of going you know lower than that more conservative fund is it could happen which which one gets the platinum, which one gets gold. Or have I just total Trashed your and walked over your model?

branislav_nikolic:
So you open, you opened two very important questions.

jay_watson:
Should I answer

branislav_nikolic:
I

jay_watson:
that,

branislav_nikolic:
think I think you should the last one, but I think you opened the very very very two very important questions. One is about the sales practices and illustration practices which we can get into you can get into, and the other one is Um, What’s what’s the preference? You started talking like means and stoundedeviations, And I did some that I in my schooling, But the key here is that My grandma doesn’t doesn’t understand a single word that you just said, So I think what what may work for for some one like her is like, Are you preferring index that’s hitting singles and doubles in baseball terms, or you’re looking for someone who is hitting home runs and which you prefer? It’s your thing. On average. they’re going to have the same number of rounds in the season to take a long term, So that’s the first thing, But the other one is that you mentioned illustration practices and impassionate about this one. It’s that I think they are. They’re kind of product of their time. If you go back to an n I cereals came about. It was like in early twenty tents, which just about two thousand eight. and I think that the last really meant to show. If two thousand eight happened, What what would the out can be? Now you? You move that rolling window away from two thousand eight, and last really becomes that you’re looking into the raging blue market hat we’ve seen. Now you’re starting To see a little bit of twenty, twenty, twenty or twenty twenty two coming in, but over all like eight out of out of those ten years are still phenomenal, so I think those are due to be to be adjusted to kind of prevent. what what I think is. It’s cheating that something that was meant to do a good thing include a widely bad outcome in those illustrations. Now in its place you are seeing the best possible thing that can happen to you. So so then and then, the third question that you asked is about How does the performance impact our rating, So I’ll go ahead and ask ask J to to give you give you the explanation there, Because that’s basically a difference between ratings and forecasts.

jay_watson:
Yeah, the answer Paul is, we do take into account our forecasts, but it’s only one of the things we look at. We’re not just looking for the index with the highest forecast. Put all your eggs in that basket. That’s not the approach we advocate. As I say, we’re trying to give an appraisal of how well engineered an index is how well how robust it is. Is it likely or less likely to do what it’s supposed to do? That’s what we’re looking for. And so to your question, Should somebody choose six percent return expected return with a vol of one and a half? By the way, that would be if you could find that index. Tell me, that’s amazing versus nine per cent with a Vol. Can’t remember what higher it depends. Is the preference. as brands said, it’s the preference of the end investor and that’s where the advisors come in in helping those end clients make a decision. Do you happy with singles? Oh, you’re happy with nothing. Nothing and then maybe the occasional home run. it’s up to the client. So our role as we see it is to try and put in front of people that information to help them make an informed choice. Help guide their own clients to what is most appropriate for

branislav_nikolic:
So

jay_watson:
those

branislav_nikolic:
is

jay_watson:
clients.

branislav_nikolic:
it fair if if I simplify it may be the other way that, if you’re look into our ratings, that will tell you that will describe the index. It would take everything that the index has to offer into consideration, and it would can tell you whether the index keeps its promise. In other words, whether the design that showed very well in design phase, or back to days carried into the future. Whether the mechanism works as described, How are the metrics coming out for for for Next mechanism? And then you combine that with a forecast, But you then can compare the forward looking view on how the index would perform, and you would say ideally you would pick like metal index, platinum, gold or silver, with a very stable return profile in the forecast, that doesn’t deviate much between conservative, moderate or strong, and then you look into even into the past, and say that now, last end Years or last twenty years, this index was returning five or six per cent. For we’re looking. we see somewhere between four and seven. That means that that’s indicative of what might might might have happened, but I think that’s that’s kind of. that’s harder to gage once you get into into the annuity and I think this is the last piece. and this. I was hoping that that was your question. Like how much you working of spending in the room, thinking about how to simplify the location with an annuity and how do you present those Results? So maybe maybe we want to talk. Talk about that for for for a second, And then do you want to want to lead it off, or do you want me just to say that again? The idea was there to make it simple. Make it. I’ll go it mic again, so there is no. there is no secret sauce in it. Everything is there. everything is disclosed and we want to give the option, especially in today’s hot higher than than what we’ve seen of our last year’s interest or environment given to F. A. There still fixed anuities. How much of above and beyond the fixed rates are these strategies bringing to the table? And should you consider the fixed rate that it’s now short history, but historically high. And what not? Do you want to maybe talk? Talk about the process for a little bit.

jay_watson:
Yeah, sure, thanks. have so again, we’re acutely aware that people are presented with a long list of choices which re going to be very difficult to understand these strange terms on unusual indusyes, strange indusies. What we do for every single crediting strategy is calculate the expected returns of that crediting strategy, So in fact, we calculate the moderate, and also conservative and a strong number, sort of weaker the expected value, and then a good scenario. We do that for each index, Each crediting strategy linked to each index. That’s the first step and it’s a big effort. So there might be five, six, there might be twenty different crediting strategies across three or five. in. She is. For each index we pick out the crediting strategy with the highest expected return. This is the selection part of the process, So for each index, look at the crediting strategy linked to it and pick the one with the highest expected return. Next step Check is that higher than the fixed rate? It jolly well ought to be, Because if it’s not higher than the fixed rate, why would you Take the risk of allocating to an index which the expected return is less than the fixed rate, So it’s less than the fixed rate. We throw it away, we discard it. We also discard an index of the best of its crediting strategies. The expected return is substantially less than the best available in that F. A. So there’s a big selection process. We try and sort out the wheat from the chaff You like. Once we made that selection, we then have two possible model applications. We propose. Both of them are fundamentally simple and both of them are based on the idea of diversification. So having made that selection in our first model, we just allocate equally to each of those selected industries. very very simple. The other model is a little bit more sophisticated. We tilt The locations according to the forecast. The expected returns are forecast for those crediting strategies. And so if the forecast, the expected return is higher, we give it more weight. If it’s less, we give it less weight. So you’re taking a little bit of a view according to the expected returns, But in both cases the selection is the same. The selection is looking to pick out for each index, the crediting strategies, which over the long Term, we think calculations show, demonstrate indicate will produce the highest returns over the long term.

bruno_caron:
Yes,

jay_watson:
Does that make

bruno_caron:
absolutely.

jay_watson:
sense? Everyone?

bruno_caron:
And it’s a very complex approach obviously to to help again to take Bronslab’s grandma and everybody else out there. Of course, you touched on diversification significantly earlier on. How is diversification achieved in the context of what you just said, Like having that algoritam picking and choosing different. You know, comparing

jay_watson:
Sure,

bruno_caron:
The the the expected return, Um. How is diversification achieved through this this process?

jay_watson:
Okay, Well, let me let me express it a different way. What we don’t do. You might be tempted if you have the for every crediting strategy of the expected return. Say Ha, there’s the highest one. Let’s put everything in that We don’t think that’s sensible. What we do is for each index we allocate where we check that the crediting the best crediting strategy for that index is not below the fixed rate or not too low. And then, if assuming that’s okay, then it gets an allocation. That’s the diversification we allocate to all of the industries where the crediting strategies are good to very good.

ramsey_d_smith:
So my comment? So Bruno? Actually? Did you have another follow one there before I jump in. Just going to say Bruno. Yes, it is it is. It is a complex process, but it’s also a a complex problem right, so industys, even simple induses have complexity, some of which I alluded to before. and then you know, many of the industries that are in in this space are even more complex because they’ve got lots of different rules and they’ve got Utility controls and lots of things like that. And so then there’s a. There’s a process valuating them at that level, And then you put them on to A and do an f. I a chasse. and suddenly you have all these right symmetries that are brought in because you’ve got you’ve got caps and things, so, I mean, I don’t know how one could actually sort of see fit to be able to optimize any of this without a very strong quantitative model, Which kind of brings us back to where we were with Ronesla earlier. Right

branislav_nikolic:
Oh,

ramsey_d_smith:
is at the end of the day you need a model, right, you need a model, and then, to the extent that you have a model, It, really, the discussion comes down to how robust are your in puts in your methodology, And so right, This whole discussion is really about like you know, you are describing the care that you put into those two critical elements to using this right. this sort of widely. Why The accepted way of evaluating evaluating the economic opportunity? So anyway, that’s that’s my. That’s

branislav_nikolic:
Oh,

paul_tyler:
Yeah,

ramsey_d_smith:
my twenty five cent summary. But did I did? I miss anything there, Bones love.

branislav_nikolic:
I think I think you get it. Get it right on and then Bruno, just to try to answer your question, Because again, I think the question that you ask like sounded simple, but I hear it as a very deep consequences. so one thing is that we try to read out redundancies in terms of strategies on the same index, because again those could be redundant. those could be all waiting. So for example, if you have an index and you have two strategies that perform the best You could say, Oh, give me half of one half of the other. You did not diversify. You just chose to different pay out structures on the same index. So that’s the first step how diversification comes into play. but we also rely on on diversification. Is that the carriers, when they are putting these in the sin like they are usually not redundant. So you, you wouldn’t have industries that are kind of carbon copy replica of one another with within the annuity, and the third one is diversity Cation. With respect to the fixed rate, a fixed rate is favorable compared to to those well performing strategies. So that kind of is kind of on a three levels of the versification that the dis offers Now, Could you could you go? Could you go deeper? Could you try to optimize? use use term that that Ramsey brought up like optimize? How can you optimize this? I think when you say optimize, people Go to mark of it. and like Moltiporfolio theory, and mean variant optimization, and the key with it a fixed in dexcnuities that allows us to be a little bit simpler to use a ittle bit more of a curistic approach. If if you want to call it is that you cannot lose money, these are principal protected product and you can really look into what’s the difference in my upside. Now you want to do this for, let’s say registered index annuities that you can lose the money. You definitely have to start measuring the downside and compare upside and downside and desk. This would kind of add you another level of the versification. Do you want to go for strategies? We can win big, but lose big occasionally, or you want go for a more stable stable return. So I think you’re asking a very deep question we’re trying to in a context of fixing eccenuities. answer it with a very simple solution. But there is a lot of lot of things that are going back on,

paul_tyler:
You know, this is a real problem,

jay_watson:
Ah,

paul_tyler:
our business that you are all solving, you know, and we’ve been a conferences. I’ve talked to Im. as we’ve talked some more top agents, and in selection is a very important issue. I think that really could benefit from. you know more support in the industry with the tools like yours. Um, I think last year You know the combination of bonds being down with stocks really heard a lot of these low vall induces, and I think the nejercoraction as I’ve heard from some agents is, I’m just going to put everything on the S and P five hundred, but that’s not the right solution for your clients. Necessarily

branislav_nikolic:
But you, sorry, I had to had to jump in you. you’re You’re saying two things you’re saying Control Industries didn’t work well last year, but going forward I’m going to put him into

paul_tyler:
Exactly.

branislav_nikolic:
how S impeded last year

paul_tyler:
I know Vranslavthere’s

branislav_nikolic:
Like these industries did a bit better than M. P,

paul_tyler:
Right

branislav_nikolic:
So

paul_tyler:
in going back. Going back to Ramsey’s point. We need structure around this

branislav_nikolic:
M,

paul_tyler:
and this is not a.

branislav_nikolic:
M,

paul_tyler:
You know, we’re not trying to time the market inside fix into exinuities. Nor should we. we need you know. J. that perspective look that encourages you know behavior that that creates outcomes that the products or designed to design to deliver. So I know we’ve got a lot more we can talk about Ramsey. Lot more more at the top of the hour. Um, you know, tis a. Do you you have any like last thoughts or comments on this topic?

tisa_rabun_marshall:
I mean, I think we all agree it’s complex, right and so I think this this rating system To de mystify it, break it down. make it simpler. So it’s interesting to hear you know some of the thoughts that went into building it, and um, I think I think it’s a step in the right direction, right to help

paul_tyler:
Yeah,

tisa_rabun_marshall:
the industry

bruno_caron:
Yeah,

tisa_rabun_marshall:
and to help the end consumer understand or make a decision in a different way,

paul_tyler:
Oh, an, I’d like to see our somer products and see the radiance you have here,

tisa_rabun_marshall:
Yeah.

paul_tyler:
Bruno, you, your last thoughts,

bruno_caron:
Well, I certainly applaud the indevor and the the initiative. I know I was in similar similar position not that long ago. and when things are going well and platinum and gold continued to be platinum and gold, you don’t necessarily get the metal. But when the boat starts rocking, then that’s when you get the tough question. So it’s It’s a tough. It’s a very difficult challenge and at the risk of stating the obvious, I know Complex environment, So yeah, I applaud the initiative well done,

paul_tyler:
Um, Ramsey,

branislav_nikolic:
Thank

paul_tyler:
bring

branislav_nikolic:
you.

paul_tyler:
us home.

ramsey_d_smith:
So

jay_watson:
Yeah,

ramsey_d_smith:
thanks again to Bronnaslav and J for being here. Hopefully, I should have pre summarized my my thoughts earlier. and so I think that your your question earlier about marketing this, and in the way it’s communicated super important. There’s everything about this. this, this challenge and opportunity is, it requires a lot of thought, everything from it, the quantitative progression to how we ate, He, and communicating it to the channel. So thanks to everybody for for another great episode, and thanks to the index standard for being such a great sponsor and friend of the show for the last year,

paul_tyler:
Yeah,

ramsey_d_smith:
Yeah.

paul_tyler:
hey, thank you all and

jay_watson:
It’s a pleasure,

paul_tyler:
once again thank

jay_watson:
thank

paul_tyler:
our

jay_watson:
you.

paul_tyler:
listeners. Listen. send us feed back. Call us. I get text. I get calls. I know everyone else does, and give us your opinions

bruno_caron:
M.

paul_tyler:
and we. we’ll continue this. the discussion, this topic. I think it’s really important for our business

bruno_caron:
M.

paul_tyler:
and join us kin next week for another episode of that annuity show.

Episode 187: Making Sense Of The State Of The Economy With David Czerniecki

March 31, 2023 2023, David Czerniecki, Podcast, Retirement No comments

Volatility seems to be the word of the day. Volatility in fuel prices. Volatility in the market. And of course, volatility in interest rates. David Czerniecki, the Chief Investment Officer of Nassau Financial Group joins our show today. He discusses current events and explains the difference in risk profiles between banks and insurance companies.

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paul_tyler:
Hi, this is Paul Tyler, and today I’d like to welcome David Zernicki, the Chief Investment Officer of NASA Financial Group to our show. Today is our quarterly review of the state of the economy. David, welcome.

david:
Thanks Paul, good to be here.

paul_tyler:
Yeah, thanks for making time. I know your time is precious these days. And the state of the economy is in quite a state.

david:
Mm-hmm. That’s indeed.

paul_tyler:
Now, the CPI, which we’ve been watching intensely, we’ve had a lot of conversations about over the last year or so. CPI finally looks like the inflation may be slowing. So do you think the Fed is finally winning the war or starting to win the war against inflation with all the rate hikes.

david:
We do, Paul. They are making progress, as we’ve stated in the past. It takes time for the rate-hiking mechanism to flow through to the real economy. The Fed’s tools are powerful but blunt, and so the rise in rates is having a dampening effect. I think there are a couple things going on. One is that, again, continued improvement in the supply chain, trade activity, and the you know, all the port jams are, you know, cleared. Things of that nature has helped, particularly on the good side. So we’ve seen progress there. Services costs are still up, and labor costs are still up, which is, we would expect, because labor tends to be more sticky. If I give you a raise, Paul, you’re not going to give it back when CPI comes down, which is why I didn’t give you a raise when you asked for one last week. But, no, seriously though, Paul. You know, so it does tend bit more sticky and the mechanism tends to be a little bit slower. The other thing is increases in rates will tend to slow economic activity and I’m sure we’re going to talk about that today, but slow down in economic activity will reduce demand for things and that too is disinflationary. So you are seeing traction. We don’t know when we’ll sort of get back to that 2% percent target but we are moving in that direction.

paul_tyler:
Yeah, well, this is good news.

david:
Thank you.

paul_tyler:
We’ve also had conversations in the past about how rising fuel prices works its way into almost every commodity we buy. Now, good news is that I’m driving past freeways on the Merit and 84, the numbers are going down. Now, how long does it take typically, or do you think it will take for those lower fuel prices to work its way through, you know, shipping cost of goods and things coming in from other countries.

david:
Sure. So, again, I think similar to the broader inflation context, it does take a while. One of the things that economists look at, in particular the Fed, is what they call core inflation, or core PCE, personal consumption expenditures. That’s their favorite number. And what that factors out is food and energy. Now, if, you know, for most working Americans, them so they haven’t the Fed tell you we’re factoring that out. You might as well factor out A or two, right? But the reason they do that is because the pricing mechanisms there are much quicker. So energy prices as we’ve all seen swing around week to week and pretty volatily at times. But what’s really happening? You’re starting to see inflation come down a bit. You are seeing some slowing in economic activity. And so less inflation. Reducing commodity prices, especially oil. And so therefore, you see that at the pump rapidly or more quickly, it’s transmitted. But also, slowing economic activity reduces demand for oil. And that’s what you’re starting to see pricing a little bit here, is people’s forward expectations of how much oil we’ll need for, not just to fill our cars, but to make plastics to build things, as we’ve talked about. somehow or other petrochemicals is everywhere and the less demand for goods and services, you know, the less demand there is for oil and so you’re starting to see that play through. I think you’ll continue to see volatility in oil. Geopolitical factors of course have been a big player there, independent of inflation and that’s not gone away, okay? But you are seeing slower economic forecasts both domestically abroad, particularly in China, which is a consumer of oil because they’re big manufacturing platform. So you are seeing it start to play through and I think that generally the trend will continue. Although I don’t think we’re going to see $10 oil anytime soon.

paul_tyler:
Yeah, let’s hope not.

david:
Right.

paul_tyler:
You use the word volatility a couple of times. Now, one thing that’s been exceptionally volatile over the last few months have been interest rates, short-term rates,

david:
Bye.

paul_tyler:
long-term rates. How do we make sense out of what’s happening with interest rates?

david:
A number of factors play into rates and we could spend a long time on all of these things, but let me just hit a few highlights. It’s clearly the level of rates, particularly in the short end, is set by institutions such as the Fed, the ECB, the Bank of China, etc., etc. So you’re seeing some of the volatility just coming from their actions. The longer term rate tends to be set by the market and the market will be putting into that. You’re factoring in. about where we’re headed from an inflation perspective. So to give a very simple example, if the market believes that the Fed is getting inflation under control, you would expect the longer end of the curve to come down because we’re not worried about the purchasing power of our paycheck 10 years down the line. And so you start to see rates come down. If we think the Fed doesn’t have it under control, you’ll see rates go up a lot. But other factors that play into rates are, outlook on GDP and economy. Well, the Fed is the, If that is raising rates right now to fight inflation, will they start cutting rates to fight a recession? So that’s a place. And now clearly from the past couple of weeks, a lot more economic uncertainty leads to a lot more volatility. If you take the view that we’re headed into recession and I take the view that we’re going to achieve self-lending, guess what? We have a market because you and I don’t agree on what the level of rates should be. And so we’re willing to trade around that. If your position is extreme, which it might be right now. are nervous and my position is you know adamant and firm you’re gonna have a lot more vol as we you and I try to trade so you’ll see that the other thing is and is is rates also reflect risk not just prices and so what you’re seeing is risk has dramatically repriced in the last couple of weeks that people have become more concerned about financial institutions about the general state of Again, if we go into a, let’s say a deep and prolonged recession, we’re not calling for that, but let’s just say that with a case. You wanna be compensated as an investor a lot higher to cover you for that. And so your expectation or our rates in return just changed dramatically.

paul_tyler:
You mentioned financial institutions, David, so you open the door here.

david:
Yeah.

paul_tyler:
It’s hard to have a conversation these days without talking about some of the bank’s in the news. Now, to what extent do you think bank failures reflect more in the state of the technology industry versus, say, a rise in interest rates?

david:
Um I, it is a little tough to parse, but, and usually there are some catalysts to some of these problems and challenges, and I think it’s easy to somewhat extrapolate and say, look, what happened in Silicon Valley Bank was unique to the tech space, it was an odd confluence of factors, it was an odd network, Paul, if I’m running a giant, giant, well-known venture capital fund, and I have lots of companies that I’m invested with, not to mention the network of folks that I’ve known in that industry for years because I’ve invested with the previous generation and the previous generation and the previous generation of tech companies. And I am worried about deposits at Silicon Valley Bank. I’m not just calling up the bank and saying, send me my money. I’m calling every one of my counterparts, constituents, my portfolio companies and saying, get your money out. So you can see how in that scenario, that network, that fabric of that space reacted very rapidly and very extremely to a concern. It’s a little bit of the thing of yelling fire in the movie theater. There we go. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. So there is an element of that, but I do think that is somewhat unique to Silicon Valley Bank. What that sparked is a general level of concern around mismatches of assets and liabilities in other smaller, I wouldn’t say poorly capitalized banks, but maybe not super well capitalized banks. The, you know, the Jagundo banks in our country, right, the big money center global banks are very living wills and they have significant restrictions on what they can and cannot do. They are monitored very, very closely, but we have thousands of banks in the country. It’s hard to monitor all of them very, very closely. And so Silicon Valley banks problems spook the market. Banking is a confidence game. People may forget, but we have what’s called fractional banking in this country. When you put $100 in the bank, They’re only keeping a few bucks around to give back to you on a given day because they’re putting that money to work in loans and Securities and things like that so that they can pay you an interest rate And so it’s not all there on any one day And I think what you’ve seen is a bit of a spooking of that It has largely been centered or focused on regional and smaller banks, but as you’re well aware we read the papers and Other issues of confidence have hit some of the bigger banks, not in the US, but international banks as well. Not just about fractional reserve banking and about mismatches of assets and liabilities, but other business issues have had an impact in the way folks have reacted in the sector.

paul_tyler:
Yeah, and I guess if you think about banks and insurance companies, some similarities, a lot of differences.

david:
future.

paul_tyler:
What is the difference in risk profile today of a bank and an insurance company? Maybe it’s a balance sheet comparison. I mean, what’s the best way to put these sectors in relative

david:
Yeah, no, that’s

paul_tyler:
comparison?

david:
a good question, Paul, because I think there’s a natural tendency to, you know, we are all in the financial services industry, you know, and we know that. And we do similar things, you know, a bank takes deposits and it makes loans, a traditional bank, an insurance company, you know, takes in premium and invests it in order to, you know, and we’re both doing the same thing. We’re providing a return to that investor, that depositor over time. So there’s that thematically. There’s that similarity. But, but insurance and banking is very different in other respects. You know, insurance companies generally speaking aren’t designed to be liquidity providers per se. Again, we go back to the example you put your $100 in the bank on Friday, on next Monday you decide you want to, you know, get lunch and you go take your $100 out and you expect them to give it to you. When you deposit, you know, when you purchase an insurance policy, an annuity or a life policy, you that you’ve signed up for a period of time before you can access that $100. It’s a little bit more like buying a CD, let’s say, right? And so we then turn around and invest that money along the lines of what we’ve promised to pay. So the asset and liability, so the liability is what we owe to you. Our assets are what we invest in in order to meet that obligation. The liability and the asset well matched with banking. Some of it is matched, but also there’s a lot of guesswork as to whether or not you’re going to show up on Monday because you need cash for your turkey sandwich. And so you get these disconnects, and so it can happen more rapidly in banking. Insurers have controls over that. We have surrender agreements, and we have contractual agreements with policyholders, And part of the way we’re able to do that is because we have more certainty around when we need to return that money. If I have to have your money there in the bank every day for you because I don’t know when you’re going to want your jerky sandwich, I can’t invest it the same way as we can as an insurance company. If you promise me I can have it for a year, we invest that $100 different.

paul_tyler:
Yeah. Well, listen, very interesting. Yeah, time, you know, time is valuable. And I think it sounds like the structure of the insurance policies in some way give us a little more buffer from those sudden runs that, you know, banks may be exposed to, which is should be reassuring for our policyholders. Well, David, listen, thank you so much for your time today. This is great. And listen, we’ll look forward to having you back again in another few months and hopefully we’ll have the Federal Reserve in our banking system will have navigated these rapids successfully. So thanks so much, David.

david:
You’re welcome, Paul. Thank you.

Episode 186: Simplifying Market Exposure and FIA Indices with Josh Mellberg

March 24, 2023 2023, Podcast, Retirement No comments

Sometimes very basic questions can be hard to answer when it comes to annuities. One example – How much exposure does a specific vol-controlled index actually have to the market? Josh Mellberg joins us today to show how to use simple match to estimate relative exposure across different indices at one given point in time. The question may become more common as clients looks for ways to make up for declines in 2022.

Links mentioned in the show:

White Paper View only Link: https://www.canva.com/design/DAFb7vQeOtI/VF-N4Ox6DW9zlLJqhGFXdA/view?utm_content=DAFb7vQeOtI&utm_campaign=designshare&utm_medium=link2&utm_source=sharebutton

Risk Control Calculator: https://forms.zohopublic.com/secureinvestmentmanagement/form/RiskControlTool/formperma/bxij_AEky1gQM6kvYHzz1BtXOQAk-1XrOO2tmQ0y72I

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mark:
Thank you.

paul_tyler:
Hi, this is Paul Tyler and welcome to another episode of that annuity show. Ramsay, how are you this morning?

ramsey_d_smith:
I’m good, always happy to be here.

paul_tyler:
Good. Hey, looking forward to our innovation retirement event we’ve got cooking in New York on Monday. Can’t wait for your panel.

ramsey_d_smith:
Absolutely. One of the topics we’ll be talking about today, dovetails nicely with what we’ll be talking about on Mondays. This is great.

paul_tyler:
This is great. And Mark, wonderful to have you back.

mark:
Thanks Paul, it’s great to be back. It’s been a while and I’m glad to be back on the program.

paul_tyler:
Yeah, yeah, no, and you’ll be introducing a panel as well in New York, so looking forward to it on the, what’s the role of the advisors, right, going forward? How do we help them? How do we help clients get advice? So thanks for doing that. And we’ve got a great guest, returning guest, somebody we’ve done for a long time. Mark, do you wanna do the intros? I’m Mark Lerner, and I’m a CEO of the company.

mark:
Yeah, sure, I’m perfect timing in terms of the role of the advisor in the ever-changing world in terms of the marketplace. And it’s great to have Josh on. I’ve known Josh for over 10 years. Josh, I think you started your business back in 2006. And you’ve always had an incredible passion for education and marketing. And you’ve done a phenomenal job in terms of your outreach through infomercials and advertisements. I think you’ve reached over 14 million households over the years, primarily educating on the you know, guarantees of income in retirement and not guarantees and the benefits of annuities. And now you’re taking a different look at it in terms of the various indices and crediting strategies that are out there. And obviously the ball control strategies have come into play over the last several years, a big byproduct of low interest rates. And you see a concern in the marketplace in terms of understanding that. So I know you’re working on a white paper around this and you put together a really cool tool slash app, if you will. that I think does a great job in terms of really breaking it down to the fundamentals and giving the basics behind it. So without, why don’t you tell us a little bit about when this became a concern from your perspective in terms of the need for education and how you feel this approach is best suited in terms of reaching the, not only agent but end consumer.

joshua_mellberg:
You know, Mark, it’s never been better to be in this annuity environment that we’ve been in today. For almost 15 years, rates have been very low. And annuities provide protected growth, or they can provide income for life. And these insurance companies have gotten more and more innovative because interest rates have been so low for such a long time. And they’ve been trying to figure out how to get more return for the client or for the policyholder. And that’s where they created these amazing risk controls. What’s happened in this last year as interest rates spikes short term rates and longer term rates with the innovative products, it’s just put a lot more juice for the client’s potential for them to make some money or generate more income with this innovation of the products out there today.

mark:
And have you seen a shift in terms of, I guess, utilization? I mean, I guess if you look back three or four years, there was very high concentration in folks electing the volatility control structures and the

joshua_mellberg:
Mm-hmm.

mark:
bespoke indices. And again, you’re going to big buy product of the low rate environment and the impact on option budgets. And now with option budgets, you know, much higher than they were, participation rates caps on standardized indices higher. Now they’re starting to look at, you know, the full platform. This is where, I think, becomes important to really kind of understand, you know, what par rates are relative to each other in these different types of indices, and how to really best explain that in terms of the participation that you’re actually getting in that underlying credit behind the scenes.

joshua_mellberg:
Yeah, well over a decade ago it was pretty simple. You know, you get a cap of 10% or a monthly cap of 3%. And a lot of these companies, if they didn’t have a cap, maybe you get a percentage of the S&P 500 on a monthly average or annual point-to-point or so on. Now that these rates have increased, what the insurance carrier does is they take the interest rate and they take that rate by calls or they buy options on major indexes such as the S&P 500 NASDAQ or the innovative indexes that you guys make. The rates have and the risk controls, if it’s a one-year maturity date, the insurance company can get a certain amount of percentage, but if they go two years or three years out on a percentage, they can get more purchasing power or juice on the options, which allows the policy holder to get a lot more crediting rate. because for about 15 years, there’s only so much water you could squeeze out of that rock, and it’s really hard to get a client a rate that beats inflation. And so that’s where clients are looking at these more and more, because if you look at just last year, bonds were down close to 20%. S&P was down close to 20%. And inflation was almost double digits. is getting hit in three different ways. And that’s why people are trying to beat inflation safely. And that’s why these products have never been better.

ramsey_d_smith:
So one of the things that’s happened in the last, I’ll call it at this point, yeah, it’s almost 10 years since the first one of these came out and just full disclosure, this is a business that I ran in my prior life at one of the investment banks. One of the things that’s happened though is there’s been a proliferation of lots of different choices. And so how should people think about choosing, even within a single platform, there may be multiple different types that are offered. I mean, how can you help, how do you help your clients or the people that you advise to think about either allocating between those various indices or choosing one or the other?

joshua_mellberg:
Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Well, I think financial advisors and policyholders are trying to put their arms around how much is my contract going to make. How do I measure that? Well, what has to happen for them to get a good return? And obviously, the policyholder has options. They can put their money in the fixed bucket yielding 4% to 5%, depending what company you choose. They can choose an S&P 500 option that has no cap and a lot of the competitive rates out there are 50 to 70% participation rates. But then they have those innovative risk controls. And there are several hundred risk controls out there today. And how do you know which ones are good terms and how do you know which ones are not good terms? Because I remember back in 2007 when I actually had some clients in the index annuities, but they had monthly caps at the time. And I had a fairly upset client. And because I kind of said, well, you get market index upside, but you don’t have the downside. And I think that year they made five or 6% interest on their policy, but the market was up almost 20%. So there was a disconnect on what the client thought they were going to make and what the policy actually credited. And that became a pretty fast learning curve to say, well, how can I manage the client’s expectations? Because this is supposed to compete with savings vehicles. necessarily could be supposed to compete with investments. And so as these risk controls became more and more innovative, now you’re seeing participation rates at 100%, 200%, 300% or higher, and what 300% of what? And so what we did with our CFA is we kind of broke down a kind of a chart to help financial professionals understand what is your equity exposure? What is your participation rate in? of that is working for you today. And for those of you who can see the screen, I’ll share it with you. But one of the indexes that these are shared with is geared towards the VIX. The VIX is known as the Volatility, is a Volatility Control Index. It’s also known as the Fear Index. And you probably see this on CNBC You’ve heard about this in the past. But essentially, the VIX determines what the cost of an option is on the S&P 500 or US markets. The average VIX historically has been close to 16 and 1 half. And it changes. It changes depending if fear is high, if the VIX can spike, if fear is low, the VIX can drop. And you can see a little bit of the history of the VIX, but back in 2018, the VIX was the lowest 12. Just a few days ago, it hit as high as 31 recently. Why is that important? Well, if you were to purchase a call in the S&P 500 for, say, it’s a $100 call option at the price of $20, and then a month later, the VIX is at $30, and you bought that same call option, you would need almost 50% more dollars to buy the contract for if it was a VIX, it was at 30. And I share that with you because these vol controls you typically see, they’re issued in vol control fives, vol control sixes, vol control eights, vol control tens. And some of them go as high as 16 and 1 half. And why is that important? Well, if you take a look at a vol control

ramsey_d_smith:
Can I ask you to actually just to clarify

joshua_mellberg:
five,

ramsey_d_smith:
one thing? When you say a vol control five, seven, 10, because not every been in our audience may understand that. What you’re saying is that’s, that is the lower the number, the more strict the vol control is, and the higher the number is, the more wide the vol control is. Is that correct? Yeah.

joshua_mellberg:
That’s a good way of saying it. I’d also look at it from this way. The lower the vol control number, the less equity exposure you have. So the lower percentage that’s working for you today. So if the market goes up by 1%, the lower amount of your dollars are in equities, and maybe more money’s in cash or bonds, if you can look at it that way. So in this white paper here, this kind of shows an example where if you had a S&P 500 risk control five, which you can actually get those indexes and buy the vault controls on the S&P 500 if you chose to. But the Vault 5 and the VIXBIN at 20 today, that tells me five goes into 20, what percentage? Five goes into 20 is 25%. So that tells me you have 25% equity exposure with the VIXBIN 20

mark:
And

joshua_mellberg:
today.

mark:
Josh, I don’t know if you’re looking to have the white paper on the screen. It’s not currently on the screen. It’s still the volcadral indices.

joshua_mellberg:
Okay, let me show the white paper here. Maybe you can see it now.

mark:
Yes.

joshua_mellberg:
Yep. So essentially, what doesn’t change is the vol 5, or the vol 6, or vol 8. What does change is the VIX. So just probably about a week ago, when the banks were crashing, the VIX was as high as 30. So if you had a vol till it control 5 at 100% participation rate, 5 goes into 30 about 17%. So that means you would have 17% equity exposure if you bought that vol till it control directly. The reason I share that with you, And Paul, is that a lot of these indexes are giving 200% participation rates. So if the VIX is at 20 like it is today and you have a vol total to control 5, which only has a 25% equity exposure, your participation rate at 200% is really 50% equity exposure. So all that means is if the S&P 500 goes up by 1%, your equity exposure for that day was half percent, 50 percent of that. Does that make sense?

mark:
It does. In a sense, it’s a way of looking at it where 100% isn’t always 100% relative to the other variable factors that go into it. I guess one analogy to look at it from a different perspective is like on an income rider. You have roll-up rates and you’ve got payout factors. Just because you might have a higher roll-up rate does not necessarily mean the income’s going to be higher. It also depends on what that payout factor is to get to that net number. So you need to look at a couple different points of reference to really understand what your opportunity is in terms of getting a credit, correct? So I’m going to go ahead and do a quick quick review of what I’m going to be doing next. I’m going to be doing a quick review of what I’m going to be doing next. So you need to look at a couple different points of reference to really understand what your opportunity is in terms of getting a credit, correct? So I’m going to go ahead and do a quick review of what I’m going to be doing next. So I’m going to go ahead and do a quick review of what I’m going to be doing next. So I’m going to go ahead and do a quick review of what I’m

joshua_mellberg:
Exactly, exactly. So if we take another example here, if you had a risk control 10 on the index that you choose and 10 goes into 20 is 50 percent, well, in that example here, if you had a 200 percent participation rate and you had a risk control 10 and the VIX is at 20 today, you would actually have 100 percent equity exposure. So if the S&P, as an example, went up by 1 percent, you would also go up by 1 percent. like it did in 2018, and you had a risk control 10 at a 200% participation rate, your index account, your index would go up by 1%, you’d go grow by 166% for that day. So what’s great about this is the higher the risk control, think of it the more equity exposure potential you have. such as risk control five or six, then you need a much higher participation rate to have the same equity exposure. So if you looked at the chart below here, if you wanna have 100% participation rate of the equity, of the S&P to 500 a day, and you have a vol five, you need a 400% participation rate on that vol five to have it, the market goes up by one, you make 1%.

paul_tyler:
Y a-

joshua_mellberg:
But if you had a vol controls 10, If the market went up by 1%, you’d only need a 200% participation rate out of all control 10.

paul_tyler:
Yeah, I like Josh how this connects the dots. I think too often people look at the products we offer and you look at, to Mark’s point, you look at roll-up rates or you look at participation rates. Volatility controls have added sort of another element and I think it’s tough to sometimes put those together. Now, you spend a lot of time, as Mark said, connecting with 14 million households. Where are their heads right now? Now, bonds went down last year as did equity. We know it’s like, I think the third time in the last hundred years where that happened.

joshua_mellberg:
I mean.

paul_tyler:
But if I open up my 401k and I saw that my account went down 20%, this is interesting, right? Simple math. Gosh, how much does my account have to grow to get back to where I was? Oh, 25%. You know, is volatility, are volatility controls now something that less is better in this environment or are they going to say please in this whole crazy marketplace take some of their risk off the table.

joshua_mellberg:
Yeah, there’s a lot of the consumer right now is scared. They took a big hit. Those people that were prudent and diversified, they took a big hit in their bond funds, and streets went up, bonds went down. The stock funds went down, and inflation’s going up. So what’s helped them keep up with inflation a little bit is their houses prices for last year. Their house prices went up. This year, housing is expected to go down. And we don’t know what the market’s going to do. It’s going to kind of stuck in the muck and very volatile. because they feel inflation or shrinkflation, things are getting much more expensive, but they don’t want to lose their money. So they’re seeing losses as inflation goes up, and they don’t know who to trust. If you look at the banks, a lot of people are pulling their money out of the banks. What’s nice to say is not one insurance company with a fixed annuity or indexed annuity has ever lost principal. That’s what, not even when insurance companies went under, no one’s ever lost it. a dime. Policy holders always got their money out. So right now people are trying to get, try to protect their assets and how do you do that and how do you fight inflation safely. And even though my go rates are really great, they’re 5%, that’s not keeping up with inflation after taxes.

mark:
So I think one really important thing in terms of the innovation behind this, and we’ve talked about this on previous shows, and I know Paul and Ramsey have talked about it too, is that people tend to kind of fall waves, right? So when the income writers first

joshua_mellberg:
Thank

mark:
came

joshua_mellberg:
you.

mark:
out, you saw huge utilization, 80%, 90% utilization, and the timing made sense because it was after 2007, 2008, 2009 when those really became and people were scared. And they’re making decisions in terms of, they’re a long-term protection based on that. And then the market started doing really well, and then you saw people dialing back in terms of the utilization of that, thinking, hey, this is great, do I need to spend the money for a rider fee when I can make more of my credit rates and do systematic withdrawals? And then you get a little shake up of the market

joshua_mellberg:
Mm-hmm.

mark:
and you start to see these trends shift. And I think, looking at that analogy on the income riders, I think the same holds true on these crediting strategies. You know, back when interest rates were low, these came out optically, you know, those par rates were much higher, and you saw people really move towards that, and now you’re seeing a move back. I think the key here is that there’s not one that’s good or bad, you know, it’s really diversification in different market environments, and it’s having a portfolio that allows really the benefit of picking and choosing different opportunities in different market environments, because it’s not like you’re making a selection today that’s really only gonna impact based on today’s market. These are long-term programs for people’s retirement. And I think the more options, the better. And obviously, what you’re doing to educate, hey, I’m not saying one’s right, one’s wrong, but here’s how you got to look at the differential to balance it out and figure out which ones make sense for which part of your portfolio. So, I’m going to go ahead and do a quick recap. I’m going to go ahead and do a quick recap. I’m going to go ahead and do a quick recap.

joshua_mellberg:
Mark, this is why more than ever it makes sense for advisors to become fiduciaries and understand what indexes are the best ones to choose from. And I think that’s critical knowing how to pick which indexes are across the board. I’ll kind of walk you through a cool calculator we made, if you can see the screen. Basically how do you know which? number is right for you. Different companies are going to have different numbers. They can have a five or six or an eight or a 10. They go as high as 16 and a half. But if you put in the risk control number, 90% of the risk control vols are fives. You can just typically, it says vol five right next to it or on the index you choose. And then you can look up what the VIX is. You can by clicking this link, it’s 21.6 today. So I’ll just type in 21.6. And then what is the participation rate you’re getting? So some of these companies are paying 200, 300% participation rate. I’ll just put 200% in there. And what this shows is it shows what your approximate equity exposure today or participation rate on a vol five with the VIX being at 21. Well, today it would be at 23.15, but because you’re gonna 200% participation rate, your equity exposure is closer 3. But if you wanted 100% equity exposure, you would need to have a 431% participation rate. So if the S&P went up by 1%, you would also gain 1% for today. And so I share that with you because this kind of compares what you would need if you had a risk control 10, what would your estimated equity exposure be, or participation rate, which would be 46%. 100% equity exposure on a risk control then, what would you need? And if you had a risk control 16 and 1 half, and there’s a couple carriers that have higher risk controls like 10 or 16 and 1 half, then you would have 76% equity exposure on a risk control 16 and 1 half. But if you had 200% participation rate, it would be much higher than that. It’d be closer to 150% participation rate. So this just kind of points out that when choose indexes and vol controls, make sure you have if you have a low risk control, make sure it has a very high participation rate, or it’s okay to have a much lower participation rate if you have a higher vol control. The reason this is important, Mark and Paul, is I don’t think financial advisors and consumers really understand how much the money is growing today or what’s going to make over the year. How do you calculate that? It’s easy to calculate if you have a 50% participation

ramsey_d_smith:
Mm.

joshua_mellberg:
rate on the S&P 500, you make 10, that’s easy. But it’s not easy to see behind the scenes if the market goes way up how much of that gain did you make when the market rips.

mark:
Yeah, and obviously I think there’s other factors too in terms of like the volatility itself and how quickly that moves, what type of… you know, either a crediting period or a longer duration. And that’s why it’s important to obviously, number one, have the choices, right? And then number two, to be able

joshua_mellberg:
Thank you.

mark:
to monitor

joshua_mellberg:
Thank you.

mark:
it, you know, as you go looking at each term when it comes up for maturity and saying, okay, well, let’s maybe adjust based on where we either think the market’s going or experiences that we’ve had based on, you know, the allocations that were made prior to. So, I think that’s a good point. I think that’s a good point. I think that’s a good point.

paul_tyler:
So I’m curious, if Ramsay’s presenting this to me, Josh, when does he optimize for higher exposure and when does he optimize for lower? What’s, you know, if I’m the client, what would dictate going up or down? So, I’m curious, if Ramsay’s presenting this to me, Josh, when does he optimize for higher exposure and when does he optimize for lower? What’s, you know, if I’m the client, what would dictate going up or down?

joshua_mellberg:
Well, I think most advisors and most clients just say, oh, wow, I get 300% of the gains of that index. And they’re like, that’s pretty good. How is that possible? That’s what they think. It sounds too good to be true. And a 300% participation rate or 400% participation rate is not too good to be true because the vol control is very low. It’s in a way, it’s marking things up to mark things down, call the sale. So how do you know how much money is working for you in the market in a way? That’s kind of how I try to simplify it. It’s really simple. You can see the fixed bucket at 4% or 5%, or you can see the S&P 500 at 50% participation rate. You can measure that. But how do you measure how much money is really going up for you? And I think you have to look at what the VIX is at for the day or for the average for the year. And you got to look at your participation rate with the vol number. You have to have all three calculations to be able to say, do I have a shot of making 20% if the market really goes up? high ball toe to control, like a 16 and a half, you really do have a good shot of making double digits. But if you have a very low ball control and the VIX is high average for the year, then I think there’s going to be disappointment when the market rips by 20% and client statements come in at 5 and 6. But here again, if you look back in 2018, there was times where the VIX was only around 12, and this risk control 5s did really, well. So I just think we’re gonna have elevated volatility ever since the pandemic and it’s gonna be like that for the next couple years with all the things going on with inflation.

mark:
Ram’s here on mute.

ramsey_d_smith:
You got me now?

mark:
Yep.

ramsey_d_smith:
Sorry about that. It’s saying,

joshua_mellberg:
Yep, we can hear you.

ramsey_d_smith:
look, there’s a lot of really good and important science behind these volatility controlled indices. And to your point, Josh, essentially what dealers and asset managers do with these is they translate what would have been a participation rate or what

joshua_mellberg:
Thank

ramsey_d_smith:
would

joshua_mellberg:
you.

ramsey_d_smith:
have been a cap, they translated that into an asset allocation policy between a risky asset, i.e. equities, asset bonds, right? And for a, a, a, a, a vol control five, the relationship is going to be a lot more bonds, relatively speaking than stocks and for a risk control 16, it’s going to be the other way around. And so, you know, when it ends up being presented to the end consumer and they’re told they get, you know, a multiple percentage, like 300% of the, of all control index, we’re really what’s happening is to your point, that can be done because the index underlying index is less risky because less of the index is assets are allocated into the risky asset. So I think that having a tool that helps both advisors and their clients understand directionally what these things mean I think is super important. Because the underlying engineering, if you will, is really like it’s fairly complicated. But I think if people have that top line from a 1,000 foot understanding of what it means to have low vol, expensive, exposure versus high ball exposure, I think is important. And that gets people a long way to where they need to go to make a good decision.

mark:
Thank you.

joshua_mellberg:
Yeah, Ramsey, you hit the nail on the head. A lot of agents are looking at the illustrations and they’re backtesting. And they’re backtesting the hypotheticals and they’re backtesting on when volatilita is much lower. And so I guess the question would be is if you had a 25% participation rate on the S&P 500, would you go to a client and ask them if you’re going to average 8% per year and tell them they’re going to average 8% per year? I think the answer would be, most advisors would be no, you’re not going to average 8% with a 25% participation rate. And I think that a lot of the agents are looking at just the backtesting in a bull market when the market went straight up and when volatility was very low. And that’s not really fair to say what’s going to happen forecasting, what’s going to happen in the future, because volatility is much higher, rates are a lot higher, and the lower vol controls can do very well, but you have to have a 300% or 400% participation rate to really. compared to a volatile control 16 and a half or so.

paul_tyler:
So.

mark:
So it’s interesting. We have a really interesting dynamic on this podcast here today because Josh, you’re looking at from the standpoint of helping educate agents, advisors, consumers in terms of how these all play together. And Ramsey, you’ve developed one of the very first, if not the first ones of these strategies. So I guess a question from your perspective is Josh talks about the education behind it in terms of how they interplay with each other has the way these unfolded worked out the way that you anticipated initially when you designed. And then secondly is the behavior patterns along the lines of what you thought might happen in terms of the way that they’ve drawn attraction.

ramsey_d_smith:
Wow, so there’s a lot in that question. So first and foremost, one was this idea that in a low rate environment, you did wanna give people different ways to make money. For us, one of the most important things was to be able to take institutionally available investment strategies. So strategies that were only available institutions that we had developed at my prior firm and actually being to deliver them in an FIA and using that in a vol control context as something to provide another way to get exposure, like diversified exposure beyond just the S&P. So there was that piece of it for sure. I think to say beyond that what’s been amazing to me is how many of the indices there are now. So the first index was in 2012. Trader Vic with an insurance company whose name I won’t mention. And it was probably about three or four years until a lot of other ones started to come out and then it just took off. So now I think the interesting challenge is to give consumers and advisors some simpler decoder rings, if you will, to figure out how to make some decisions. Because the reality is, if you line up industries next to each other. As somebody who’s in the business, sometimes industries, indices all feel very different to me. One versus the other. But there are some big commonalities that I think people should focus on. So for example, sort of, the control levels and again the par rates they translate into I think are very important for people to understand. So they see it as a choice. It’s not magic, it’s just math, right? It’s really, it’s math. And so you want to give advisors and customers some Some good rules of thumb to help them with the math But having to get sort of deep into the science and I think that I think that tools that help you view that are you know are valuable

paul_tyler:
Yeah,

ramsey_d_smith:
Did I

paul_tyler:
I

ramsey_d_smith:
answer your group your question?

mark:
Yeah, no, very much so. Appreciate

ramsey_d_smith:
All right,

mark:
it.

ramsey_d_smith:
cool.

paul_tyler:
Yeah, Josh, I think bottom line what your tool does is allow advisors to have better conversations with clients and better inform them and set expectations that have a higher likelihood of showing up on a statement. And I don’t think we can

joshua_mellberg:
Thank

paul_tyler:
overestimate

joshua_mellberg:
you.

paul_tyler:
this. Mark, we get calls all the time from clients who’ve forgotten that they put money into a two-year strategy and they say, well, why don’t I see a zero return a year one. Well, let me remind

joshua_mellberg:
Mm-hmm.

paul_tyler:
you what a two-year, how a two-year strategy works. I don’t think we can underestimate the need to make these conversations as clear as possible in the beginning. So, Josh, tell us what’s next. We’ll certainly share your, we’ll share a link to your white paper, Mark. I think that’ll pass muster. I think what’s next this year? This is gonna become a valuable tool for advisors to use.

joshua_mellberg:
Yeah, if you download the white paper, it’ll kind of give an example of the history of the VIX. It will show what kind of rates you need to be equal to 100% equity exposure. And there’s a calculator link in it that you can plug in. There’s going to be so many great innovative indexes and participation rates that come out. And it’s great. And in competition, the consumer wins. The advisor wins. So I think the important thing is to, there’s a basic rule. It’s the thumb is if the risk control is let it go, it has a very high participation rate. And then the higher risk control number, like a 10 or 16 and a half, you can actually have more equity exposure and more gains for the client at a much lower participation rate because you just have more money working for you in the market. So I think that advisors and agents are gonna start doing their due diligence more than just who’s the manager behind the index. They’re gonna start looking at what is the risk control number and what does that mean and real returns for the forecasting

paul_tyler:
Yeah,

joshua_mellberg:
in the future.

paul_tyler:
well thank you. And Ramsey, any final thoughts or questions here?

ramsey_d_smith:
No, I just want to reiterate what I said. I think rules of thumb are very important in finance because finance is, finance generally speaking, whether at an institutional level or at a personal level is a natural tension between a great deal of precision on one side and on the other side, some really important rules of thumb. And in fact, my experience is that much of the finance will really relies on rules of thumb from day to day. So many of them are very, important. That’s probably for another podcast to go into some of those, but I think it’s valuable.

paul_tyler:
That’s great, Mark, you want to close for us.

mark:
Yeah, you know, I agree with Ramsey’s comments about kind of setting a baseline rules of thumb. And you know, what’s interesting is, you know, the product lines have changed so much over the years. And the one constant that we continuously hear out there is there’s complexity in these products and there’s a need for education. And I think that that’s not going to go away. And I think the more that we can set understandings out there and reach the masses through, you know, pathways that that Josh does very well. I think the more education, the better. So I think this is a great way to kind of help, you know, bring that pathway to not having them be so, you know, complex and misunderstood. So I think this is great. I think this is great.

paul_tyler:
Excellent. All right. Hey Josh, thanks for coming back and catching us up on what you’re doing. Mark Ramsey, thanks. And thanks to our listeners. Give us feedback. Send us comments. And otherwise, tune in next week for another episode of That Anoddy Show. Thanks.

Episode 185: Pushing the Frontiers of Digital Insurance with Josh Elohim and Reid Tattersall

March 17, 2023 2023, Josh Elohim, Podcast, Reid Tattersall, Retirement No comments

We know both consumers and agents want and expect a different buying experience today. The industry has made significant strides in the last few years. However, the journey isn’t over yet. Josh Elohim and Reid Tattersall from Back Nine Insurance Services give their recommendations for innovation that carriers should support.

Links mentioned in the show:

https://www.back9ins.com

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Episode Transcript

paul_tyler:
Hi, this is Paul Tyler and welcome to another episode of that annuity show. Today we are going to talk about advice and technology, how it’s changing, where it is today and what it may look like the next four or five years. Tisa, good morning. How are you?

tisa_rabun_marshall:
Good morning, doing good.

paul_tyler:
good. Well, this is a topic that’s going to be near and dear to your heart. So looking

tisa_rabun_marshall:
Definitely.

paul_tyler:
forward to questions you’re going to pose to the group. Bruno, good morning.

bruno_caron:
Good morning to you.

paul_tyler:
Yeah, and great to have you on the show again. Ramsey, do you want to do the intros?

ramsey_d_smith:
Be happy to. So as always, very happy to be here live from Atlanta. We’re joined today by two folks from Back9 Insurance out of Southern California. We’ve got Reed Tattersall, who is the founder and VP of Back9. And we’ve got Josh Elohim, who is the is the head of sales. And I had the opportunity to meet both of them through various venues over the course of the last you know, interact with their software. And as somebody who thinks quite strongly that software is gonna be an important part of the future, or should be an important part of the future of insurance, I thought it was a great opportunity to bring them on the show, to chat about their approach. Because it, I think there’s a lot of things about it that I think, you know, will be relevant for our industry going forward. So with that, I’m gonna pass it on to the two of you. Reid, why don’t we start with you? Tell us a little bit about yourself. And what made you decide to take this approach as somebody that came from a traditional background in this space?

reid_tattersall:
Thanks for having me. Yeah, so, Scott Mystart, like most agents with the captive company started with Mass Mutual. I think I was in college at the time. Don’t know what I was thinking, just wanted to work or do something productive. And then, I worked for another wholesaler when I was in college as well. And I was all about that education early on, before kids had a lot of time on my hands. CHFC

josh_elohim:
Thank you.

reid_tattersall:
kind of went on and started to grow back nine and kind of started at the bottom in terms of the case management, the marketing, the sales went on and on and Took a while to realize that to have a larger business, to scale it, it’s difficult if you do that just based off of relationships. You know, if your competitive advantage is my relationship with you, you can have a great career, great business, but to grow your team is difficult because the power in that relationship is between that salesperson and that agent. the switch to the technology. Hey, how do you create something that’s a bit more lasting, a bit more sticky, and kind of just dove into that and found a passion for it, and haven’t quite picked our heads up since. So it’s been, I say we’re a very, I still feel like a startup, but it’s been a long time in startup world. I mean, it’s been maybe nine years of building software of iterating to get here.

ramsey_d_smith:
Josh, tell us about yourself. So I’ll just say that Josh is somebody you’ll see spreading this gospel through webinars at conferences.

josh_elohim:
Ha

ramsey_d_smith:
You know, it’s you are, you are out and about and I’ll say you do it very well. Tell us about, tell us about your story.

josh_elohim:
I really appreciate it. I won’t go too far back, but opposite of Reed, I’ve kind of had kids first, and then started working second, if that makes sense. But, so yeah, I’ve been doing sales since I was born. I joke around and say that, but sales is just kind of in my blood, and I just love talking to people and communicating. But I’ve been with Back9 now for, it’s been almost 13 years. Now, I came in with no experience, so it’s a little bit different. whole sales side. It’s always nice talking to someone when they have 30 years of experience and you’re explaining to them why they should work with you, right? So ideally, I’ve learned so much in this business. It’s an absolutely phenomenal business. We always say it’s kind of like this, just very, very, very, very, very slow. It’s not like this, but just very slow and steady. So life insurance, you change people’s lives and it’s truly been a great amazing people and really help to change people’s lives. So I’m really excited for the opportunity here.

paul_tyler:
Yeah, maybe talk to us about a little bit about the problem you’re attacking. Reed, you kind of mentioned that you said it’s hard to grow a business just on personal relationships. You know, what’s the problem you’re solving for agents at your firm?

reid_tattersall:
It’s a big industry, as you know, and so many different ways to sell. So we’re trying to solve a, it’s like the Steve Jobs thing, where how did he compete with free, right? In the era of free music, free movies, just download it for free. What did he do? He made it easy, so easy that you decided to actually pay. So that’s kind of been high level of, How do we create a marketplace so I can go to Expedia.com as opposed to, you know, one airline. I can see all the options, my contractings all handled, I can view the case from start to finish and I can service it as well.

ramsey_d_smith:
Well, what are some of the things that, as you talk to agents, what are the things that, one, come up as the biggest friction points that you’re resolving, and then two, that agents are most surprised that you fixed.

reid_tattersall:
I think agents are most surprised that it’s all just there and they don’t know how easy it is. Right, Ramsey, we were talking, and hey, if you have a WordPress website, you can grab your snippet of code, put it online, and you’re in business. So, agents are constantly emailing, hey, I wanna get set up, cause it’s gonna take time, or am I all set up, what are the next steps? And usually the next step is go sell a policy. You’re already set up. From there though, it’s not easy to be an agent, right? It takes a lot to be successful in that business. So that’s when I say, the hard part is on them to build relationships, to go make it happen. We can make it easy in terms of put everything there for you. Carriers obviously do their part of the whole operations from putting products out and paying commissions. making it happen with customers.

josh_elohim:
To add onto that too, if you don’t mind, I think to figure out a solution, like you said Paul, what’s the problem? And the problem that I’ve seen in this industry is that I joke around, but agents used to do life insurance illustrations with a rock and a chisel, right? So people are used to 40, 50, 60 page paper applications. And so Reed’s vision, he’ll be bashful here, but his vision was he’s a surfer. while collecting applications at the same time. How is that physically possible? So that’s kind of part of the reason that QuotinApply came to fruition. So the goal is when you show people who appreciate our software the most are the agents who’ve been doing this for 20, 30, 40 years. They’re the ones that are like, this is the best thing since sliced bread. Millennials will say, isn’t this the way it’s always been? And then we have to bring them back to reality that, oh, you have no idea this process used to be. So really identifying the problem allows us to get to the solution and that’s what we’ve kind of done here is really just identify the challenges and the second part to that is keeping a lot of agents that have been in the dark. They don’t know what’s going on with their business once they do submit an application. That’s the whole second part of the equation and that’s where we created a whole software to track everything to help agents out, bring them to the 21st century.

tisa_rabun_marshall:
I have a question. Sounds like you’ve been on this technology journey well ahead of the pandemic, but I’m just curious during the time of the pandemic, when we hit that timeframe and we went to quarantine and we really had to change how we worked right overnight. Do you feel like your platform was like well positioned and poised for that change? Were there any surprises where you had to quickly pivot, do something different with your technology to meet agents change in how they were doing business?

reid_tattersall:
Yeah, that year, I think our application count went up at least 60%. So from a business standpoint, we were, um, you know, somewhat prepared, right? It fell into our business model, but there were some bumps along the way, right? You know, carriers change a lot of rules in terms of e-delivery and new forms and such. Um, you know, it’s, it’s awkward to say that, you know, COVID was good for your business platform where insurance agents now have an easier way to sell insurance online or over the phone when in time when you can’t see people I’m happy that you know we were able to do that.

tisa_rabun_marshall:
Did you have any new kind of new offerings come out like post on the other side or?

josh_elohim:
I can speak on this if you don’t mind, Rita. We, for us, it was, I think it was absolutely amazing. Well, first of all, we went to Zoom, we went to technology, software, so being able to communicate where before, I would go, you know, I’ve been in this business for a while, I would throw the suit on, and I would go drive to agent’s office. Did any of you remember that when that used to happen? So that was a very interesting time. Now I can talk to 20 people in a day, and I can see them and I can hear them. integrations that we were trying to get access to. So the front door has been closed for a long time, but the back door with integrations and I had integration come through that was one of my biggest ever. So for me it was absolutely a game changer for us to have the pandemic helped us out tremendously in my opinion.

ramsey_d_smith:
So what has the state of readiness been with sort of the suite of characters, carriers, with whom you’re contracted? Because sometimes the front end, right, the front end is ready, but then at a certain point it hits a back end, set of back end processes. And sort of across all the carriers you deal with, I mean how many of them are sort of product and business.

reid_tattersall:
That’s one of the hardest things of having kind of a marketplace is how do you standardize You know the user experience when each carrier you know has a different interpretation of the same law of You know how products can be sold so there’s a lot of Unique logic that goes on per carrier unfortunately, and these carriers they’re the mountains and Signing up for the fight of gonna try to move a carrier, you know We’ll give a little prod a suggestion here and there, but it’s really up to them That being said, we’ll kind of wait for the carrier to say that they’re ready on certain initiatives, like direct integrations to get applications done instantly. A lot of carriers are excited, but I think their sales teams are well ahead of where the departments are. And then a lot of these insurance companies are dealing with software that was built a long, long time ago. that and it’s not that they’re not working, it’s just, you know, they’re working with some more difficult tools. So we kind of, you know, on a, maybe even a daily basis are looking up and saying, Hey, what’s going to make the best impact? You know, how do I improve our business 10% this week? And those decisions constantly change. It’s hard to know that six months a year in advance. I mean, we have general visions on, on where to go. moving fast and I think if you have a team you just start you know you start building you start you know adding value you start making your users happy and you iterate it’s that lean startup mentality for insurance so you have so many companies out there each one has a different writer or feature or underwriting thing that and it’s insurance right there’s so many niches insurance to life to all these different lines to my guess Paul we were talking about. So our thing is kind of just shots and goal and continuing to try to improve the product, make users happy, that’s the North Star.

paul_tyler:
you could talk just a minute about the other end, the agent operating system. You know, I would say, you know, our Tison and I, Tison and, uh, and I spent a lot of time with some of our agents, you know, talking through their digital marketing needs. Um, they’ll have a website. May not be very good. Sometimes it does look good, but they just don’t have a lot of traffic here for somebody to really take advantage of this technology. What type of journey do you have to take them on? as long as it takes to go, Josh, from I’m used to driving out with a suit and tie, to I actually can comfortably build up my email network and traffic onto the website where I’m actually getting business.

josh_elohim:
No, absolutely. Well, I think failing is what helps us to win, right? And sometimes the only way to really appreciate something is to not have it or to fail at it. And that’s where we’ve seen, you know, our job, like I always said, we have the most fun job on the planet because when you’ve already gone through the failure and you see all the challenges, like I’ve seen everything that can go wrong, right? Everything. And then you have an 85-year-old who gets on a call with you and he says, I can’t believe how easy this is. job is it’s actually working right and so ideally you’re just showing them a process that’s normally done very painfully in the past and then you show them how easy it is now and they’re like wow this is where have you been my whole life? You know how many people have called me and said I’m gonna come out of retirement here because I used to do this all the time and now you’re here now so my favorite quote that I heard was this brings the life Right.

ramsey_d_smith:
So what kinds of things, what kind of agent profiles do you see that are, for whom this works? I mean, so you have, I don’t know, you have however many folks in your pool, like what kind of habits, personality traits, et cetera, like what do you think, how is the agent in this paradigm different than the one that was successful in the old sort of smile and dial paradigm? person.

josh_elohim:
You’ve definitely seen a change in our business. The agent that we know from when I first started was the traditional life insurance agent. That’s all they sold was life insurance. Now we call them dinosaurs now, but that was their bread and butter. They used to carry a book around, right, a thick book, and no one had access to that book, so that was their go-to. And that life insurance agent, what we’ve seen is that now life insurance is not just change now is we’re seeing P&C agents come in and sell life insurance. We’re seeing employee benefit agents come and sell life insurance. We’re seeing financial planners starting to cross sell life insurance. So I think sometimes it’s out of fear, sometimes it’s out of greed, sometimes it’s out of, you know, there’s several different reasons why, but if anyone has a book of business, that’s the best opportunity for them to start cross selling life insurance because what It’s a very sticky client and what it does is it helps because people don’t get rid of their life insurance. They might change it, but they don’t normally get rid of it. So it really makes a very sticky client and it helps to secure that book of business.

reid_tattersall:
Ramsey,

bruno_caron:
And you mentioned

reid_tattersall:
I, I,

bruno_caron:
the, oh sorry, go ahead. No,

reid_tattersall:
no,

bruno_caron:
no,

reid_tattersall:
go ahead, Bruno.

bruno_caron:
no, but you mentioned the 15, the 50 pages that are already, oh, always there that everyone struggled with. How do you see and how can you use technology to make it more efficient? And most importantly, shape the right message. Because I think we all know that sometimes puts us all on different tangents that are not necessarily relevant for the core and the real focus of any insurance product that you’re selling. So how can you use technology to bring the conversation at the right place and focus accordingly?

josh_elohim:
I think that, it’s a great question Bruno, and I think that freedom is what people really want these days, right? They wanna be free and they wanna do, they wanna be able to have what they wanna have. I always joke around, I say, you wanna be free, like Braveheart. But, does everyone see this thing right here? I know the viewers can’t see this, but I have my cell phone up here right now. We’re all hunters, not like we used to hunt, but hunting now is done through the cell phone. So, people hunt through their cell phone every single day, So ideally, we need to build it to have the new features of hunting. This is building this for the millennials, building this for people who are so used to having what they want, when they want, without having to, I’m sure you’ve all seen things where you go to get life insurance, and then they say, give me your email and your phone number. Most people just leave that site. So it’s about giving people information and giving it to them quickly. And when you give people what they want, happens, they take it and they run with it.

reid_tattersall:
I think people think of life insurance online, and a lot of times they just associate with like direct marketing or spin a website up, and all of a sudden people are gonna purchase life insurance or products from them. And that’s been especially difficult the last couple of years. You’ve talked earlier about money going into a bunch of companies that are no longer in business or are not doing so well. It was a red ocean to buy leads. If you were doing SEO or buying leads 10 years ago, very different than the last five years. As some of these people stop spending so much, that wave may come back where it’s a bit more affordable. Companies, it’s not okay to lose a ton of money. The type of agent using this is technology can be used by the traditional agent. process to quote, I want to have my fingertips, I want to take applications whether it’s on my phone or the customer does it or you know we have this other sort of embedded insurance type of marketing and we’ve sped that process up dramatically right it’s you know if you have if you have trust with your users the initial thought with this was hey we’re gonna go to think of America and for products but aren’t doing them. What do they have? They have the trust with the customer. So those sorts of organizations, if you have trust with your audience, you can probably do embedded insurance because your brand customers know you. If you don’t and you’re for the first time buying Facebook ads, you know, you’re going to have a much, much harder time. You’re probably going to fail. agent thinking that I can just stick this on the website, there’s probably a bit of a reality check for nine out of ten of us.

paul_tyler:
Interesting. So we have an event actually in New York on the 27th. Ramsey’s leading one panel. Topic is Future of Innovation and Retirement. We actually have a VC panel. And one of the questions is, you know, where is the money going? Where should the money be going? If you kind of look to take your experience, you know, look, a lot of people have done some great work, some as found and solved a problem. I think others juries out. You know, if you were advising somebody on a hundred million dollar VC portfolio in this space, where would you put the money?

reid_tattersall:
Yeah.

ramsey_d_smith:
Pick your bank carefully first.

paul_tyler:
Pick your bank.

josh_elohim:
Ha ha ha ha!

reid_tattersall:
Crypto life insurance. No, just kidding.

paul_tyler:
Yeah.

reid_tattersall:
What’s so we’re talking? Hey, do you become a carrier? Do you become a distributor? Do you become a fee based service?

paul_tyler:
Yeah, if you kind of looked across the services you’re building, the services you’re using, you said, you know what, if we had a better XYZ, this industry would be a lot better. It would be easier for us to go to business, it would be easier for agents to sort of plug into this marketplace. Would it be, you know, on the lead gen side, would it be, you know, the technology that maybe may have a broader, you know, impact on our business? Zoom, I’m going to tell you, is probably one of the best insure tech disruptors of our time.

josh_elohim:
Thank you.

paul_tyler:
probably don’t see it that way, we do.

ramsey_d_smith:
Well, maybe another way to think about it is, so you’ve solved, we’ve got a business process here, right? There’s a value chain and you’ve solved a clear portion of it, right? And then there are other parts of the value chain that probably introduce some constraints in your business. As successful as your business has been, there’s probably other things you wish other people would fix. So maybe what are the things that you would wanna see fixed outside of your direct purview, be helpful to to growing your business further.

reid_tattersall:
It’s great to see carriers hiring their own talent for engineering and building their own tools. In that situation, they control their destiny. If they use a third party, what usually happens is, well, let’s get a bid from that third party. Let’s get approval for these hours and things just don’t happen. So, you know, I can’t say you could just jump in insurance company, but if you could allocate that money towards, you know, hey, you spend a couple million, five million per carrier and you divvied out to 20 carriers, and their job is to build APIs for distribution for anyone that needs it. And now we have this ecosystem, almost like this open source community where we can see everything that’s available. story to carriers of creating an API sales strategy. One of the most important things from a company is being able to provide your quote. What is your price? You can’t provide, are you serious? You can’t provide your price? And a lot of companies are still there today where we don’t want our price to get out because we don’t want to be spread-sheeted. So yeah, I’d say companies build internal tools, put them out there with public documentation, show the world what you have. And I think it might take some time, but people are gonna adopt that.

paul_tyler:
I love that answer. I do think like open banking should come to insurance open insurance Now it’s interesting. I’ve talked to people who are involved in the NAAC and they say what could we do? I’ll tell them, you know, you got a lot of power there. You dictate that carers must file a PDF application for you to prove Why don’t you require an API at the same time now I get just blank stares What are your thoughts here? Should we, you know, when we go to mark with products, should we, every carer be required to also file the API with the regulator state by state?

ramsey_d_smith:
Well, I think sort of philosophically, I think as an industry, and even coming from being an investment banker, we were wired the same way. We tend to focus a lot on the technology of like the project itself, the widget. But the real sort of opportunity is to focus on the experience. And so the question is, you know, all right, well, what form of product lends itself to being delivered through electronic media, for the whole, again, from point to point. So yes, whether it’s submitting an API or whatever it happens to be, but literally in the process of developing a product, also being very clear on the electronic journey it’s going to take along the way, I think is important.

reid_tattersall:
When you compare that to a company that has to deal with hardware or inventory, I keep on thinking it should be so much easier, right? We’re selling intangible products. You know, these things are unlimited.

tisa_rabun_marshall:
Yeah, it’s an interesting question, Paul. I mean, I think about the power of enforcing or standardizing something through the submission and approval process. And I think technology or the API sort of unlocks and gets everyone’s mind shifted to, we’re going to enable this every time and all carriers will offer it. But I almost take it back a level to the very, very basics of a common form or a standardized, like, everyone needs name, everyone needs SSN. then enabling technology on top of it would be much easier. You’re not necessarily having to retool and rebuild for each carrier. Each agent, you know, agents across several carriers would have a common experience. Clients across several purchases could have a common experience. And I know it’s a kind of huge thing to tackle. I’ve heard it talked about a little bit, but standardizing or creating sort of that common form. And they’ve done it for scholarships. You know, why can’t we do it for insurance?

paul_tyler:
Yeah, Bruno, I actually think Canada’s farther along this curve than the US. I mean, I’ve seen, now there are fewer carriers in Canada who have much more market cloud. But I know that there were some sort of standardized efforts to do things as, yeah, Ramsey’s boring as checking licensing centrally. Bruno, have you spent much time looking at the Canadian solution to this?

bruno_caron:
Well, it’s like everything else. The big institutions, government, tackle problems one way or the other. So I wouldn’t say one way is better or the other way is better. But I think there’s a common denominator where everything takes so much time. Simple things, just like Tisa, just like you mentioned, those very simple things take a long, long time. For better or for worse, but I wouldn’t say, you know, when one country is significantly ahead of the game or the other, I mean, those issues, I think, are recurring everywhere.

paul_tyler:
Josh, yeah, go ahead.

josh_elohim:
I was going to say, I get the challenge. See, the challenge for carriers is they have to protect themselves. So life insurance has always been sold through an agent. That’s kind of like been their security of protection. Well, nowadays, now we have, I can’t speak for anyone else, but our software is individually. It can be done by the client. So now, all of a sudden, you have a new level of security that scares the carriers for their protection. We know that consumers are driving everything right now and they want to build, do stuff themselves. So, part of what was really important to us is the agent-facing slash consumer-facing. And that opened the door to five or six other industries that we never had a chance to be in before. Hence, the employee benefits, the property casually. Before, we had no opportunity to be in that space. signature and you could be selling life insurance like that. Oh you have 10,000 clients, okay, how about cross selling every single one of them life insurance without you lifting one finger? It sounds pretty nice, right? Now it is happening now, you know, maybe 10% it’s by the consumer 100%, but that just kind of gets the ball rolling here. So that to me is some of the challenges of the carrier, but that’s they have to overcome that challenge because consumers now are really running the show, they don’t have to go to more. So that’s probably the biggest difference

paul_tyler:
Yeah,

josh_elohim:
that I’ve seen.

paul_tyler:
I’ll agree with you. Fear blocks lots of change. Everybody’s in favor of change until it changes them. We all kind of wired

josh_elohim:
I like that.

paul_tyler:
that way. I was in the flip side, if we had, T.C. jump in here, if you disagree, if we had our IT team on here, they’d say, we’re not scared, Paul and T.C. We’ve got a lot of projects on our plate. Big, huge things. We got this big, giant mainframe that was built. You heard this stuff. case. So, Reed and Josh, I’d really be interested. So, you’re how you would go and pitch this allocation to all these carriers. What’s the ROI here? Is it selling more per agent of what they’re selling today? Is it that, oh, finally, you can start to see cross sales. We’ve all been talking about it for years and years, but it hasn’t happened. It will happen now. What’s the business

reid_tattersall:
Yeah, I think for a lot of companies, I would say it’s simply renting versus owning or term insurance versus some form of permanent insurance. Are you going to invest in your own engineering team or are you going to continue to use third parties? And, you know, at best you’re gonna be kind of average if you can stick with, you know, outsource stuff. If you wanna differentiate yourself, which every insurance company wants to do. If you want to improve that user experience, if you outsource, you’re probably going to be just like the next person. You outsource as well, probably to the same company. So it’s a chance, every business is a technology business. It’s a chance to lead, to be forefront and the investments that they make today are going to pay off long-term.

paul_tyler:
Okay, Josh, what’s your pitch for 10 million bucks to go into this stuff? Because you know, whatever costs, you know, you think it’s costs multiplied times 10 when you get to the large organization.

josh_elohim:
Well, we do this pitch almost every day because companies are wanting to know why they should partner with us, right? Well, how is this going to work out? How is this going to benefit us? We won’t mention names, but Reed knows the company we’re talking to right now about this. For me, in order to change your circumstances, you have to change the circle you’re standing in, right? So what we had to do, I’ll speak on us for a second, we had to step out of our comfort wholesalers or GA’s or IMO’s, whatever you want to call them, how many of those do you know who have three full-time programming people? So Reid is actually practicing what he’s preaching right now in the call. We had to step out of our comfort zone, and seven or eight years ago we really had to say, hey, we have to do something different here, because what I realized is all these wholesalers are all the same, you know, they’re really just, they’ve been given, they’re kind of order takers. So we really had to step out of our comfort zone to be able to do something different, programmers came in the play. And now, like you said, you were impressed. You said we have an open API. We have all the stuff that we’ve built here. But I call it walking on water because we don’t charge anybody anything, any kind of money, right? I’m still working reading that part of the equation, charging for this, but I don’t think we’ll ever get there. Go ahead, we were going to say something, Ramsay.

ramsey_d_smith:
No, I just was, you and I have had some conversations. So I was just revisiting those conversations

josh_elohim:
Ha ha.

ramsey_d_smith:
in my mind. Well, look, I have to say, this is, look, it’s all fascinating. I mean, I’m particularly sort of intrigued by this notion that development should be done in-house versus outside. That’s like a real tension right now in the industry, right? And there are legacy systems, mainframes, a lot of COBOL, and we’re in a world where, in general, the new world is obviously cloud-based solutions. So yeah, that’s an interesting takeaway for me from this discussion,

reid_tattersall:
Yeah, I

ramsey_d_smith:
I have to say.

reid_tattersall:
mean, definitely make things cloud based, but I think some people outsource and they feel like the problem’s off their desk.

ramsey_d_smith:
Yeah.

reid_tattersall:
And sometimes they hire, you know, they say the 10x engineer, well, they’re hiring 0.1x engineers and they have a hundred of them. Um, so, you know, a small team can do a whole lot. And I know

ramsey_d_smith:
Yeah.

reid_tattersall:
that they got legacy stuff, but work late, you know, I told people done, you know? And some of them I feel like just, that’s not their MO, right? They’re not that start-up mentality where they’re going to shake the trees and push stuff. You know, they’re looking for their boss and their boss’s boss to have three meetings before they get the okay and they procrastinate and things don’t get done.

paul_tyler:
So Tisa, you push this argument a number of times. What would you add to what they’ve said? I mean, what are the arguments that convince people to do things differently inside carriers?

tisa_rabun_marshall:
Inside carriers, I was going to say the industry, their market is really driven by what consumers are going to start looking for and demanding. We can talk about how agents may or may not be looking to change how they do business. But if they don’t, the consumer or the client’s going to show up that is looking to buy differently, I think that drives some of the change. But inside the carrier, maybe it’s a lot of the same conversation. A lot of times when I’m sitting there explaining what we’re working on, I take it out of the industry. our everyday life, whether it’s how you’re ordering food home to the kid because you’re at a meeting and they’re at home texting you saying they’re hungry or your own buying experience for travel or your own buying or investing experience, you know, online to do it yourself investor. Like I feel like if we think about our own lives and how we are in the consumer seat often and think about the technology and experiences that we’re demanding, why wouldn’t the So I feel like when you bring it down to that level and think about your life and your everyday, it starts to paint the picture, the ROI. I’ll just give one more comment, which is being in a position of sort of supporting aging parents. It comes to the forefront really quick. You’re sitting here thinking about, how are you going to help your parents make their decisions? And you’re a lot of times taking the control there. It may not be my parent that’s looking for the modern buying situation, how I’m going to do the research and how I’m going to help them make the decision is very much looking for a more modern technology driven on my own time type of experience. I think that helps justify

paul_tyler:
down.

tisa_rabun_marshall:
why we need to shift how we do business.

paul_tyler:
Well put.

josh_elohim:
Believe it or not, in 2023, today, people are still scared of going through a life insurance process. Because you believe that or not? Like they’re still dreading going through an application. They still think that it’s paper. They still think that, and so really we just have to change that mindset. It just has to be one person at a time. I can’t tell you how many times we do a, we go through an application and the person at the end says, that was it. I’ve been dreading this whole entire time. I’ve been scared of this process and we’re done. Obviously it helps with Zoom or Teams when you pass the screen, right? The joke that I say is we just finished a 60 or 70 page paper application and you don’t even know if I had pants

paul_tyler:
Yeah.

josh_elohim:
on. It always gets a good laughter. So I try to keep it lightened

paul_tyler:
Yeah.

josh_elohim:
and have some fun here. in the same sentence, but you gotta keep it fun

paul_tyler:
that’s

josh_elohim:
these

reid_tattersall:
Tee-sa-bit

josh_elohim:
days,

paul_tyler:
great well

josh_elohim:
you know?

paul_tyler:
here rams you right at the end of time you want to like

ramsey_d_smith:
Sure, just a couple things. First of all, any parting comments from Josh or Reed? Do we miss anything?

reid_tattersall:
I want to hear what Tisa did, right? That was a real life situation. Did you have the, you know, was the information there for you to make a decision? Why didn’t you make a decision or why did you?

tisa_rabun_marshall:
give you kind of a two-part response. So of course, no, everything I needed wasn’t there and there were gaps, right? Because our industry is behind and I got frustrated with the process. But maybe going off of what both Reed and Josh you said, I think that there’s an avoidance of process, but I think more so it’s an avoidance of the emotional. Like, I don’t think really people acknowledge the emotional impact of that life and also say specifically life insurance, life think through what it feels like to not be here or what it feels like for there to be a gap in your family, whether it’s financially, emotionally supportive. And I think that’s the avoidance factor. Luckily, I have parents that were kind of willing to have the uncomfortable and sit down and say, like, here’s what we need to do if I’m not here, here’s what’s in place if I’m not here. But like, that’s a really hard emotional place to be in. I think people avoid that more than anything and then comes the process. gaps and how it got done. I happened to be by Coastal, so parents in Seattle, and I’m in Hartford, Connecticut. So if my agent wasn’t willing to get on Zoom and go through this with me, I wasn’t flying home to have the conversation. So building that relationship on Zoom was very real for me. And going through the process, even though it was paper and printing it out and scanning it and signing it back and docusign, we got it done. There were a lot of pain points along the way. the importance of it probably because I’ve grown up in the industry. But that’s not common for every family. So I hope I’m answering your question. But there’s definitely room for improvement, but there were some bright spots along the way.

reid_tattersall:
That’s a great point and all end with maybe taking Paul’s $100 million and

tisa_rabun_marshall:
Bye.

reid_tattersall:
tying it in. I think one of the best super ball commercials was about the dog and the dog food. They appealed not to the ethos, which is the logical side, which is most of the marketing we see, but to the, I think it’s correct me if I’m wrong, but to the pathos, to the emotional And I’d love to see some companies master the emotional side of life insurance in a class U.A. that gets people like Tisa convinced and sold. Because when you get a customer that’s already mentally convinced, they make decisions fast and they implement.

paul_tyler:
Excellent.

ramsey_d_smith:
All right, well, thanks everybody. And we were just over the hour. It was great conversation and appreciate having the two of you on.

paul_tyler:
and the

josh_elohim:
Thank you very

reid_tattersall:
Thanks

josh_elohim:
much.

reid_tattersall:
guys.

josh_elohim:
Appreciate it.

tisa_rabun_marshall:
Thank you.

Episode 183: Banning Monte Carlo Simulations & More With David Macchia

March 3, 2023 2023, David Macchia, Podcast, Retirement No comments

BDo Monte Carlo simulations cause more harm than good? David Macchia, Retirement Income Strategist, Entrepreneur, and Founder of Wealth2k explores this topic and more today. We cover the politics of pay, why “sales” seems like a dirty word, and our upcoming Retiretech 2.0 conference in NYC.

Do Monte Carlo simulations cause more harm than good? David Macchia, Retirement Income Strategist, Entrepreneur, and Founder of Wealth2k explores this topic and more today. We cover the politics of pay, why “sales” seems like a dirty word, and our upcoming Retiretech 2.0 conference in NYC.

Links mentioned:

https://www.linkedin.com/in/macchia/

https://www.fa-mag.com/news/why-monte-carlo-simulations-for-retirement-income-should-be-banned-71909.html?print

https://imagine.nfg.com/retiretech-forum-2-0/

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Episode Transcript

paul_tyler:
Hi, this is Paul Tyler and welcome to another episode of that annuity show. Bruno. Good to see you.

bruno_caron:
Good to see you. Good afternoon, and very always always in a good mood when we talk to David. So looking forward to this

paul_tyler:
Yeah, good. all right, Ramsey. good

ramsey_d_smith:
All

paul_tyler:
to see

ramsey_d_smith:
right,

paul_tyler:
you on a

ramsey_d_smith:
good

paul_tyler:
Friday.

ramsey_d_smith:
to be here on on on a Friday here from Atlanta. Delighted to welcome back to our program. David, Marcia, David Is, has done lots of different things in our In our space Primarily would like to be described to somebody who’s I’m paraphrasing, been steadfastly dedicated to financial literacy and in Lusion, and along the way has done so defending the benefits of annuities, And we’re going to be talking about some, some, really, some, critical, some critical ways that he thinks we should be thinking about both annuities, and also importantly, thinking about some of the analytical tools that that underlie some of the advice that’s given these days, So with that I’ll turn it over. Turn it over to actually turn over to you, Bruno To start off the conversation.

bruno_caron:
Well, thank you, Ramsey, and as we said, very very happy to always continued the conversation with with David and David. Why don’t we start off with with a recent? A few recent articles that were were published in Advisor Perspective. That was all related to H to Monte Carlo simulation. We all know that it is a tool that is being used by by advisers and planners, and Sometimes that tool is being used counter the benefit of potentially using annuities and financial planning. You’ve been a very very deep voice on on income retirement income through through your flame framework of the constraint investor. What are your thoughts on the the status today of money car Simulations?

david:
Well, great question, and so good to be here with you guys. Become such a devotee of this show. You have done such a wonderful job with it, and privileged and honored to be part of it again today. thank you for having me back. So Bruno when that article was published by Advisor Perspectives, January ninth, I believe, written by Weight Fou and Massimo Young. it was a monumental occurrence that did not in my judgment, get as much attention as it should have. I think every financial advisor in the United States should read that article, whether you are a anuityfan or not. It’s so very important, because what it showed in a way that’s inauguable is that Marny Callow is anything but scientific. It’s variable, it’s arbitrary. It’s contingent upon the capital markets assumptions that an advisor or firm users and foul and young. Even I thought this Fascinating. They went to forty investment firms, including some of the largest in the United States. Mere Goldman sacks, J. P. Morgan and others, and they brought the case of an individual and said, What would your money college simulation tell this person? And the range of outcomes among those forty firms was remarkable from a sixty two percent confidence rate to a ninety five percent confidence rate. What is a Dividual? What is a consumer to think of that? And you know, the assumptions that they showed, maybe like on equities, ranged from five percent to ten per cent on bonds. The range was incredible.

ramsey_d_smith:
The return assumption, You mean?

david:
the return assumptions,

ramsey_d_smith:
Yeah,

david:
so there’s absolutely no scientific a notion about it And here’s here’s my problem with it. I’ve always thought and I’ve written about this multiple times that it was an inappropriate tool to use with constrain investors, because Constraint investors, by definition, must have protection against longevity risk, and they must have protection against time and risk, And Marni Carlo does not make room for That Doesn’t make room for what. for those people is the most important issue in planning their income. But what thou and young did was showed that it’s It’s inapplicability is way broader than I had thought about it. It really is inapplicable to logically kind of everybody. And my problem is that it gets used as a proxy for safety. You have a false set of confidence that comes out of it, Because you say retire, You have a ninety five percent chance that this is going to work out perfectly, but it could be a sixty per cent chance or a seventy percent chance, or a fifty nine percent chance, or an eighty eight percent chance based upon those assumptions that are selected, and that’s just way too risky for most people for most people, Retirement. And so I think it should not be used in the context of retirement income with certainly most people, if not all. And that’s why I wrote that article, and again, I think foul and young. That article needs to be read by everybody. It was such an important development.

bruno_caron:
It’s a good point, and I think that risky is one thing, and you know the fear within within investments, and all of those risks that retires actually face are absolutely true. But do you also see an angle where either using annuities or using other types of lifetime vehicle can not only reduce Risk or protect, but also leverage and help retires. being a position of strength, in other words, not just playing, not just used annuities to play defense, but use annuities to play offense

david:
A great point, and I think annuities reduce risk and enhance risk of exposure. And what I mean by that is if you are a retire who has a plan that incorporates annuities in the right way, you get a couple of things that come out of that. you, first of all, every month through retirement, you havei a guaranteed pay check. Secondly, you have long term protection against longevity risk. If you have those two comforting factors in your plan, And and then you have exposure to equities, which you should have, But the market goes bad. It gets really volatile. It’s generating big losses in a strategy that doesn’t have those protection dynamics. People are going to run away from it most likely, But if you have that security, if the advisor can get on the phone, you know Bruno. I know you’re nervous. Everybody’s nervous. but listen, your paycheck is secure. Don’t worry about it. Write this Out. and there, the annuity becomes the empowering factor for being able to stay exposed to risk. Does that make sense?

ramsey_d_smith:
I think you’re

bruno_caron:
Absolutely

ramsey_d_smith:
muted.

bruno_caron:
Absolutely, And I think that’s a. It’s a very powerful message that things need to be looked at on an aggregate basis, and I think

david:
Well,

bruno_caron:
we all agree.

david:
it goes to the notion that the secret of retirement income is not one thing you know. we tend to. We tend to you know. again, Go into these silos and the investment people think that they’re the answer for everything, insurance people. they think that they’re the answer for everything. In the reality is that we’re both the answer. We have to by definition be both.

ramsey_d_smith:
Yeah, that’s that’s the truth and it’s unfortunate that that a combination of a combination of things sort of contribute to that one is cultural and philosophical. Between those two parties. Another one is the way to those two parties has compensated right and there isn’t you know. There hasn’t been sort of an easy way to sort of melt. The two things melted two things together. We’ve talked a lot about this on this show about different ways you can resolve that Flat fees. Ourleafees. What have you? But it is it isn’t it is an, it is, an ongoing is an ongoing challenge. And you know, as we talked about before the show, I mean Marti Carlo Monticarlo, I think look, I think it’s useful. Certainly it under penned a lot of the work I used to do in my old, my old profession, but the key thing is that it shouldn’t be used as an absolute answer. It should be the start of a conversation, and to your point, the drama To the differentials in in in assumptions, Uh, you don’t make all the difference. All the difference in the world. It’s really, and it’s really going to be very hard for you, typical consumer to be able to decipher that Like which which advisor

david:
Yeah,

ramsey_d_smith:
has got the right set of assumptions Versus which one doesn’t

david:
Yeah,

ramsey_d_smith:
They don’t have the

paul_tyler:
Yeah,

ramsey_d_smith:
tools to do that.

david:
I can’t.

paul_tyler:
well, I would. also you. just sort of take another angle. Then another vector criticism is. Does the presentation of the data create a false impression of the results? I mean David. In your paper, you kind of hit on that is that man, the capital. You know, some of the capital market assumptions have wild impacts on this. you know, I saw one annuity Where some people have done some back casting on a particular set of returns with one index strategy was interesting. You. Ow. you, look at it. It was if you kind of looked and said, Okay, what are the odds that this thing is not going to result? Return great results. you know, Fifteen, twenty years out, I look like it was a flip a coin. So of chances, Now when you really dig into those dots at the bottom, what do they all have in common? Well, they were all markets in which you had Steep declines in the last couple of years of retirement, and just sort of wiped out your retirement. So Ou know, if I had just looked at a sort of normal distribution results, I would have said well, probably could work out, but it really didn’t tell me that I’ve got mammoth amount of risk in this particular strategy. If like god forbid, I get close to retirement and the market does what it just did,

david:
That’s an excellent point and you resonates with me for a couple of reasons. Paul. One big reason is that when I started in the retirement income business, I had a bucketing strategy. Six buckets, you know, and the buckets. I’m absolutely convinced From observation help people behave better, you know, especially the early years of retirement. But there is that risk that what happens when I’m eighty three and I’m close to the end there and I have a big down turn of the market, And that’s why we added flooring into the strategy. That’s why we add the lifetime Income element years ago to create a hybrid. because just for that very reason, you need to have that downside protection, at least a minimum amount of guaranteed income to cover your essential expensive. Your point is, Your point is an important one. in my judgment.

bruno_caron:
So going back to the you know the Man Card simulation in parallel to that, Having Carlo simulation type tool implies that you have a systematic withdrawal plan. If you have a systematic withdrawal plan, can you discuss some of the dynamics that are going on in terms of withdrawal versus versus return? So in, in an upward return, You’re selling more or less of securities to get the same pay check or same same same withdrawal, and vice versa markets go down. What happens and what is the philosophy behind that In terms of

david:
M.

bruno_caron:
in terms of executing on your systematic withdrawal plan,

david:
Ah, so the way an advisor said it to me once was the best I ever heard. I wish I had thought of it, he said, The problem of systematic withdrawal plants, as they force you to make poor investment decisions, classically poor investment decision. So what do you mean? he said, Well, think about it. The markets going up up up up up. What would you want to do as an investor? A smart investor would want to sell them and take profits, lock in profits. But the systematic whdrawupplan forces you to sell less when the market is going up, and when the market is nose diving. What? What a smart investor do? Well, That’s when you hold on, you know to to those positions regain you know their value and you could sell them at that time. but the systematic with Dora plan advises you to do the opposite when when stocks on nose di, think it says, sell more some more, And that’s when you get into. obviously the downward spiral that if it happens early in retirement, can cause people to run out of money and have those two dreaded words. The academics, a portfolio ruin, Right means in your dead, broke in retirement. So you know The other thing is, and I get criticized on line for this by by a noted academic. Um. I said, I quoted another advisor. You know the idea they come back with. You know remedy for this as well. We have a dynamic which roll scheme. When the market is going down, you know you’re going to cut back your income right, And the advisors had a beautiful quote and basically said, You know that’s something that works in the academic world Right in a spread sheet. But when you’re sitting down at the kitchen table with a real client and you tell them that they need to take a thirty five percent pay cut this year that doesn’t go, that doesn’t work. And you know if you’re a constrained investor, go back to that type of investor again. you know. for me, the systematical drug plan should be forbidden, because those people may have enough money to retire. They don’t have any money to make a mistake.

bruno_caron:
That’s It’s a good way to put it, and that’s when the conversations on. Well, if the plan doesn’t work, I still need money now, for you know, for basic needs for necessities or for trips, Because I mean do that trip later on. I may be injured later on, I may be impaired. I may be dead. and the flip side to that is you may not. So that’s that. That’s definitely definitely a consideration that the practical world is not always in line with with the theory. So what do you? What do you? How do you? How do you gage at? How do you calculate that? How do you? How do you see if you’re if you have enough. If you’re a constraint investor? What are some of the some of the guide lines that that you have that you can recommend to people to bench mark themselves in terms of Sets an income.

david:
Yeah, well, in building a plan, I think most advisers who are working with Constrained invests would try to determine how much of the total acid base has to be devoted to safe income sources. Social security obviously would be one. If there’s a pension there, Lucky an annuity to supplement that. What would it cost to create enough a safe income to match against their essential expenses? And then what’s left over? And what kind of plan can you eat? And you know it’s not unusual where the clients, um, conception of retirement is really, or kill with reality where they think that they’re going to have a ex amount of dollars, you know of income and they’re not able to really get that, And I give you a real world example from about two months ago I was introduced to these people in Colorado, and she’s seventy two and he’s seventy three, and they have lost. They had about two point one million dollars, and before these corrections in recent months, then they lost about three hundred and ninety thousand dollars, and they were told by the financial advisor that he was going to put them in quote, Unquote Warren Buffets portfolio, whatever

bruno_caron:
Oh,

david:
that means, And you know now they’ve lost about four hundred thousand dollars And there are life style is too expensive For what their portfolio can yield, and so became a conversation. Where can we cut back? Do I need the third car? You know, Can I cut this back? Can I cut that back? And these are difficult conversations that advisors have with folks all the time, and you have to go through that process with someone who’s really constrained to get to something that can work for them and create a aminimally acceptable lifestyle.

ramsey_d_smith:
See you’re on mute, Paul,

paul_tyler:
So I’ll open this door carefully.

ramsey_d_smith:
M,

david:
Oh

ramsey_d_smith:
M.

paul_tyler:
So is the government actually in policy makers? They finally seen the value of annuities, Now evidence secure Act to Dot, secure Act, secure Act, Dot. I can’t believe the government is actually making matching contributions.

david:
H.

paul_tyler:
Now you know,

david:
M.

paul_tyler:
for one case, or savings vehicles in first people of certain income levels, I think they’ve made it more friendly to Annuities inside for an K. plans. Is this? Are we finally starting to take annuities a little out of a political discussion more, and moving it into a one of policy?

david:
Well, policy is political, so first of all, isn’t it a wonderful development that these things are happening right and it isn’t in the national interest that these things are happening. I believe it is. I believe it is. M. It’s a healthy trend and I think it’s probably going to continue because the social compact is strengthened by more annuity, annuitized, income or guaranteed income. There’s no question about that, but I’d like to if I can’t ask you guys a question. Tho, because when you talk about politics, I go back to Ramsey’s comment earlier about compensation right, There’s a lot of fights that are compensation based. Would you agree with me that All advisers have to be paid for their work and we have a big enough space where we can accommodate multiple payment schemes and multiple practice models. The bigger issue for me is let’s do the right job for retires. Let’s not exclude solutions based upon a payment model. Let’s acknowledge, Okay, I get paid the way I get paid, but I’m going to do the right thing. You know, to me, That would be taking the politics out of the annuity conversation, as opposed to fighting about the annuity and the payment schemes. I don’t know. What do you guys think about that?

ramsey_d_smith:
So let’s go one question at a time. So the first one was the first one was that every the advisors should be paid. And so if if I use the term advisors very generically to

david:
Yeah,

ramsey_d_smith:
include fiduciary advisors, to include insurance agents, to include right with a small, A,

david:
Yeah,

ramsey_d_smith:
Um, Yes, absolutely, I think that there should be compensation there. And and as much as people say that certain certain types of advisors and agents don’t Don’t don’t always add value. If that were the case, then there wouldn’t be so many questions from clients and long conversations to get to

david:
Yeah,

ramsey_d_smith:
right to get to a conclusion of a sale. So

david:
Good

ramsey_d_smith:
yes,

david:
point

ramsey_d_smith:
for sure, there should be compensation. And then the second piece was. Um. Was that, having accepted that that we should be able to focus on retires first? Absolutely so, yes and yes, Bruno. you’re up. We lost Paul temporarily. So you’re up,

bruno_caron:
On the compensation issue, I mean, it’s a broader question, I mean, should should construction worker get paid? Should doctors get paid? Of course, I mean that’s that’s That’s how we’re constructed as as a society. and as you, you both alluded to. It’s a complex world. It’s it’s a complex environment. So you need that knowledge you need. you need. you need that that connection between the consumer and you know this, this this complex Environment. So there’s there’s no doubt there that that’s That’s just stating the obvious. And so you know, the question is how, and of course I think that anyone with the right sense is. Uh, cannot argue that you know annuities should be ignored for everyone. I mean that that’s just a complete nonsense. If you’re you’re looking at it from a pure Academic standpoint. Some you price future cash loads to certain reality at the end of the day. Are you going to accomplish your goes through through some guarantees through some insurance contracts or through some investment? I think we all agree that the answer is a little bit of both, and I think that those those things should be should be looked anintendem. And and that’s just a simple reality, that that that that can help retires do the right things accomplish their their goals of simply living a life that that they want and deserve.

david:
Makes sense.

ramsey_d_smith:
Paul. it’s your turn. You were off for a second. The question was are can agents? should agents and advisors be compensated for their work? And if we can agree that they’re more than more than one way to accomplish that fairly, should we be able to focus on retires?

paul_tyler:
I would think so now as risk what I guess or question mark. What will? what will the dol come out with later this year? They’ve already told us that they’re coming out with another fiduciary rule and David. I think this will have a major impact on retire plan Now, Maybe it’s the compensation mount model. Maybe it’s the disclosure. Not sure you may have

david:
Yeah,

paul_tyler:
more better information than I have.

david:
I don’t I know. I know it’s being challenged or will be challenged more. I don’t know. but let me let me throw one more question out. I think we should dlink two words. This really annoys me when when advisors say I don’t sell annuities, sell annuities sell being a pajoritif. By definition, right, in my perspective is everybody sells. The whole economy is based on selling right. lawyers sell doctors, so investment advisors sell their services. They persuade clients that they’re a better investment adviser than another investment advisor. It’s not a dirty word. Do you agree that sell is not a dirty word

bruno_caron:
I agree.

ramsey_d_smith:
All right, I, well, I fundamentally agree that I agree that everybody sells sell is not a dirty word. What it does do, is it? I think it clarifies that, irrespective of your of your job, whether you took the hypocratic oath or your, you know, a c, f, P, or you’re an agent, or whatever, whatever you happen to do right, you ultimately end up having to sell your services. It’s Very clear in the medical profession whether it’s farmer suticals, or it’s cosmetic surgery, or you know all other sorts of sort of alternative, alternative forms of medicine that you know that are optional that are nice to have the not need to have that that are sold very aggressively by by by the medical profession. It’s everywhere. it’s everywhere. So so my point of view is maybe I come across a ittle bit more cynical. I just sort of accept that it’s normal in every part of our lives Doesn’t make me love. Word sell,

bruno_caron:
M,

ramsey_d_smith:
But I just accepted

bruno_caron:
hm,

paul_tyler:
Well,

ramsey_d_smith:
that

paul_tyler:
you

ramsey_d_smith:
it’s

paul_tyler:
know I agree, David. we’re selling all the time. Somehow you know, semantics have gotten to the point where selling has A has been linked to manipulation or aggressive persuasion. Because you noticed nobody has have yet seen anybody in the last five years, Get promoted to be head of sales and a company that are all Chief Revenue

david:
Distribution?

paul_tyler:
officer, Chief

bruno_caron:
M,

paul_tyler:
growth

bruno_caron:
hm,

paul_tyler:
Growth officer. Right,

bruno_caron:
That’s a good point.

paul_tyler:
Right,

david:
Yep,

paul_tyler:
it is.

ramsey_d_smith:
I never thought of that.

paul_tyler:
I don’t. Yeah,

bruno_caron:
Yeah,

paul_tyler:
it’s yeah. Seriously, look at linked in. See if you can find somebody. be able to point it at head of sales. They’re not today Across the industry Now is a good thing. Well, I think if it shifts people away from well, how big was that annuity sale? What did you sell generate in deposits? I think if we shifted more towards asking ourselves, how many Retirement plans did we deliver this year? How many clients did we did we serve, Um. Michelle Rector’s point, I think would be how much retirement income David did you create this year

david:
Right.

paul_tyler:
For people

david:
that’s a great way of saying it.

paul_tyler:
get focused

david:
Yep.

paul_tyler:
on purpose, But I agree with you. We’re all in the. You know, we’re all shaping impressions of ourselves, Ramsey, the services we provide And Just because I get paid one way, David doesn’t mean it’s bad. and just because I meant I’m getting paid this way doesn’t mean I’m good.

david:
Yeah, I think if we can take the politics out of the equation, then the judgment doesn’t be The judgment over how I get paid. the judgment over. You know, the words sell, it doesn’t become insulting. and that’s what I would hope to have happen that we can extract the political disagreements over annuities and focus on focus on securing people’s financial security and retirement.

ramsey_d_smith:
All right, So David. that’s that was. That was one of one of many topics that you you were active discussing on Linked in and published. On. What? What other things are top of mind for you these days?

david:
There’s such of three areas, Ramsey that that I write about one is obviously what we’ve talked about. Another one is Maco economics. And then I just had an article published about how people can use these new kind of applications that have been created to build their own videos. Because you know people love video. Everybody knows that it’s so much more engaging. It’s so much more interactive And there’s these applications that have come out that make it easy for you have. No, You don’t have to be a designer in any way shape perform. but you know in an hour or two you can have a beautiful video that gets your message across and my advice to the advisors was you know, Investigate these things, write a script, write a script, that is, think of how you would speak to a real client and make it that way, crate a script. Record it. I showed them where they could get on application. That makes it easy to record and put a video together and start getting it on you Website and get it into your email marketing and your social media marketing, and join the video revolution. You know, in our business, financial advisory business is too little used in my view, and it’s just now too easy to avoid. So that’s what. That’s my most recent topic.

ramsey_d_smith:
All right, What are the platforms that you like for that?

david:
Oh, there’s There’s an application called Beyond V, I n d. There’s animaker A n I, m a r H. dudelydoodl. You’ve seen these animated videos everywhere. That kind of like these

ramsey_d_smith:
Yep,

david:
cartoon characters move around to do that. It’s like super easy, super super super easy That you can. If you want to you know, create a valentine for your wife. You can. you can do it in video in fifteen minutes.

ramsey_d_smith:
Now

paul_tyler:
Okay,

ramsey_d_smith:
I know

paul_tyler:
I got

ramsey_d_smith:
for next year.

bruno_caron:
Uh,

david:
Yeah,

paul_tyler:
okay. I’ve got. I’ve got to ask you

bruno_caron:
huh.

paul_tyler:
if you tried chat. g. P. T yet.

david:
I did. I did and guess what I has to you know, could you define a constrain investor and it gave me a pretty pretty good answer. Pretty accurate answer. So yeah, I have, and that’s fascinating, Paul. I mean, I got a hundred million users faster than anything ever.

paul_tyler:
Oh, it is. I said. please write me. I don’t have to use the word please. I don’t Ramsey. Do I have to say please to a machine? Write an eight hundred word essay on why people should defer taking social security until they have to. With citations,

david:
Really

paul_tyler:
David. It did. I send it to our compliance

david:
Wow,

paul_tyler:
person, and he looked

ramsey_d_smith:
Did

paul_tyler:
at

ramsey_d_smith:
it

paul_tyler:
and

ramsey_d_smith:
pass?

paul_tyler:
he started to actually argue with the context of this thing. Like some, A couple of assumptions they made.

david:
Okay,

bruno_caron:
What was the conclusion?

paul_tyler:
Oh, it was better to wait. They gave. It was a great say, Bruno. on this, I’ll send a copy to you. It was good.

david:
It. also, it also will give you some goofy answers And I read an article Coincidentally about this yesterday people were asking a question like if you could, if you could avoid the halo cost at the cost of insulting one person with Rachel Episode. What is the right answer? And the answer that came back was Well, you should always avoid the Rachel epithode.

ramsey_d_smith:
That’s

paul_tyler:
Oh

ramsey_d_smith:
It’s a strange question. yeah,

bruno_caron:
That’s

paul_tyler:
very

david:
That

bruno_caron:
it?

ramsey_d_smith:
yeah,

paul_tyler:
odd.

david:
that that kind

ramsey_d_smith:
yeah,

david:
of crazy craziness,

ramsey_d_smith:
yeah.

david:
Uh

paul_tyler:
Yeah, doesn’t compute

david:
people people people don’t take doesn’t take people long to find bizarre ways to test systems.

ramsey_d_smith:
Well, and it’s and it’s still. It’s still. It’s still early days right. So a hundred million users are essentially a hundred million trainers, Right

david:
Yeah,

ramsey_d_smith:
And

david:
it’s it.

ramsey_d_smith:
I don’t think there’s any question that it will get better. I think that the adoption the doption piece is what’s most telling. Like people are people are comfortable interacting with it Like that’s that means that more and more people are going to continue training it. So it’ll just be a question of whether or not you know it has enough computing capacity and it kind of content, Sort of things, and also like how much actual curation is need, because I think there is some curation behind the scenes that

david:
Yes,

ramsey_d_smith:
goes on. but fundamentally, though I mean there’s it’s like anything. It’s like Crypto. I, On’t. now exactly know what the future is going to look like, but it’ll be part of it. you know.

david:
Do you guys think that it will You think This is the thing that could alter Google’s dominance?

paul_tyler:
Absolutely

ramsey_d_smith:
Uh, potentially,

david:
You do.

ramsey_d_smith:
Yeah,

paul_tyler:
Absolutely. but I think what it will change and how you approach building websites, Um achieving Sco. I don’t know. I’m sure Google has to rewrite its Alcarim, David, like you, and I could probably create a thousand page website on one particular subject of financial planning or retirement planning kind of own. Every single word in there is Google really going to put Sup it like the you know on the first page. I don’t know.

ramsey_d_smith:
But here’s the thing. though, like if where before, Google would bring a set of choices. You know, according to some hierarchy, either you’ve paid or you know your your Co ranking as higher. But now something just gives you the answer, So there’s no click through right. There’s no click through to some to somebody’s sort of commercial website. It’s the answers right there, so I mean at the end of the day like Google is part information part, It’s It’s important source of information, but it’s largely an advertising channel, right if you think about it,

david:
So that’s

ramsey_d_smith:
but that P. T is not that yet.

david:
Right. But maybe only micro stuff could have afforded to do this Because the you know they don’t have that revenue the Google has right now. it’s

ramsey_d_smith:
Yeah,

david:
all they

ramsey_d_smith:
yeah,

david:
have only only to go up.

ramsey_d_smith:
Yeah, yeah, Bing. Bing needed being needed. Some kind of hook Now it hasn’t.

bruno_caron:
Uh,

david:
It’s Bing bong.

bruno_caron:
uh,

david:
That’s a fascinating

ramsey_d_smith:
So

david:
thing. just

ramsey_d_smith:
it is

david:
absolutely fascinating.

ramsey_d_smith:
it is.

bruno_caron:
And

ramsey_d_smith:
it is

bruno_caron:
a lot of people have asked what what anuities are doing, and I think it has you know, come up with some very very sensible sensible answers. So in that particular context I guess it’s

david:
Can it define an actuary

bruno_caron:
uh, no one can, not even the machine.

paul_tyler:
Hey, Well, you

bruno_caron:
Um,

paul_tyler:
know, this has been a great conversation covering the water front on a Friday afternoon, kind of oddly warm. you know Friday afternoon I don’t know

david:
Sixty two in Boston yesterday?

paul_tyler:
sixty two. Imagine

david:
All

paul_tyler:
that

david:
time record

paul_tyler:
Bruno. final thoughts questions

bruno_caron:
Well, No, no questions. Because they tend to, they tend to take pretty long, which is a good thing with with David. But but thanks for coming again. We always appreciate your your in. put in your presence, so

david:
To my pleasure,

bruno_caron:
we’ll talk to you very soon.

paul_tyler:
Ramsey.

ramsey_d_smith:
Same

david:
Right,

ramsey_d_smith:
here, David. Glad, glad to have you back. Um, you know, it’s I’ll say to the listeners. So to Dave, Dave writes about constrained investors and actually spoke in uncharacteristically constrained way. If you read the titles of his articles,

david:
M.

bruno_caron:
M.

david:
M.

ramsey_d_smith:
they are

bruno_caron:
hm,

ramsey_d_smith:
definitely like He’s not worried about burning bridges. Right

bruno_caron:
Uh,

ramsey_d_smith:
are burning bridges or boats right?

david:
Well, I

bruno_caron:
uh,

david:
guess I,

ramsey_d_smith:
he’s fully committed.

david:
I’m a constrained speaker today. I guess

bruno_caron:
Uh,

david:
Hanks

ramsey_d_smith:
Well,

david:
for

ramsey_d_smith:
we

david:
pointing

ramsey_d_smith:
all

david:
that

ramsey_d_smith:
were,

david:
out,

bruno_caron:
uh.

ramsey_d_smith:
I’m just I’m just teasing. I mean you,

david:
I know

ramsey_d_smith:
you

david:
you

ramsey_d_smith:
write,

david:
are.

ramsey_d_smith:
you write with, you know, with great verve and vigor, so keep at it

david:
Thank you.

ramsey_d_smith:
right.

david:
thank

paul_tyler:
Yeah,

david:
you, Ramsey.

paul_tyler:
yeah, David. thanks. well, Listen, we’ll put put your links in our show notes and hey, listen. I look forward to a senior person in New York on the March twenty seventh that our event. We’ve got a great retire tech event. We’ll put the notes links to our event in the program and probably record those and show them as appropriate with with this audience. So David. thanks for thanks for dropping by. It’s always

david:
Thank

paul_tyler:
a

david:
you

paul_tyler:
play.

david:
again.

paul_tyler:
Yer

david:
It’s a great pleasure for me. I appreciate all of you guys. Thanks so much.

paul_tyler:
Excellent. All right, Hey,

ramsey_d_smith:
Take

paul_tyler:
thanks,

ramsey_d_smith:
care.

paul_tyler:
thanks for listening,

david:
Bye bye.

paul_tyler:
and join us again next week for another episode of that annuity show.

Episode 182: Make 70 Your 100, Save 20, Give Away 10 With Dale Alexander

February 24, 2023 2023, Dale Alexander, Podcast, Retirement No comments

We have spent a lot of time talking about rules of thumbs for managing saving in retirement. However, what are the rules we should be giving to our kids for saving into the future. Today, financial planner and author Dale Alexander joins us to share his rules that he believes all young people should follow.

Links mentioned in the show:

https://www.linkedin.com/in/dale-alexander-2a500511/

https://dalealexander.com/httpsdalealexander.comthe-talk.html

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Episode Transcript

paul_tyler:
Hi, this is Paul Tyler and welcome to another episode of that annuity show Bruno. Good morning,

bruno_caron:
Good morning to you.

paul_tyler:
Howse Canada’s Today

bruno_caron:
No complaints. A little bit of Nope, but that’s as expected, so

paul_tyler:
No

bruno_caron:
no

paul_tyler:
balloons,

bruno_caron:
complaints.

paul_tyler:
snowbaloons flying over us. Is that right?

dale_alexander:
Yeah,

bruno_caron:
H. that’s not right. There’s a couple. There’s a couple all over the place, So

dale_alexander:
Great.

paul_tyler:
Okay?

bruno_caron:
yeah, looks like we’re all. We’re all struggling with the same the same issues.

paul_tyler:
Yeah, Laura, thanks for being a another sort of guest co host yet again. Maybe you’ll turn into a regular one pretty soon.

laura_dinan_haber:
Yeah, it’s great to be back. Happy to be here.

paul_tyler:
Yeah, so really interesting topic today And it’s you sometimes don’t know how the universe is going to work. We had one of our guests cancel, and earlier this week you know we have a. You know, we got inquiries coming in from the media for some of these stories and I literally had two questions come in and from one source and it said, Is there a correlation I’m reading? This, Is there a correlation between the level of educational attainment and retirement outlook among Americans and number two? what do you think would be a comfortable Tire ment amount for twenty five to thirty year old, looking to retire at sixty. Now, Laura, lo and behold, you know, through our various connections we met person who wrote a book and has a real interesting perspective on it. You want to do the introductions

laura_dinan_haber:
Happy to do so, and we’re happy that the universe answered that call. So today we have with us Dale, Exander, Dale is a benefits broker and strategist for school systems at Alexander and Company. He’s also a celebrated author of the Talk about money, So Dale, we’re excited to have you here with us today. Please, for our guests, introduce yourself and talk to us a little bit about the work that you do.

dale_alexander:
So thank you, Laura. glad to be here. Yeah, come a long way around. I’ve been employe benefits advisor for since nineteen ninety five, and actual a little bit before that, so we do employ benefits for schools and I got my certified financial planning designation early on in my career, So wild being financial advisor, financial planters, not what I do day in and day out. It’s what I’ve studied for thirty six years, And I’m always talking to my kids about money, and we’ll get to this point a little bit, but one night three years ago my middle son Grant says Dad, You need to tell all of our friends the story you keep talking to us about. So that’s why I’m so. I’m on this show this morning, So thank you for having me.

paul_tyler:
Well, First of all, please tell us about your book. Okay, I think this is the launching point because this actually is an answer. A great answer to the question that we. we had to struggle through.

dale_alexander:
So it’s funny when I go. it’s called the talk about money, and probably for obvious reasons, but why did you call it that? whenever I go speak at high schools or universities, it’s amazing if there’s an adult in the room, almost all of them come up and they universally say two things. Where were you when I was eighteen and our parents never talked to us about money? It’s almost always the two things that are here, and the third one is. what do I do if I didn’t do like you just said, How do how do Exit? but almost everybody says our parents never talked to us about money, and part of the reason is is most of us kind of didn’t get it right. And even if you’re going to talk to your kid about money, what are you going to tell them Hat Ar you goin to tel them to do? So you just leave that alone so I tell parents. Look, you got your talks about sex or jobs or morals or ethics or work or whatever it is, you know, but I’ll handle the talk about money. And so that’s why it’s called the talk about money. A young adults Add to the one decision that changes everything, Because there literally is one decision that changes everything, and I’ll explain that in just a second. So that’s kind of how it started. I’m always talking to kids about money, and several years ago when he said that I said, Get all your friends together when they came home from college, everybody came in this conference room here, work and we did it, and I said That’s kind of got legs, So started going around to high schools and passing out. this created this bracer, And my friend said, Write the books of Fox Business, Did the article, And now the State of George Lads places are getting

paul_tyler:
Yeah,

dale_alexander:
it for

paul_tyler:
we

dale_alexander:
kids.

paul_tyler:
want to hear about the success. Maybe you kind of

dale_alexander:
Yeah,

paul_tyler:
step back and school education, And you know what does the Crik look like today? and I’m going to date myself. My high school junior high experience was like, put on these like ugly, uncomfortable. You know, gym clothes and

dale_alexander:
Amen.

paul_tyler:
like, had to do the pegs. Like can imagine doing setting

dale_alexander:
Yeah,

paul_tyler:
kids to do these peg things Now

dale_alexander:
the

paul_tyler:
like

dale_alexander:
bags.

bruno_caron:
M.

paul_tyler:
right

dale_alexander:
that’s good.

paul_tyler:
and then the choice was

bruno_caron:
M.

paul_tyler:
either shop, and like you, worried about getting your finger cut off or do

dale_alexander:
Sure.

paul_tyler:
They had quote home economics Where you? actually?

dale_alexander:
yep.

paul_tyler:
I think they actually covered balancing checkbook, But it was like maybe

dale_alexander:
Yeah,

paul_tyler:
a chapter. Then, I mean, what do kids get today if they show up Like if you come through high school? Do you learn anything like

dale_alexander:
Well,

paul_tyler:
this?

dale_alexander:
this is this landscape. This is all changing. and because there are about seventeen to probably now, eighteen to twenty states that are mandating personal finance, Florida came out a year or so ago and mandated personal finance. Georgia came out last year. I believe in mandated personal finance. And so you got Michigan and other states that have done this. Tennessee is very successful In high school financial personal finance classes. And so this is changing and I don’t know if the run up in the markets, if if even crypto, the interest in Crypto, Green Light, Acorn Robin Hood apps. I don’t know what’s created this, but I just have heard a general sense of kids going. Why aren’t we learning this kind of stuff and high school and states are starting to hear this and they’ll stop. You know all state. We’ll start mandating this. You know, you’ve got states that have economic classes and they’re making that kind of become personal financial. I love this because we do, and it’s not hard to figure, out, as I’ll say, it’s just not hard to figure out if you’re young. It’s not hard.

bruno_caron:
So am I the one who has the honor of asking What is the one decision? I feel bad because you know, on some level, I say

dale_alexander:
Somebody

bruno_caron:
like

dale_alexander:
asked the question.

bruno_caron:
somebody has to ask you. I mean,

dale_alexander:
Ask me all right. I was going to say it, Bruno. Nobody would. Here’s the. here’s the thing. Everybody relate this. This change is grand children’s grand children’s lives. And like I tell all the kids in the auditorium, I’m gonna challenge myself and I’m gonna ask you. Did I tell you something that would change your grandchildren’s grandchildren’s lives? Here we go with the one. I say, financial decision. That’s the most important decision that you. But I’m going to change that and I’m going to Csay. It’s the most important life decision that you’ll ever make in your life, and it deals with money. Now you could pop back and say Dale, the person that I choose to marry is going to be my most important life decision and I would say that’s very important. but if we don’t get money right, half of our marriages are gone, and many of the other half of marriages that make it aren’t as great as they could be because of the Weight of money, and it’s not hard to solve. so here’s how you solve it. Think back if you were when you were eighteen, I saw sign the other day in a in a school that said Be the person you needed when you were younger right. So think back to when you were ighteen young adults with your eighteen, twenty, five, twenty four. You’re about to leave and go get your first real job, whether you talk of high school or whether it’s out of college. And you all remember when you got your adult job Where a lady named Doddy gave you some paper work to fill out Right And you got like insurance stuff right. You got a real grown up job, and when you got that first grown up job, you went from making nothing to the most money you’ve ever seen in your life. At least on a regular basis, you’re at zero and you went to making the most the biggest check you’ve ever gotten in your life, And I tell kids When you get that first job pay check instead of taking all one hundred per cent of it, I want you to stop and only take seventy per cent of it. Make seventy your hundred, and I want you to live and spend seventy per cent, and I want you to say invest twenty per cent and give ten per cent away. Look at me. I don’t care where you give it away. It’s not important. Give it away. I’ll come back to that point in a second. Make seventy, your hundred, Listen, seventy per cent of that first job pay check is still going to be the most money you’ve ever gotten in your life. You’re at zero. It’s still going to be the most money you’ve ever gotten in your life. And here’s why you can do it. and by the way you know what the average American does. We’re so cocky and arrogant about how much money we’re going to make. in the future. We go get credit cards and load up on debt and live on it A hundred and five per cent of that first job pay check. And I don’t care how much money. Well, I’m going to come out and make a hundred out. I don’t care. You’ll set your expenses at a hundred and five. It doesn’t matter how much you make. Don’t fool yourself. So here’s why you can. They can do this. They don’t have a standard of living established yet, and whatever number they accept as their standard, that becomes their reality. If you don’t know that seventy, It’s not a hundred. If you make seventy, your hundred from zero. That’s just a hundred. It’s just what you know. Here’s the thing. all of us live on some percentage of our pay check. Now imagine in your life if nothing were different when you go home today, Nothing in your check book. Nothing, the way you live is any different, But that had really been on seventy per cent of every check you’ve ever taken in you Adult life, And you don’t know any different. It’s just what you’ve been living on and are living on right now, but at seventy per cent of every check you’ve ever taken, and twenty per cent had been invested and ten per cent had been going out to the world, how our lives would be different, And here’s the most important thing I’m going to say in this whole pod, The most important principle. These kids have one shot to get this done. Because if you take three of those first job pay checks, three of them spending all one hundred percent of that check, you will never back down to zero. It’s you’ll say you will. You will never back down to zero. It’s impossible almost and you will live life like most of America, which is broke, stressed, angry and anxious because of the weight of money, And I don’t care how big the house is broke. And it’s one of the imagine. When you pay off a car lone the next month you’ve got five hundred free dollars. Don’t you found dollars free money? You can either immediately turn and use that for good or you can leave it alone, and in two months life has grabbed it and it’s gone and you can never get it back. This is that decision On every pay check for the rest of your life period, and you will never know any different because you’re at zero. Now I’m going to show you the example of that. Let me answer any questions you have. Hey, you ask for this, Paul, you pull this chain, Kay,

laura_dinan_haber:
No, I love this, so let’s pretend I’m sitting in my car. I’m driving. I’m listening to this podcast and I’m having a mild panic attack right? so I am an adult. I’m living on far more than seventy percent of my pay check.

dale_alexander:
I

laura_dinan_haber:
I

dale_alexander:
get

laura_dinan_haber:
love the

dale_alexander:
it

laura_dinan_haber:
example with the car, Lone, that found money. That feels good for anyone who has children and day care. That’s like a whole Next level found money. But is there anything else that listeners could do like is? are we just we’re going you know. Ride the debt boat The rest of our lives Or what can we do?

dale_alexander:
Okay and Laura. there’s really three things. Most adults in the room come up and say where you. When I was eighteen, Parents never talked to us about money. What do I do? I didn’t do this. What do I do? And most of you know most adults didn’t So if you didn’t there’s here’s the thing. Here’s what I say, first thought, first thing, every new dollar from the rest of you from This day forward, every new dollar that comes into your house, That car, a raise, a garage sale, every new found dollar that comes into your house, You never take more than fifty per cent. Look, you’re living on. You’re living where you are right now. Go back to the point. you’re living where you are now. And when the average American back to that car land when we pay off a Carline. What’s the first? What’s First thing the average person does. What can I go by now?

bruno_caron:
Get a bigger car.

dale_alexander:
the first. The thank you. The first thing we do is it’s it’s sick. We are creating our own illness in most, but we’re creating our problem and we’ve got to get to A. If I can just get to a place of just complace. Just be complacent. Even it’s for for a few years, for a few seasons, every every raise. It don’t take more than half of it. Don’t take any of it. And if my wife and I got to the point where you know, I just i said, let’s just try to not take any of our raises. Every. let’s just live where we are, And if you keep doing that when your two years, three years in the future, all of a sudden, you’re living on less and less of your income you’ve got when you’re in a whole, stop digging right. just first of all, just stop digging, but every new dollar right. That’s the Is thing you’re not going to take. Hopefully any of it for a few seasons. Second thing is, if you have a for one of four or three, be any kind of savings plan. You’ve got to get that money long term working hard for you. You’ve got to get that money working as efficiently as it can. So I’m telling these kids and we talk about the stock market. Risky is the stop market risky And so for a kid you know time, it depends on time perspective. Stpmarket is Start Market isn’t risky. If you’re taking about time. It’s by far the safest place to be. It’s not close. It’s up seventy three per cent of the time, and when it’s up, it’s up far more than it’s down. it’s not close. and so when you have time to work for you, you’ve got to get your money working harder, and that means getting it in the market in companies of great value companies, so get at work super charged. If you’re gonna save money, have it working hard for you, And so you know, and that’s all Rsonal decision, working with your planners, and after you study and you learn the truth about the market, you still may not feel good about it. That’s a personal decision with your advisors. But those couple of things and then I’d love to hear any other ideas. You all have you. where you work. You have pension plans anyways.

paul_tyler:
Okay, I’m gonna pull on one word. Actually, two words you mentioned. I think I think you

dale_alexander:
Good.

paul_tyler:
mention the second one, but it was implied in their time and habits. Habits are incredibly powerful. Habits over time are uh,

dale_alexander:
M

paul_tyler:
life changing,

dale_alexander:
A

paul_tyler:
So if I put just twenty per cent of my pay check away, Dale, how do those numbers work out? Do you happen to have have you done that calculation?

dale_alexander:
Wow.

paul_tyler:
Dale?

dale_alexander:
W. let me say. Well, let me say if I can find in, I do have it right here. Thank you, so that that that kid that I’m talking to and I start at twenty three, twenty three. If you started at eighteen, these numbers are much larger, so so let’s say you did this and if you have a child who is a young adult, getting, or you are young, and you’re starting your career, and let’s say you do what this crazy guy is saying and I’m going to start this example at a thirty six Housand dollar salary. Everybody in the room can achieve that every kid in the auditorium can achieve that. That’s a normal starting salary. I don’t care if your you work at U. P. S. Wall Mark. Teach law that to a factory that’s a normal starting salary in the United States. Everybody can achieve that. Okay, and I’m gonna start with the thirty six sousand dollar salary. I’m gonna give you some raises and I’m gonna have you living on seventy percent of that salary. and by the way, all this information is on my website, so everything Showing you everybody can find this, But you’re going a live on seventy per cent, and you’re going a invest, invest twenty per cent, and you’re going to give ten percent away at the end of your life, Working life, sixty seven, You will have given away four hundred and thirty seven thousand, given away, four hundred and thirty seven thousand dollars, and have five point two million dollars on a thirty six thousand dollars salary. That does, and that’s conservative, Does not care what kind of family you come from. It’s a principle and principals don’t care. It does not care if you have an education. It does not care what race what faith or what country you come from. It’s a principle and principles don’t care. Anyone with a plan can be one of the wealthiest most generous people in the world. and society has lied, certainly to kids today, Because this has lied to our kids today. This is a lie To us because people believe, and certainly youth believe that wealth is. Call it well, because you can be homeless and be rich. Wealth is reserved for this that they think this thin line that was lucky or inherited it. That’s not true. Most millionaires made it, and that that it’s reserved for this few, and that they can’t come to the table. That’s not true. It’s just the wealth have figured out how to have less going out than comes in, and they just they just learned this stuff. It’s not hard and this will be one of the easiest decisions these kids will ever make in their life. And they will drift is an important word. They will drift to being one of the most financially successful givers and savers in the world.

bruno_caron:
Well, that’s it’s quite powerful and any any parallel? I think the answer is yes, but I think a lot of these lessons can be can be applied for people in their working years, thinking about their their retirement. Of course, the more you save, not only have more dollars, but you get used to a lower base. So can you talk about that That exact same paradox for You know, younger younger folks getting into the work force with older for older folks getting out of the work for Sorry, the work force and that potential. that potential calebration of saving versus spending in retirement.

dale_alexander:
You know. it’s It’s even more. At’s a great point. It’s even more than that because just the psychological impact of living inside financial margin, as I tell these kids when, first of all, why would you ever give money? There’s a psycho. There’s a. There’s fascinating reasons. Why would you ever give? But just the fact of if if you’re people listening to this older people that when you don’t take that raise when you don’t take all that, And you know all that garage sale money, When you take that car note and you start turning it for good, there’s a mediate and immediate lift mentally internally with people When you start getting better inside financial margin. I think people are sick and tired of being sick and tired about just money issues, and they just they’re just trying. Let me say this. In the book I say this, most most money problems I’ve ever dealt with, they’re not money problems. Most money problems I’ve had were greed problems were envy, problems were keeping up with the Jones. Is there? By the way, their don’t keep up. We keep trying to keep up. Keep up. Itis. it was more than a money wasn’t a money problem. Until this there’s a great question when we start off true or false questions. And the last one is most Americans are rich. You just love to hear these kids answer that question. Most Americans are rich. It’s true, As you know, If you went to Kennangu, you went to Karema, Ken. If you went to Quambakenyou, went to Kennangu, You went with us in the innermost remote villages of Kenya, the deepest parts of Kenya, and you tell these kids, not you. I’ll tell kids if you have a job and you walk in that village and you tell them how much you, not your parents you make. They would look at you and go. Are you royalty? What kind of house do you have? I mean, if you have, If you ever put food into a disposal, you’re rich. If you, if your water doesn’t move on the top when you go get it, you’re rid our car garages. our cars have their own bedrooms. We’re sickeningly wealthy, And so it’s a young girl asked me one time, Bruno, a young girl in auditorium, she said, I can’t do that. I can’t live on seventy percent. I knew where this was going. I can’t live on seventy percent of my income. Usually when somebody says that we’re bringing a maro And reasons into that argument and she said I can’t live on sand on my income. First of all, she’s got a part time job and that’s not if she and I go tell me why you can’t live on sand. I knew where this was and she goes back left. She goes because it cost me a hundred dollars to get my nails done, and every kid and that auditor turned around, and with Oh, and take the Prince, just let her up. That is an American problem. that is not a money problem. That’s not a money problem. That’s a personal choice and most of us do it to ourselves. And and you, just if we can get complacent, my pastor said, one time you said this, Um, you never noticed the drift. You never noticed when you’re getting lost, but you noticed when you’re all I love the ocean. Have a place to jack, surfing And if you go out in the ocean or you serve, you’ve ever been in the ocean playing around. It’s fun. everybody looks playing in the ocean, and you get red. You go home and forty five minutes an hour out there you get ready to come back and you never noticed you’re a quarter of a mile down the beach. Have you ever noticed that you never realized when you were drifting? but you realized when you drifted, Didn’t you? That pass said, Nobody realizes when they’re getting lost, Everybody realizes when they are lost, and we’re just unaware about money, and it’s daily decisions that we make Bruno that that you get you get ready to go home, and your, you’re just, you’re a mile down the beach and I’ve always told my kids you know if you’re surfingorif you’re swimming. always have a reference point of home On the beach. always paddled back to home after the way, Angle, paddle back to home Because you need to know where your goal, Bruno, your goal. What’s your vision? What’s your goal Right? There’s four things you got to have you know, a passionate discontent about something, and and a powerful vision, or you will never change. You’ve got to be mad enough, but you got to know what you want to change for, or you’ll never have lasting change in anything. You’ve got to be passionately discontent, mad enough, but you got to know what you’re mad enough about you. Get those four things, you can stop drinking, you can stop smoking. you can stop doing anything in one day, if you’re mad enough and the vision is powerful, Dale. If you smoke One more cigarette, if you drink one more drink, you’ll never see your grandchild graduate. Done. I’m in Dot. It’s the same with money. I’ll shut up now.

bruno_caron:
That’s what we’re here for some.

laura_dinan_haber:
No, it’s fascinating and I think that the drift reference is a powerful one. Um, I guess my question would be in using the nails as an example, Because it’s interesting. right people define what is important to them based on their individual circumstances, and earlier in the conversation you held up your cell phone In my mind immediately went to social media. Right and the stories that are being told and curated from individuals and how

dale_alexander:
M.

laura_dinan_haber:
that can affect those receiving the messages. Shaking your head and I love it. Go ahead.

dale_alexander:
I did not ask you to ask this question, but

laura_dinan_haber:
No, you did

dale_alexander:
I’ll

laura_dinan_haber:
not.

dale_alexander:
send you. I’ll send you ten dollars afterwards. I answer that, Laura, two different ways. Number one is, why would I ever I cover this? Why would I ever give money away? Because I know these kids sitting here going. Im gonna answer it round about. Why would I ever give money And I know you all are the kids. I know you’re asking. What would you ever? Are you crazy? Here’s one reason why, And we got kids Dealing with anxiety, loneliness, anger, depression, even worse thoughts. and by the way, not to make light of that, we’ve always had that in society we’ve always had that it just shows up all the time, and every day now it just shows up more and quicker now. But one of the reasons why is because everything that we are look that and I’ll include me. He’s about to basshowstome. I don’t care. Just listen to what it’s doing. But what we are looking at much of the day. Do with this what you want. Just listen what we’re look In at every day. Much of the day is telling me to get more for myself, to keep more for myself, to hoard more for myself, and that the way to success and happiness today is by serving myself. It’s the world’s greatest lie, And if you want a life of peace and hope and happiness, it’s about becoming second and serving others. the mind. It’s impossible to feel hopeless when you’re giving hope. the mind doesn’t allow itself to feel hopeless when because there are even chemicals, a reward system built into our brains, dopamnoxitos, and ceratone, and endorphans. When you do something good, you get a reward for doing that good thing. chemicals get released in your brain Here. The second reason that you want to release what this is lying to us about is because the law of reciprocity is John Maxwell says, Because the world rewards people that are givers because you can never out. give what you out. get. hang on. Hang on in my world, I’ve seen The more I try to give away, the more I’ve seen Just come back financially. I’m not. I’m not. I’m not going to preach that. I mean, that’s just what I’ve seen, but here’s the thing. The more you try and out, give the world gives more back. Why? Because everybody wants to be The person that’s a giver. This is where people have gotten lied to. Everybody wants a piece of a person that’s a giver Because they’re rare, People will ask you to business lunches. For your advice, they’ll ask you to serve on boards. they’ll take you to places you can’t imagine, because givers are rare and everybody wants to be around them and more will come back. But here’s the thing when I say you will get more than you give when you start giving, And this is the trick that kids don’t know and I tell them I go. You’re getting tricked Because here’s the trick What you want to get back when you start giving what I give tea, and I’m gonna get titled back. Here’s the trick When you start giving to you Don’t care what you want to get back changes Because everything about life changes when you start giving your perspective about life totally changes. And I’ve got some examples of what kids should do to just try this out. Just try this. There was a guy George Jenkins that founded public grocery stores. I said, Chain of grocery stores in the South East, very wealthy, very philanthropic and he was once asked how much would you be worth had you not given away so much money? Listen to this, he said, Probably nothing. He owed everything he had to what he gave away, because that’s how the world works and this is lying. And the second thing to answer your question, Laura is all we’re looking at is how light reels I tell these kids. You know what you’re looking at Here is not the truth. Every time you put something on here, Is it the best or the worst of what we’ve got? I mean, do you post something on? Her hair is got nappy and you got on that terrible dress That beats looks nasty and car is messed up right. You got a little bit of what you know. You know what I’m talking about. All we post is the best and it’s not true. It’s not true all year. Seeing is how light reels, but Laura. to answer your question, everybody has to keep up because they think they’re going backwards and they’re chasing something that’s not real. You ever seen a great trailer for a movie and you go see the movie and it’s terrible. It’s because you got played and all you saw was the best and it wasn’t true, And this is killing us financially relationally emotionally psychologically. it’s tearing us up Heart and it’s not true, so I’ll leave that

paul_tyler:
All right, No, you know it’s It’s true. By the way before I can post anything in Dale and my family, it has to go through a whole review process Committee says. no, yes, no, no, not that

dale_alexander:
You have been denied

paul_tyler:
denied. So

bruno_caron:
Yeah,

paul_tyler:
my editorial committee is very. You know, the there. they kind of say. That’s that’s the way of the world. So we’re close to

dale_alexander:
Should

paul_tyler:
the

dale_alexander:
be.

paul_tyler:
end of the time. So another real

dale_alexander:
Yeah.

paul_tyler:
simple question, how’s the book being received?

dale_alexander:
So A M. When I did that first taught that night with about fifty kids in this room is pizza all down the hall Over there. it was crazy and I went the kind of Facebook live thing and it locally kind of went viralandiwent. man, This is kind of got this kind of got legs and started going to high schools and that they were getting crowded in the book came out and it kind of went crazy And then Um, I started talking to schools and then Miami Dade County Schools. I’m talking to them and they go. We want twenty five thousand at Miami Day. Listen to this for their ninth graders, not their seniors for their ninth graders. And I said, What’s that about? He goes? They’re about to start getting money. I won’t have to know this principle when they start getting money. I thought it’s brilliant. So there twenty five thousand actually being delivered this week, And then Fulton County, Atlanta, where I am started. They called and wanted seven thousand. And And and then this week the State of Georgia Department Board of education. The state of Georgia Is sending out. We’re sending out one hundred and twenty thousand. This book is about to go to one hundred and twenty thousand seniors in the state of Georgia. Every kid in the state of Georgia is going to get this book and it’s a timeless principle. I’ve got a call later with a large Texas school that went four thousand five hundred for all of their seniors, And I just think to answer your question. it’s just it’s It’s wider than I thought. But here’s here’s the thing. There’s three Eight million seniors in the state in the United States. there’s three point eight public school high school seniors in the United States. I just think this decision can change a generation’s giving and saving habits where there’s no hope. I just think it’s hope that any kid can see they can be one of the wealthiest most generous people in the world. And if I can tell you how I close in an auditorium, could I tell you how to do that

paul_tyler:
Please?

dale_alexander:
and I’ll close with this. Imagine you’re in an auditorium and I’m speaking to you in your high school Till kids. this, Everybody look at me and know that’s hard. but everybody look at me and focus for one minute. Because here’s what’s going to happen in thirty thirty years. I want you to imagine you’re in this back yard, this huge backyard. Its massive home is back here, and there’s a oak tree and pine straw and a flower bed and this gorgeous zaga grass. And maybe you’re looking at A at a marsh or a mountain. a beach City. I don’t know what you’re looking at. It is gorgeous back yard and the kids running around all over the place and you’re in an atarundeck chair and one of them runs up and jumps up in your lap. Look at me. Remember this moment. You’re going to remember this like it was yesterday and you’re going to laugh when you say this and they grab one of the little kids, grabs your face and they pull you right up to their face and they go. come on, how did you do all this? Remember this moment and you’re going to go. I remember, He even said I would laugh at how fast it happened, but I remember a long time ago in my high school auditorium. This little short, all heat. It kind of creepy, but it kind o came to my high school and he said, If I would make seventy, my hundred, he said everything about my life would change. he said my marriage would change Your vacations. how my kids act, the opportunities mature, he said, my grandchildren’s grandchildren’s lives would change on one decision in my life, and I don’t know why, but I believed him, and that baby girl is how we have all this, and a friend of mine came to a high school one day and I’ve never looked. He goes. Can I say something and he walks down front and he goes In thirty years. One of you is going to get in your private jet and flat to Jacksonville Beach and sit on Net Marsh with M. Dale, and thank him for what he told you today N went. That’s all I got, man. I appreciate you.

paul_tyler:
Wow, Dale. thank you.

bruno_caron:
Got to be a nice

paul_tyler:
this

bruno_caron:
beach

paul_tyler:
is.

bruno_caron:
there.

paul_tyler:
what. What a way to start morning, Okay, Bruno.

dale_alexander:
I’ll

paul_tyler:
Yeah,

dale_alexander:
I’ll tell you this of three hundred kids in an auditorium. You won’t see one phone. I don’t mean that this arians. Just what it is. You won’t see one phone come out of three hundred kids. They’ve just never heard any any hope like this, So I just want people to understand there’s hope out there and it’s easy.

paul_tyler:
Bruno. you’re an author. Your passion about these final thoughts,

bruno_caron:
Well hope, I think that it’s a very very powerful ending message. And so I think there’s a lot of a lot of lessons from from that particular point of view, and that that suggestion and not just for the young ones, of course for the young ones, because that’s that’s where that’s where habits are formed, but also for everybody else at all other other stages. In some ways, retirement is a little bit like Two. where you kind of going through this this transformation, different habits, different way of thinking different, you know, different relationship with money, so I think so, thank you. thank you for coming.

dale_alexander:
More than welcome.

paul_tyler:
Laura,

laura_dinan_haber:
You know. I usually love to ask the question. What is your? why? Why do you wake up every day and do the work you do? And I feel like we. We received a percentage of that answer. But is there anything else you’d like to add to the work? and your? why?

bruno_caron:
Yeah, we only got seventy percent of it,

laura_dinan_haber:
Yeah,

bruno_caron:
so

laura_dinan_haber:
I

paul_tyler:
Uh,

laura_dinan_haber:
need the other twenty in the ten.

paul_tyler:
uh,

dale_alexander:
Um, I’ll get emotional, but anyways, I mean, you know, I’m called to just love others right and my kids will ask me in an auditorium. Why are you doing this and I say, Does it look like I’m having fun up on this stage? You know, this part of my career of going around and paying out of my pocket to stay in hotels, To drive and leave my family and buy these grocers and books, and give that you know this is the greatest part of my entire career is spending money and time doing this. Doesn’t look like I’m having fun, but it’s the greatest part of my life and you know just somebody said. Do you get tired of signing books? Are you kidding me? Are you kidding me? And so it’s just one of the great parts. It’s part of giving. When I say giving changes your perspective about everything, But you know I’m called to do that. Um, it’s the greatest part of my career right now

paul_tyler:
Hey, well, listen,

dale_alexander:
and I just want. I just want kids to know what’s worked in my life and I just want to go if you got an answer to a problem and you don’t tell. It is sick. So got to do my part.

paul_tyler:
Dale, thank you, thanks so much. How do people find your

dale_alexander:
I was just going to say, Can I tell where

paul_tyler:
yea,

dale_alexander:
everybody can

paul_tyler:
and we

dale_alexander:
find

paul_tyler:
will

dale_alexander:
this?

paul_tyler:
put this in the show note, but tell them the website or the name.

dale_alexander:
So it’s it’s It’s easy to talk about money dot com and it’s got everything. The link to the book, the trailer video, The whole less, this whole lesson is online. You don’t have to watch by the book. The whole lesson is online fifty five minutes. The whole thing you can watch the whole thing. This broer is under lesson notes, So you can print out this broer. Everything is there and also get started, which is the link that I teach kids Get directly in the mutual funds and I’m not a broker, so I can’t. I can’t make money on anybody, but I need. I want to get kids started investing because once they send twenty dollars to a mutual fund it’s on. They start talking differently. They got. they get different friends. They just want to find out if it’s up or down and everything changes. Everything is on the talk about money Dot com,

paul_tyler:
Excellent. All right, well, Dale, we’ll put the link there. How do we find you on Tik Tok?

dale_alexander:
Dude,

paul_tyler:
I’m sorry. I had to ask you this.

dale_alexander:
Uh,

bruno_caron:
Uh

dale_alexander:
uh, Instagramcertainly,

paul_tyler:
It’s a grab. Okay.

dale_alexander:
Facebook, I mean, that was a layupfacebook

paul_tyler:
Okay,

dale_alexander:
Instagram,

bruno_caron:
huh,

dale_alexander:
linked

paul_tyler:
yeah,

dale_alexander:
in, Linked in, I

paul_tyler:
Yeah, okay,

dale_alexander:
call my son my kids. I don’t know.

paul_tyler:
Okay, all right, I predict.

dale_alexander:
Instagram

paul_tyler:
yeah,

dale_alexander:
and Facebook.

paul_tyler:
Listen, I predict you’ll be there. I predict you’ll be there.

dale_alexander:
Help help me,

bruno_caron:
M, hm.

dale_alexander:
help me,

paul_tyler:
Okay.

dale_alexander:
help you, help me,

paul_tyler:
all right, hey, Listen, this is a great show. Thank you, everyone, De Lara Bruno. Thanks four listeners. Give us feedback, suggest guests. This is the kind of discussion we like to have and listen like us. recommend us to your friends and join us again next week for another episode of that annuity show. Thanks,

dale_alexander:
Thank you all.

paul_tyler:
Stopping stopping, Laura. can you stop it?

laura_dinan_haber:
Yeah, I just clocked it. It’s doing the same for.

Episode 181: Diversification Isn’t a Risk Management Plan Anymore with David Lau

February 10, 2023 2023, David Lau, Podcast, Retirement No comments

The use of annuities by RIAs continues to grow. David Lau, one of the leading pioneers in the space, joins us today. David is the founder and CEO of DPL Financial Partners. We talk about the opportunities and challenges of “poking the bear” – and creating better retirement plans for clients in the process.

Links mentioned in the show:

https://www.dplfp.com/team/david-lau

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Episode Transcript

paul_tyler:
Hi.

ramsey_d_smith:
My.

paul_tyler:
This is Paul Tyler, and welcome to another episode of that annuity show. And today I think we’ve got a really interesting topic, but I’ll let Ramsey do the intersin a secon. Say, how are you.

bruno_caron:
Yeah.

ramsey_d_smith:
M.

tisa_rabun_marshall:
Good morning.

bruno_caron:
Yeah.

paul_tyler:
To.

tisa_rabun_marshall:
Doing.

paul_tyler:
See.

tisa_rabun_marshall:
Good.

paul_tyler:
You.

tisa_rabun_marshall:
Good to.

paul_tyler:
Bruno.

tisa_rabun_marshall:
See you, too.

ramsey_d_smith:
M.

paul_tyler:
Bruno. It feels like Canada here in New.

ramsey_d_smith:
Oh.

paul_tyler:
York. Today I.

ramsey_d_smith:
Oh.

paul_tyler:
Just had to take the trash in the mail out and it was. I think Winchell is like maybe zero or something. That’s a.

bruno_caron:
Okay.

paul_tyler:
Warn.

bruno_caron:
Well.

paul_tyler:
For you. right.

bruno_caron:
Well, Canada here is minus forty.

david_lau:
Here’s.

bruno_caron:
And.

david_lau:
Minus forty.

bruno_caron:
Celsus.

paul_tyler:
Yah.

bruno_caron:
Or Faronite is the same.

david_lau:
And I.

bruno_caron:
So.

ramsey_d_smith:
Oh.

david_lau:
Am, though.

paul_tyler:
H.

bruno_caron:
Pick whichever you want.

david_lau:
Whichever you.

paul_tyler:
All right.

david_lau:
Want.

bruno_caron:
So not not shedding.

david_lau:
No.

bruno_caron:
Any tears.

david_lau:
Not shedding.

bruno_caron:
Here.

david_lau:
Any tears.

bruno_caron:
Oh.

paul_tyler:
Right.

david_lau:
Here.

paul_tyler:
So.

ramsey_d_smith:
Yeah.

paul_tyler:
Ramsey, we don’t even ask. But.

ramsey_d_smith:
M.

paul_tyler:
Do you want? We’ve got a great guest. Do you want to set this up for us.

ramsey_d_smith:
Sure. well, first off Bruno. I think it’s probably like eighty degrees, eighty to ninety degrees warmer here in Atlanta.

bruno_caron:
No comments.

ramsey_d_smith:
Very thankful for that up we are.

david_lau:
Oh.

ramsey_d_smith:
We’re very honored to have joined us today, David Low, the founder in Co of D Financial Partners, I would say this has. this has been a long time coming, Where this is Episode in.

david_lau:
M.

ramsey_d_smith:
Eighty one, And we’ve been doing this for a few years, and and really really glad to have David join us today, because he’s been.

david_lau:
M.

ramsey_d_smith:
Really one of the most.

david_lau:
Yeah.

ramsey_d_smith:
Important innovators.

david_lau:
Yeah.

ramsey_d_smith:
And disruptors in this space over the last several years, His experience in the space goes way back. so David. I’ll let you sort of fill in. You know some of the things that you’ve done. You can really go back to eat rat. All the things that have led up to your founding deep financial partners in the last several years.

david_lau:
Yeah, well.

ramsey_d_smith:
Oh.

david_lau:
First, thanks so much for having me on. I’m really happy to to talk with all of you and look forward to the conversation.

ramsey_d_smith:
Oh.

david_lau:
Like I said, I’m.

ramsey_d_smith:
Yeah.

david_lau:
Actually, I’m not.

ramsey_d_smith:
Oh.

david_lau:
An insurance guy. I’ve kind of been insurance.

ramsey_d_smith:
Yeah.

david_lau:
For a little while now, but you know I didn’t.

ramsey_d_smith:
M.

david_lau:
Grow up an insurance guy. I am. You know more on that innovator side for really, with a thesis of driving better consumer value. So my first foray into into financial services was I was the chief marketing officer of the first internet bank in the country.

ramsey_d_smith:
M.

david_lau:
And the thesis was Let’s how do we.

ramsey_d_smith:
Oh.

david_lau:
Bring better value to consumers, And the idea was pretty simple in its conception, which is, we’ll get.

ramsey_d_smith:
Ye.

david_lau:
Rid of branches.

ramsey_d_smith:
M.

david_lau:
Right. So branches are just expensive, efficient ways of distributing and servicing products. And that was a pretty radical idea in the.

ramsey_d_smith:
Oh.

david_lau:
Mid nineties when we did that, but it was usually successful because we could provide much better value products. You to the end consumer, you triple the now the savings rates, you know, quadruple the C. D rates. I mean much much better value than you could get from your big bank. And you know.

ramsey_d_smith:
M.

david_lau:
We really drove a lot of innovation throughout the banking. You know the banking world. When we did.

ramsey_d_smith:
Yeah.

david_lau:
That, everybody had to start offering online services. They could.

ramsey_d_smith:
Yeah.

david_lau:
Match our pricing, but they had to have bill payment, and Et cetera et Cetera, We then merged with trade, so.

ramsey_d_smith:
M.

david_lau:
To know Segu into a trade.

ramsey_d_smith:
Oh.

david_lau:
Where I was then the chief marketing officer there for a bit, and that was a similar thesis, so culturally we had the same backing. and but the inefficiency that each rade was attacking was.

ramsey_d_smith:
Oh.

david_lau:
Transactions and transaction transactional fees. You know, which are you know, were so high back in the day. If you know people can of rum ber, you have to remember the times we were in you. If you wanted to trade a stock through your broker, it might cost you three hundred bucks.

ramsey_d_smith:
My.

david_lau:
Right So you know each rade then comes along and swab and some others, and all of a sudden it’s twenty Lars.

ramsey_d_smith:
Oh.

david_lau:
Um, and that was super disruptive.

ramsey_d_smith:
Oh.

david_lau:
And you know, after being at a trade for a bit, I started you consulting around the globe for people looking to build internet banks from, helped build the first internet bank in Japan, you know, with Say bank, and you help Mary Lynch here domestically build an online bank.

ramsey_d_smith:
Oh.

david_lau:
But ultimately consulting, you know, isn’t very fun. Um, you’re writing a lot of term papers in the way. Looked at it, I never really a term paper guy. I’m much much more a doer, So I rejoined the founder of the original bank.

ramsey_d_smith:
Oh.

david_lau:
To form an insurance.

ramsey_d_smith:
Oh.

david_lau:
Company called Jefferson National.

ramsey_d_smith:
Yeah.

david_lau:
And when we looked to bring consumer value in insurance, specifically in the nuit space, You look. how do you do that? It’s not bricks and mortar. It’s actually its distribution costs. it’s it’s commissions, it’s wholesaling, it’s state dinners. It’s all the proverbial stuff that it goes along with annuities, which really drives.

ramsey_d_smith:
Yeah.

david_lau:
The price up. So you know, we launched a.

ramsey_d_smith:
M.

david_lau:
No load insurance product.

ramsey_d_smith:
Oh.

david_lau:
It was the first ever flat fee.

ramsey_d_smith:
M.

david_lau:
Variable annuity in the industry. It was twenty dollars a month, and basically you got tax defer for for twenty dollars a month. you know, super simple product.

ramsey_d_smith:
Oh.

david_lau:
And you know you’ve got to. When you take out the commission, you’ve got two options. You.

ramsey_d_smith:
Yeah.

david_lau:
Can go direct to consumer, or you can go through advisors who don’t accept commissions, which is r. I. S. So we decided to launch through r. I. S built that business over the course of a decade, and you know, very successful going into the R A market, but didn’t see the kind of change that we saw with the bank. So what we saw was a few.

ramsey_d_smith:
M.

david_lau:
Other insurance carriers offering copy.

ramsey_d_smith:
Oh.

david_lau:
Cat products, rather than carriers coming out with all their own version of commission free versions of their best products, they thought Okay, The key to the R. A world is this, You know, really simple investment, only variable annuity. It’s.

ramsey_d_smith:
M.

david_lau:
Like, No, Actually, we’re just a small carrier and that’s all we really can do. Um, Rather than this is.

ramsey_d_smith:
Oh.

david_lau:
The best thing to do.

ramsey_d_smith:
M.

david_lau:
Um. so.

ramsey_d_smith:
M.

david_lau:
That kind of transition ultimately to launching d. p. l.

ramsey_d_smith:
So tell us a little bit about what you’re doing.

david_lau:
Yes.

ramsey_d_smith:
Specifically in D. P. So what is your.

david_lau:
Yah.

ramsey_d_smith:
What is your target audience? And you know and first and foremost, and then sat, And you, now, what are some of the things that you’re trying to change in the industry both with that target audience and with the insurance carriers themselves.

david_lau:
Yeah, so d, p. L is a two sided market place, so we work with carriers on one side to help bring commission free.

ramsey_d_smith:
My.

david_lau:
Products to market.

ramsey_d_smith:
Oh.

david_lau:
And work with R. S. And you know and consume is on the other side to help.

ramsey_d_smith:
Yah.

david_lau:
Them. you find and use these commission free products. And basically the.

ramsey_d_smith:
Oh.

david_lau:
Starting point was saying you know, not only does.

ramsey_d_smith:
Oh.

david_lau:
The insurance industry need to evolve, you know, the insurance industry in terms of offering No load products, is literally decades behind the rest of financial services. You know, we’ve.

ramsey_d_smith:
M.

david_lau:
Long ago moved away from shares in the mutual fund World shares. Um, you know, the insurance world just didn’t know.

ramsey_d_smith:
Oh.

david_lau:
How to handle going. No load. you know, it’s that’s hugely disruptive.

ramsey_d_smith:
M.

david_lau:
To their distribution, so they didn’t really.

ramsey_d_smith:
M.

david_lau:
Know how, Because.

ramsey_d_smith:
M.

david_lau:
I could see that from my you point of view at Jefferson National, They didn’t. They didn’t really know what they were.

ramsey_d_smith:
M.

david_lau:
Doing, So we launched by originally consulting for a number of carriers. I knew I needed products. You know there. There just weren’t products available, You.

ramsey_d_smith:
Yeah.

david_lau:
Know for you, r. I. S. so we wanted to get a.

ramsey_d_smith:
Oh.

david_lau:
A base line of products big enough to have an actual market place and launch, and we needed the carriers to.

ramsey_d_smith:
M.

david_lau:
Do certain things to be supportive of that. They have to support feed billing, then paying commissions. they have to you know, support an advisor of record on a policy where they’re used to only having an agent. You all kinds of different things like that.

ramsey_d_smith:
Oh.

david_lau:
So it’s kind of this need where r is historically have just been asset managers. Um, And you know.

ramsey_d_smith:
Yeah.

david_lau:
We all know asset management is commoditized.

ramsey_d_smith:
M.

david_lau:
At this point, there’s not a whole lot of value in aging assets. You know. That’s probably worth a ten basis point fee. Um, so.

ramsey_d_smith:
Yeah.

david_lau:
R. S, over the last decade have really started now migrating.

ramsey_d_smith:
Yeah.

david_lau:
Their business to be more holistic to start, you know.

ramsey_d_smith:
M.

david_lau:
Doing financial planning and wealth management, you know on top of asset management, and in order to do that, you need insurance and you need it in now, ideally in a fashion that responds with your business model which is feed based right, So they need no load products, So we really.

ramsey_d_smith:
Oh.

david_lau:
Set out to drive. You know, the creation of no load products in the insurance world for r. I. s were supposed to be feduciaries.

ramsey_d_smith:
M.

david_lau:
Um, you know with their clients, so they can now use these.

ramsey_d_smith:
Oh.

david_lau:
Products without conflict of interest. It was always a conflict to be clear. you know, for.

ramsey_d_smith:
Yeah.

david_lau:
R. A. if they wanted to recommend an annuity that was lost revenue for them, you have to be a really hard core feducier to do that and let me tell you there aren’t too many of them. So.

paul_tyler:
Oh.

ramsey_d_smith:
M, ah.

david_lau:
It’s uh, you know, it’s been you know that kind of mission because ultimately it’s you again for me. Driving consumer value is, let’s bring better value products. Let’s give advisors better ways to serve their customers and help deliver better outcomes.

ramsey_d_smith:
M.

paul_tyler:
So.

ramsey_d_smith:
Yeah.

paul_tyler:
Dave. this is. This is great to have you on the show. Um, the markets interesting. Uh, you.

ramsey_d_smith:
M.

paul_tyler:
Know, you know some of these markets where you know Think you know the business models structured.

ramsey_d_smith:
Oh.

paul_tyler:
One way. It tends to attract certain people with certain attitudes about products and annuities. has.

ramsey_d_smith:
M.

paul_tyler:
Been afford.

ramsey_d_smith:
M.

paul_tyler:
Word you know, for a lot of these.

ramsey_d_smith:
M.

paul_tyler:
People.

david_lau:
Yes.

paul_tyler:
How do you think Break down in your head? How do you break down the R. A space? What percent you know are never ever going to recommend an annuity Versus you know, this percentage actively is.

ramsey_d_smith:
M.

paul_tyler:
Including.

ramsey_d_smith:
M.

paul_tyler:
In the practice.

ramsey_d_smith:
Oh.

paul_tyler:
In this one in the middle are sort.

ramsey_d_smith:
M.

paul_tyler:
Of saying. Well, let me see.

david_lau:
Yeah, so I mean, there’s a lot to that. It’s a great question. So one. you have the traditional R A market, So let’s let’s talk about the market for a minute. The R a market when I lane, you know, the product that Jefferson National Two Thousand Fifteen was collectively about.

ramsey_d_smith:
M.

david_lau:
Six hundred billion dollars in assets under management. Today it’s about nine trillion, So this is the direction the advisory world is going right. and about six trillion of that is that that original R. A, who never used annuities, couldn’t take commissions, but about a third of it is. Now you know what’s known.

ramsey_d_smith:
Oh.

david_lau:
As break aways, hybrids. You know people who, who may have traditionally.

ramsey_d_smith:
M.

david_lau:
And likely have traditionally used annuities.

ramsey_d_smith:
My.

david_lau:
Now at a broker, but now they’re use an r. i a for the rest of their asset management. So there’s you. So there’s a few different types within there, But you now speaking directly to the A traditional r. I. a Um, you know, in one sense and Ram, so you can probably relate. You launch.

ramsey_d_smith:
Oh.

david_lau:
You know, a product to this world, and you’re like Okay, They’re feduciaries.

ramsey_d_smith:
Ye.

david_lau:
They’ll get edgy ated.

ramsey_d_smith:
M.

david_lau:
You know, they’ll get educated on it.

ramsey_d_smith:
Yeah.

david_lau:
They’ll understand how to use it. They realize.

ramsey_d_smith:
Oh.

david_lau:
It’s best for consumers. Um.

ramsey_d_smith:
Oh.

david_lau:
Yeah, this will be super easy, right, No, it’s not you. You’re breaking habits. And and you, you’re breaking down all kinds of things. And it’s not simply about the product. it’s about the business process. Right. How does this work into my asset management world? You know T’s not. I’m just selling an annuity. Now it’s I’ve got a portfolio. How does it fit in the portfolio? What does it replace.

ramsey_d_smith:
Oh.

david_lau:
How do I think about this? Where does it show up in my.

ramsey_d_smith:
Oh.

david_lau:
Oft wear? How do I build on it? So it’s it’s this big evolution.

ramsey_d_smith:
M.

david_lau:
So I, you know, I cut them a lot of breaks because it’s not like just buying a mutual fund now right and you type in a ticker symbol And now you’ve gotten a new an annuity.

ramsey_d_smith:
M.

david_lau:
So it’s It’s still.

ramsey_d_smith:
Oh.

david_lau:
A little hard. but you getting you know those barriers are getting broken down every day and I think it’s much like launching a new technology. Where get the.

ramsey_d_smith:
Oh.

david_lau:
Early adoptors. You get the people who get it right away. They’ve read the academic research they know weighed foul.

ramsey_d_smith:
M.

david_lau:
Whatever.

ramsey_d_smith:
Oh.

david_lau:
They know, That annuities are better for their clients and are really strong within a financial and retirement plan, And it’s now they can do it in in a way that’s not a conflict for them. And then.

bruno_caron:
Ah.

david_lau:
You start getting to the the fast.

bruno_caron:
Ah.

david_lau:
Followers And and I think we’re.

ramsey_d_smith:
M.

david_lau:
Kind of.

bruno_caron:
Yeah.

david_lau:
Just getting into the fast follower now phase Frankly.

bruno_caron:
Ye. no. I think that’s.

ramsey_d_smith:
Yeah.

bruno_caron:
That’s really good and I really.

david_lau:
Really.

ramsey_d_smith:
M.

bruno_caron:
I really.

david_lau:
Yes.

bruno_caron:
Echo. What what you just said on? You know, it’s an annuity. How does it fit in my soft ware? How do I think about that and.

david_lau:
And.

bruno_caron:
You know I’ll ask a question.

david_lau:
I’ll.

bruno_caron:
To.

david_lau:
Ask.

bruno_caron:
You. Let’s.

david_lau:
You. Let’s.

bruno_caron:
Obviously, we have.

ramsey_d_smith:
Yeah.

bruno_caron:
You know.

ramsey_d_smith:
M.

bruno_caron:
Variable annuities have account values and we can, actually you know, somewhat relate a little more to that. Uh, but when you have, let’s say a pure lifetime income product. Let’s a pure spa That gets you a stream of income.

ramsey_d_smith:
Oh.

bruno_caron:
For the rest of your life.

david_lau:
Right.

bruno_caron:
It does not have.

david_lau:
Not.

bruno_caron:
An account. Lu.

david_lau:
But.

bruno_caron:
How do you put that in the software? How do you think about it? In turn, do you think about it as income.

ramsey_d_smith:
Oh.

bruno_caron:
Is it an asset? even if it doesn’t have an account value? Like? what are.

david_lau:
What are the.

bruno_caron:
What are.

ramsey_d_smith:
Oh.

bruno_caron:
The boundaries.

david_lau:
A.

bruno_caron:
In the.

david_lau:
Boundary.

bruno_caron:
Framework that you advise.

david_lau:
I.

bruno_caron:
Advisors to, you know, to look at.

david_lau:
Okay.

bruno_caron:
Those particular products.

david_lau:
So so.

bruno_caron:
Oh.

david_lau:
The other important part.

ramsey_d_smith:
Oh.

david_lau:
Of what we do which will blend right into this is.

ramsey_d_smith:
Oh.

david_lau:
We build technology. So from.

ramsey_d_smith:
Yes.

david_lau:
Again, my seat at Jefferson National, I knew, in order to really work real adoption within the R. A world, annuities, insurance.

ramsey_d_smith:
Oh.

david_lau:
Really had to work within their desk top. You know.

ramsey_d_smith:
Ah.

david_lau:
It had to function within the portfolio management system You had to be able to build. You had to be able to see the assets. so we built technology. which one does product discovery. So you don’t need to know anything about annuities. You just tell us what you’re looking to do will show you the best products to accomplish that. But then we partner with, you know, the leading portfolio management.

ramsey_d_smith:
Oh.

david_lau:
Systems within the R A world we’ve got already know. we’ve got partnerships with you over fifty percent.

ramsey_d_smith:
Yeah.

david_lau:
Of the now the R A market through their portfolio management systems, And there, now you can see you know those annuity products within the portfolio. Even with the variable annuity, you’re going to see the underlying account.

ramsey_d_smith:
Yeah.

david_lau:
So if you were managing.

ramsey_d_smith:
Oh.

david_lau:
To sixty forty, now you can make sure.

ramsey_d_smith:
Oh.

david_lau:
You’re doing it even with the annuity Ou know, with.

ramsey_d_smith:
Oh.

david_lau:
The annuity investments you know, and.

ramsey_d_smith:
My.

david_lau:
Of course, Bruno, you go to the trickiest one. Probably the spa. The So you know, the.

bruno_caron:
Yet.

david_lau:
Spa you know can more easily be represented in some ways in the planning software, So you can represent the income stream.

ramsey_d_smith:
Oh.

david_lau:
You know, in someone’s planning software within portfolio management system. It’s a little more tricky. You can do it through, you know, showing like a commuted value.

ramsey_d_smith:
M.

david_lau:
Just you have a sense.

ramsey_d_smith:
Oh.

david_lau:
Of.

bruno_caron:
Ah.

david_lau:
That. That’s still an asset there right. I mean, one of the now, one of the hold backs for consumers or even advisors in recommending or buying spies. Is that all this? I had two million dollars.

bruno_caron:
Oh.

david_lau:
All of a sudden. I have one million dollars.

bruno_caron:
Yeah.

david_lau:
It’s gone.

ramsey_d_smith:
M.

david_lau:
Right. So.

ramsey_d_smith:
M.

david_lau:
Can I see that now? And.

ramsey_d_smith:
M.

david_lau:
If we.

ramsey_d_smith:
Yeah.

david_lau:
Can at least show you a community value that helps with, helps with that.

ramsey_d_smith:
M.

david_lau:
But but that is, that is a trickier one. For sure.

bruno_caron:
Ah.

tisa_rabun_marshall:
David. You talked about.

ramsey_d_smith:
M.

tisa_rabun_marshall:
Being in this sort of fast follower.

ramsey_d_smith:
Um.

tisa_rabun_marshall:
Phase right? So.

bruno_caron:
Yes.

tisa_rabun_marshall:
My question to you is what.

ramsey_d_smith:
M.

tisa_rabun_marshall:
Are you seeing next in the.

ramsey_d_smith:
Yah.

tisa_rabun_marshall:
Space disruption.

ramsey_d_smith:
Yah, M.

tisa_rabun_marshall:
Innovation? What are you anticipating as being kind of the next behavior that we’re trying to shift.

david_lau:
Yeah.

tisa_rabun_marshall:
And change for the eyes. Yeah.

ramsey_d_smith:
Yes.

david_lau:
So so at Jefferson National, Now I launched the product, which was now investment only variable annuity. We had four hundred investment options right and the model was kind of.

ramsey_d_smith:
Oh.

david_lau:
Charles Swab. Once you know, so swab, the dominant custodian within R. a market.

ramsey_d_smith:
M.

david_lau:
One sources their mutual.

ramsey_d_smith:
M.

david_lau:
Fund platform. Basically we said this is one source with tax defer, Um, And you know, so leverage asset location.

ramsey_d_smith:
M.

david_lau:
Is much better. You. You’re goin t get much better results for your consumer, Much better for accumulation.

ramsey_d_smith:
Oh.

david_lau:
And nobody.

ramsey_d_smith:
Ah.

david_lau:
Did that right. and nobody did that Because.

ramsey_d_smith:
M.

david_lau:
It was too.

paul_tyler:
Ye.

david_lau:
Hard. It didn’t operate within the portfolio. All the things I was just talking Abou.

ramsey_d_smith:
Yes.

david_lau:
It was just too hard.

paul_tyler:
Oh.

david_lau:
I mean, conceptually.

ramsey_d_smith:
M.

david_lau:
Everybody could get that, but how do you rebalance how do you do this? It was just too hard. So what people know what R as did was they used it for ten thirty five exchange, and it really became.

ramsey_d_smith:
Oh.

david_lau:
Primarily a ten thirty five exchange vehicle, Meaning my client owns an annuity that somebody sold them. I can’t get paid on that annuity.

ramsey_d_smith:
M.

david_lau:
Because it’s commissioned. let me roll it over into a much lower cost product that saves the client a bunch of fees. And so that is the dominant way that R. s used annuities.

ramsey_d_smith:
M.

david_lau:
It was simply, you.

ramsey_d_smith:
H.

david_lau:
Know, regardless of what benefit might have been in there, I mean you’re you’re.

ramsey_d_smith:
M.

david_lau:
You’re going to make sure you’re.

ramsey_d_smith:
Oh.

david_lau:
Not doing harm to the consumer.

ramsey_d_smith:
Yeah.

david_lau:
In that ten thirty five change, But you know the consumer may have bought that annuity because they wanted the income guarantee.

ramsey_d_smith:
Oh.

david_lau:
But the R then would typically sell them against the income.

ramsey_d_smith:
Yeah.

david_lau:
Guarantee. Don’t worry about the income guarantee. You’re going.

ramsey_d_smith:
Yeah.

david_lau:
To do better if I just reduce your costs, and we know and we let the assets grow further, So that was the primary use. So when we first.

paul_tyler:
Oh.

david_lau:
Launched four and a half.

ramsey_d_smith:
Yah.

david_lau:
Years ago, that was.

ramsey_d_smith:
Yeah.

david_lau:
Again.

ramsey_d_smith:
Yeah.

david_lau:
The primary use, just like you would.

ramsey_d_smith:
Yeah.

david_lau:
Expect you. Now tell me about ten thirty five. Give me the cheapest product you have, and that’s where our education starts, so we’re like Okay. We’ll talk to you about ten thirty five, but let us show you an income solution here. let us show you what happens when we use this for income, and let us show.

ramsey_d_smith:
Oh.

david_lau:
You in your plan And and then we even have a tool which is like my favorite tool. Ever.

bruno_caron:
M.

david_lau:
Know? We built us this tool that’s in a.

ramsey_d_smith:
Oh.

david_lau:
Fixed income comparison too. So tell us what you’re getting on your fixed income. Tell us what kind of income you’re looking to generate for your client retirement. Now, let’s compare it to the annuity, and the annuity kills it almost every time. right unless.

ramsey_d_smith:
Yeah.

david_lau:
Somebody’s being dishonest about their returns and their fixed income portfolio, so it’s a. It’s a great way to start showing that.

ramsey_d_smith:
M.

david_lau:
Proof point. You know it’s the. It’s the academic research come to life right when we know annuities are.

bruno_caron:
Oh.

david_lau:
More efficient at generating income. You know that’s been proven. You know eight thousand ways for a hundred years, right, and now you.

ramsey_d_smith:
Ah.

david_lau:
Know we’ve got a tool.

ramsey_d_smith:
Oh.

david_lau:
That’s going to know. Just show you.

ramsey_d_smith:
Yeah.

david_lau:
In actual real terms.

ramsey_d_smith:
Yeah.

david_lau:
Real products. You know for real.

ramsey_d_smith:
M.

david_lau:
Clients.

bruno_caron:
Ah.

david_lau:
You how much better it’s going to be.

bruno_caron:
Ah.

david_lau:
And it’s not close.

paul_tyler:
Yeah.

tisa_rabun_marshall:
Okay.

paul_tyler:
So I have a question on fixeindexnuities and the future of no load. F. I is, but we’ve talked a lot about this, you know, in our some of our products You sessions. Um, So if I’m r, a okay and I.

ramsey_d_smith:
Oh.

paul_tyler:
Do, my my client, advisor or advisor, agree with Tis.

ramsey_d_smith:
Oh.

paul_tyler:
How do I.

david_lau:
Yeah.

paul_tyler:
Charge? How do I charge for managing this this annuity? Right now. there are three options. I’d see. one is, this is going to be technical for people who are listening. One.

ramsey_d_smith:
Yeah.

paul_tyler:
Is your cat value right.

ramsey_d_smith:
Yeah.

paul_tyler:
Okay, put in a hundred thousand dollars. What is a girl? Well, a lot of these.

ramsey_d_smith:
Yeah.

paul_tyler:
Designs.

david_lau:
Yeah.

paul_tyler:
Actually. Now, really, the account.

ramsey_d_smith:
Oh.

paul_tyler:
Value is almost more of a get your money back. The.

ramsey_d_smith:
Yeah.

paul_tyler:
Benefit base, To be a little more precise, is where quoteanquote accumulation happens, So I could link it advisor agreement to the benefit base. Now Michelle Rector, we had a real interesting discussion.

ramsey_d_smith:
Oh.

paul_tyler:
I’m not sure if this would be practical. I could somehow link it to.

ramsey_d_smith:
Oh.

paul_tyler:
The income that I’m generating, and that might link back to the the Spa discussion.

david_lau:
M.

paul_tyler:
David. How are you seeing R? S do it today? And A D you think? What do you tink? They’ll do tomorrow. Terms of wrapping this the charges up.

david_lau:
I think. I mean today. For sure, they do it on account value, So you.

ramsey_d_smith:
Oh.

david_lau:
Know it’s looked at just like any other investment.

ramsey_d_smith:
Yeah.

david_lau:
You know this is you.

ramsey_d_smith:
Yeah.

david_lau:
Invested in your example.

ramsey_d_smith:
Oh.

david_lau:
Paul, the hundred thousand dollars.

paul_tyler:
Oh.

david_lau:
And you know, as it.

ramsey_d_smith:
Oh.

david_lau:
Grows, I’m gonna bill against the account value, which I think is is a fair thing to do.

ramsey_d_smith:
Oh.

david_lau:
Right So we, You know we want to make sure.

ramsey_d_smith:
Yeah.

david_lau:
That we’re not creating dis incentive. Some R, say, should I build less for this? Should I not build for this? It’s like no build the same that you would for any other.

ramsey_d_smith:
Oh.

david_lau:
Product you’re going to use within the portfolio, Because there should not be any dis incentive to use one product over another, whether it’s a mutual fund or.

ramsey_d_smith:
M.

david_lau:
An annuity or a bond or whatever you have.

ramsey_d_smith:
Yeah.

david_lau:
Um. So there, So that’s how they use it today, and I think until their model changes and there is you know there is.

ramsey_d_smith:
Oh.

david_lau:
Actually movement in that, then it will. I think it will continue to be just built as an acid.

ramsey_d_smith:
Yeah.

david_lau:
Under management.

ramsey_d_smith:
Oh.

david_lau:
Um. But you know there are.

ramsey_d_smith:
M.

david_lau:
Conflixes.

paul_tyler:
Yeah.

david_lau:
We know with the assets under management.

bruno_caron:
Oh.

david_lau:
Fee. Um. now, some of which were touching on already, but you see some movement.

bruno_caron:
H. oh.

david_lau:
In the way, R. S. Bill, But until that happen, if they build on a Um, they’re going to build those products like a M.

paul_tyler:
Okay, related.

ramsey_d_smith:
M.

paul_tyler:
Question, which is you know? classes of F. I, A, so.

ramsey_d_smith:
M.

paul_tyler:
First ten years, fifteen years. Everybody was kind of like. You know, each write something for okerageaccounts. So.

david_lau:
M.

paul_tyler:
These products really work.

ramsey_d_smith:
M, oh.

paul_tyler:
All about guaranteed income, you know, flat out.

ramsey_d_smith:
M.

paul_tyler:
Guaranteed income Guaranteed. then along.

ramsey_d_smith:
Oh.

paul_tyler:
Comes the bill market.

ramsey_d_smith:
Yeah.

paul_tyler:
And you see a huge class of these F. I is that you know, are for our linked to different industries, You know, some proprietary, some not proprietary. What’s the head set for the R A S? Are they going to? Are they more tracted more to towards the income products and saying, Hey, listen to Isa. Let me just take this money away.

ramsey_d_smith:
Oh.

paul_tyler:
Put a hundred percent.

david_lau:
Yeah.

paul_tyler:
Income.

ramsey_d_smith:
Yeah.

paul_tyler:
And I’m going to let your money run and grow it in this, the money.

ramsey_d_smith:
M.

paul_tyler:
Man. I’m gonna these these.

ramsey_d_smith:
Oh.

paul_tyler:
Other accounts, or am I going to try and.

ramsey_d_smith:
M.

paul_tyler:
And do blended option.

david_lau:
Yeah, I mean we see both. you know. Originally it was you know for us, and maybe it was you know. Because of the product mix we had was more about income because those are really good income products. Um, you know, particularly when you know they’re low cost and you know you’ve got pretty high pay out rates. Then you know we’ve gotten as the bond market kept going down. even though the rates.

ramsey_d_smith:
Oh.

david_lau:
Within those products, you aren’t attractive as.

ramsey_d_smith:
Oh.

david_lau:
Attractive as they are today.

ramsey_d_smith:
Oh.

david_lau:
Still relative to bonds, much more attract. So then.

ramsey_d_smith:
M.

david_lau:
We’ve seen a lot of adoption.

ramsey_d_smith:
Ye.

david_lau:
As accumulation vehicles, and also, because, as you know the downside protection aspect of it right, this is a good way of diversifying your fixed in. Uh, you know with with a different kind of.

ramsey_d_smith:
H.

david_lau:
Return characteristic.

ramsey_d_smith:
H.

david_lau:
You know.

ramsey_d_smith:
Oh.

david_lau:
We know that you know. interest rates do dictate the kinds of return so you can get in the product, But it’s not your turn isn’t driven by the interest right. So if you’re creating a fixed income portfolio, you know F. you’re buying bonds or whatever other fixed income, it’s all driven.

ramsey_d_smith:
Yeah.

david_lau:
By interest rates. So now, actually you got the performance of an index that will drive your return. You know, the capacity for that return is driven by the interest rates, but it’s a great diversification. you know from the investment side.

ramsey_d_smith:
Yeah.

bruno_caron:
Oh, thanks. and if I, if I can go back to the retirement.

ramsey_d_smith:
M.

bruno_caron:
Income part, I think it’s very encouraging to see and hear you talk the.

david_lau:
Take.

bruno_caron:
He technology.

david_lau:
Technology.

bruno_caron:
That.

ramsey_d_smith:
M.

bruno_caron:
You’ve built.

david_lau:
That you.

bruno_caron:
And.

david_lau:
So.

bruno_caron:
All of that.

david_lau:
All.

bruno_caron:
That.

david_lau:
Of.

bruno_caron:
You’ve.

david_lau:
That.

bruno_caron:
You know, you’ve put towards the you know, the return and income.

ramsey_d_smith:
M.

bruno_caron:
What is your strategy? What is your secret sauce? On bringing the message across to clients to retire to people and make them understand.

ramsey_d_smith:
Oh.

bruno_caron:
That whole value.

ramsey_d_smith:
Oh.

bruno_caron:
Proposition.

david_lau:
I’ll give.

bruno_caron:
That whole trade off that whole need, that very fundamental need that this this.

david_lau:
Ye.

bruno_caron:
Can potentially bring.

ramsey_d_smith:
M.

david_lau:
Well, if you’re if you’re going to drive change.

bruno_caron:
Oh.

david_lau:
You can’t be. You can’t be complacent about it. You’ve got to be pretty brazen.

bruno_caron:
Yeah.

david_lau:
And you.

ramsey_d_smith:
Oh.

david_lau:
Know that kind of fits my personality anyhow. but.

bruno_caron:
Oh.

david_lau:
You know I will. I will push the envelope.

bruno_caron:
Oh.

david_lau:
You know.

ramsey_d_smith:
M.

david_lau:
I’m a contrary, and I’m going to push the envelope. I’m not gonna know. Let you get away with, you know, saying things that are false run true. and we know these things.

ramsey_d_smith:
Yeah.

david_lau:
Are good for are good for consumers. they’re.

bruno_caron:
Oh.

david_lau:
Good, they’re good for retirement, they’re.

bruno_caron:
Oh.

david_lau:
Good for financial plans. they’re good to protect assets. There are so many.

bruno_caron:
A.

david_lau:
Benefits. you know.

ramsey_d_smith:
M.

david_lau:
You can’t be all in one way or another. It’s not all you know for a client. it’s.

ramsey_d_smith:
M.

david_lau:
Not all about insurance. it’s not all about.

bruno_caron:
M.

david_lau:
Investments.

bruno_caron:
M.

david_lau:
It’s a blend that gets you your best.

ramsey_d_smith:
Oh.

david_lau:
Outcome. And so you know, when you’re trying to.

ramsey_d_smith:
Oh.

david_lau:
Change a market, you’ve got to. you’ve got to be provocative. So you know.

ramsey_d_smith:
Yeah.

david_lau:
I tend to be provocative. The technology we built was intended be provocative. You know, In other ways, it’s just intended to be really helpful. right, The fixed fixed income comparison Til specifically is intended to be provocative. This is. this will show you the actual.

ramsey_d_smith:
M.

david_lau:
Value of an annuity.

ramsey_d_smith:
M.

david_lau:
And tell me you can. We even had an advisor say I can’t unsee this right. So that’s what. That’s your ideal. You know you’re you’re. You’re poking the bear. You’re getting to take a look and then, and in a good Fo, you want that good feducier to say I can unsee this. Teach me more. How do I use these for my clients? And you.

bruno_caron:
M.

david_lau:
Know that’s you know. That’s what we’re going through And you know I do it. We do it through the technology. I do it when I talk. I do you. I write a lot of articles. Haven’t written a book like you, Bruno.

bruno_caron:
Yeah.

david_lau:
Yet, but I know I like it.

bruno_caron:
Oh.

david_lau:
A lot of articles and I tend to. I try to be.

bruno_caron:
Oh.

david_lau:
Provocative to shake up the status quo because that’s the biggest thing you’re dealing with human nature of you know, they’re complacent Particularly over the last fourteen. It’s where we had a nice bull.

bruno_caron:
Yeah.

david_lau:
Market. Super easy to be complacent if you’re an R. A making a one percent fee. as the.

bruno_caron:
Yeah.

david_lau:
Markets just going up and up and up.

bruno_caron:
Yeah.

david_lau:
Um, Now you know, in order to drive change.

bruno_caron:
Yeah.

david_lau:
You’ve got to be I could ave.

bruno_caron:
Yeah, Ramsey, you’re.

ramsey_d_smith:
So I am munt now right, sorry about that. So David, listening to you talk about the thing in comparison till it reminds me of a lot of conversations I had over the years, and I would. I have to say that I was surprised to that I had to have the conversation in the first place, because it sort of it’s math and it seemed.

david_lau:
Yes.

ramsey_d_smith:
To be sort of should have been part of the basic skill set of maybe some of the folks I was aling to Um. and and even some people who saw it still couldn’t quite get their heads around it. Um, but it sort of leads me into this. This this question I have is that you know position you’ve taken and ultimately know you’re challenging people on both sides. You’re challenging R. As to do things differently, you’re talking about sort of the elements of their existing services that are commoditized. You’re challenging, also, sort of traditional distribution in an insurance as well, and identifying.

david_lau:
That’s right.

ramsey_d_smith:
The parts of what they do that are commoditized and by the way, fully supportive Here on the same pages you one gets resistance when one has those messages like where have where have you gotten? Is there any audience where you’ve gotten like the best possible feedback? Where have you gotten the most? Where you’ve been most welcomed. And where s the most resistance come from? Maybe that’s what I’m trying to get.

david_lau:
Yeah.

ramsey_d_smith:
At.

david_lau:
Well, that’s great great question. so I know sometimes.

ramsey_d_smith:
Oh.

david_lau:
You know carriers will bring me to their distribution.

ramsey_d_smith:
M.

david_lau:
Events so I can.

ramsey_d_smith:
M.

david_lau:
Take arrows instead of that.

ramsey_d_smith:
Yeah.

david_lau:
Um, you know, talking, talking about getting.

ramsey_d_smith:
Yeah.

david_lau:
Rid of wholesalers.

ramsey_d_smith:
Yeah.

david_lau:
And a whole.

ramsey_d_smith:
Oh.

david_lau:
Saling costs.

ramsey_d_smith:
Yeah.

david_lau:
And driving to technology and stuff like that, But I mean the best I get, and I do hear it.

ramsey_d_smith:
M.

david_lau:
A lot and I’m not.

ramsey_d_smith:
Yeah.

david_lau:
Doing it Like to pat myself on the back of is not the.

ramsey_d_smith:
Yeah.

david_lau:
Way I look at it is. you know, I hear like from.

ramsey_d_smith:
M.

david_lau:
R. I. S a lot. I hear thank you like, thank you, and.

ramsey_d_smith:
M.

david_lau:
You’re doing God’s work. I’ve heard.

ramsey_d_smith:
M.

david_lau:
That quote many times and like.

ramsey_d_smith:
M.

david_lau:
I absolutely don’t look at it that way. All I take that to mean is what we’re doing is hard working with insurance carrier, working with insurance carriers Their hard. It’s.

ramsey_d_smith:
M.

david_lau:
It’s hard. not that they’re unwilling.

ramsey_d_smith:
M.

david_lau:
But you know they’re big battleships and it takes time to make change. It’s a lot of work. We spent a lot of time on it.

ramsey_d_smith:
Oh.

david_lau:
So that the you know that’s the best feedback I get. And and you, now that’s invigorating. Um, and.

ramsey_d_smith:
M.

david_lau:
Then hearing from r.

ramsey_d_smith:
Oh.

david_lau:
I. S, who are who are the converts right? That’s that’s great. We’ve got.

ramsey_d_smith:
Yeah.

david_lau:
Now of our. As we use.

ramsey_d_smith:
Oh.

david_lau:
You know for events for media. Whatever who’re like.

ramsey_d_smith:
Yeah.

david_lau:
Yeah, I used to be the four letter word annuity.

ramsey_d_smith:
Oh.

david_lau:
Person, Never an annuity, And I’ve.

ramsey_d_smith:
Oh.

david_lau:
Seen the light, and not only have I seen like when I talked to my clients about it. I love. I love the reaction I get right. So those that’s super rewarding. But you know frankly it’s and the resistance is mostly from the commission, people, you commission distribution, people, who you know.

ramsey_d_smith:
Oh.

david_lau:
I get into.

ramsey_d_smith:
Yes.

david_lau:
This flawed.

ramsey_d_smith:
M.

david_lau:
Argument all the time.

ramsey_d_smith:
Oh.

david_lau:
With them that I, what if you layer an advisory fee on top of the product than you know? the products aren’t always better than than the commission products.

ramsey_d_smith:
Oh.

david_lau:
It’s a ridiculous argument. It would be to say that the advice model shouldn’t ist at all. Like if you put a hundred basis point advisory.

ramsey_d_smith:
Oh.

david_lau:
Fee on a five basis point Vanguard, h.

ramsey_d_smith:
M.

david_lau:
T. f.

paul_tyler:
Oh.

david_lau:
It’s also worse. You know, we’re more expensive for the client, right, It’s diff and it’s about the product. The product is materially better. You know the price. you have a choice of whether you pay an advisory fee. The commission and distribution expense are built in to commission products, and it’s a material to the tune of eighty per cent cheaper.

ramsey_d_smith:
M.

paul_tyler:
Yeah, well.

ramsey_d_smith:
M.

paul_tyler:
The agencies are.

ramsey_d_smith:
Oh.

paul_tyler:
Offices.

david_lau:
Oh.

paul_tyler:
Or advisers who managed to transition their practice to some sort of a assets under management type agreement, David. their worth lot more. Well, why doesn’t everybody do it? The transition is really tough. Have you seen you know any really.

ramsey_d_smith:
M.

paul_tyler:
Good success stories where somebody has gone from, Sort of the commission model. You mentioned Breakaway, R. S. I’ve seen them too.

ramsey_d_smith:
Oh.

paul_tyler:
Where.

david_lau:
Yep.

paul_tyler:
I was his anuity agent.

ramsey_d_smith:
Oh.

paul_tyler:
You know, retirement.

ramsey_d_smith:
Ah.

paul_tyler:
Advisor. Now, I’ve got half my business here, half my business there. What’s the best bridge strategy to get there.

david_lau:
Ah, that’s and we help lots of.

ramsey_d_smith:
M.

david_lau:
People do that, So we’ve got another another tool. That is our annuity comparison tool. You can look up any annuity that’s you’ve got in force. You look it up by carrier by writer. Whatever, We’ve got a digital product catalogue that models like thirty five hundred annuities, and you know forty thousand writers and hundreds of thousands of price points. You can immediately look up those annuities. Do.

ramsey_d_smith:
Oh.

david_lau:
A comparison to a fee based, Find out if you can improve it for the client. you generally can, Um. and you know, regardless of whether it’s under wall, quote and quote underwater, and that’s a way of starting to transition. Uh, you know that that old book and then then, frankly, you know a lot of the reason, as we were talking about earlier that people have remained hybrid are not transition.

ramsey_d_smith:
M. oh.

david_lau:
Fully. Is there just weren’t products to do it.

ramsey_d_smith:
M.

david_lau:
You know, there were up until.

ramsey_d_smith:
Yes.

david_lau:
You know five years ago there were a handful.

ramsey_d_smith:
M.

david_lau:
Of products there. probably investment.

ramsey_d_smith:
Oh.

david_lau:
Only variable annuities. If you were a believer in annuities, and user of annuities, you.

ramsey_d_smith:
M.

david_lau:
Know, for your clients, you.

ramsey_d_smith:
M.

david_lau:
Didn’t have inventory right so there, as there are no products to work with, And I would say there’s been massive improvements you know, in the products. in terms of the offer, the construction, the support for being no fee building, lots of what.

ramsey_d_smith:
Yeah.

david_lau:
We call fee friendly products these days, so it’s really pretty new that you can do that. Make that transition.

ramsey_d_smith:
Oh.

david_lau:
With relative ease. You know, just.

ramsey_d_smith:
Oh.

david_lau:
A few years ago it would be super difficult.

ramsey_d_smith:
All right. Well, so one of the things that as been very interesting in this throughout this conversation, David, is that Um, you know there, there’s a lot that that can change. a lot that probably needs to change and it’s really not just about products. it’s about sort of experience. If I look at the almost everything you you’ve talked about right, it’s It’s really about working towards people’s sort of culture the way they do business, their business processes. Uh, you know, so, as you as you think about as you think about, like what it’s going to take to sort of continue this this transition in this market. I mean, how much of it? How much of it do you think it’s products versus product versus process and culture.

david_lau:
I would say there are plenty of products. Now.

ramsey_d_smith:
M.

david_lau:
It’s all about.

ramsey_d_smith:
M.

david_lau:
It’s all about attitude, culture changing behavior. you know, which is why you know we still need to continue.

ramsey_d_smith:
Yeah.

david_lau:
To poke the bear. You know this, this past year has been a great example.

ramsey_d_smith:
Yeah.

david_lau:
And you talk to.

ramsey_d_smith:
Oh.

david_lau:
An R. A. What’s your risk management strategy for the portfolio? It’s diversification. Well, how did that work out.

ramsey_d_smith:
Yeah.

david_lau:
Um, not, No, not really. Well.

ramsey_d_smith:
Very poorly.

david_lau:
It was what David blanched called a hot mess.

ramsey_d_smith:
Yeah.

david_lau:
Um, So.

ramsey_d_smith:
Oh.

david_lau:
So there’s so you know, we’ve seen.

ramsey_d_smith:
Oh.

david_lau:
Really over the last twenty years, not just last year. Um. diversification is not a sufficient risk management strategy.

ramsey_d_smith:
M.

david_lau:
Anymore. You know, you really need to bring some insurance in and poke the bear. I mean, another way. we’ve been poking the bear pretty hard. Recent.

ramsey_d_smith:
Oh.

david_lau:
Is about the four percent rule. So.

ramsey_d_smith:
Yeah.

david_lau:
Many advisors.

ramsey_d_smith:
Yeah.

david_lau:
The four percent rule is the retirement.

ramsey_d_smith:
Yeah.

david_lau:
Plan. S. like, Guess what? That’s a really bad retirement plan.

ramsey_d_smith:
Oh.

david_lau:
So you, you know, for any number, we could do a whole show on that right, But it’s not a retirement plan. It’s a. It’s a guide line.

ramsey_d_smith:
M.

david_lau:
To A to a portfolio withdrawal. that should be a portion of a retirement plan. But now for a lot of r. s. that’s the holy. It’s it’s you know. that’s the guiding. The golden rule. this is.

ramsey_d_smith:
Yes.

david_lau:
You know, four percent rule safe withdrawal.

ramsey_d_smith:
Oh.

david_lau:
Rate. That’s my retirement plan.

ramsey_d_smith:
Oh.

david_lau:
And you know I love to point out that you know the originator.

bruno_caron:
Oh.

ramsey_d_smith:
Oh.

david_lau:
Of the Four Central Bill Bangin, You know who’s in this is about total return. Right’s.

bruno_caron:
Is.

david_lau:
Just use investments.

ramsey_d_smith:
Ye.

bruno_caron:
Yeah.

david_lau:
To fund retirement for anyone who, not following.

bruno_caron:
Yeah.

david_lau:
What we’re talking about, he couldn’t do it. he published. I saw, I saw an article in the Wall Street Journal.

ramsey_d_smith:
M.

david_lau:
About.

bruno_caron:
M.

david_lau:
A year ago, right.

ramsey_d_smith:
Ah.

bruno_caron:
M.

david_lau:
He’s nine years into retirement and it was one of.

ramsey_d_smith:
M.

david_lau:
These typical articles, The four.

ramsey_d_smith:
Oh.

david_lau:
Person, the founder of the Four percent rules, As you know.

ramsey_d_smith:
Yeah.

david_lau:
I should be using a lower rate now, But the.

ramsey_d_smith:
Yeah.

david_lau:
Gem in the story was, he said that he was so worried about the markets that he’s moved to.

bruno_caron:
M.

david_lau:
Twenty percent equities and ten percent bonds and seventy per cent cash. It’s like Hey.

ramsey_d_smith:
Yes.

david_lau:
Guess what. That’s not Following the four percent rule. You got to stay at least fifty.

bruno_caron:
Oh.

david_lau:
Percent equities, preferably seventy five. Um, and so.

bruno_caron:
Ah.

david_lau:
To expect clients.

bruno_caron:
Ah.

david_lau:
To be able to do that, which is what.

bruno_caron:
Yeah.

david_lau:
All advisors say. Hey, just stomach the market Ey Just just you know. Hey.

bruno_caron:
Oh.

david_lau:
This is just a down turn.

ramsey_d_smith:
Oh.

david_lau:
You stick with it. you know it’s going to be.

ramsey_d_smith:
Oh.

david_lau:
Fine. You’re going to come out the other end and and even the guy who’s the biggest advocate, the creator.

bruno_caron:
Yes.

david_lau:
The four percent rule couldn’t do it in retirement. So how about we start thinking.

ramsey_d_smith:
Oh.

david_lau:
About a different.

bruno_caron:
Oh.

david_lau:
Idea.

ramsey_d_smith:
Oh.

david_lau:
You know, Let’s let’s.

ramsey_d_smith:
Oh.

david_lau:
Talk about all the not only financial but psychological benefits of an.

ramsey_d_smith:
Yeah. The.

bruno_caron:
Oh.

ramsey_d_smith:
The hegemony of the four percent rule in that space is staggering and we spent a lot.

bruno_caron:
Oh.

ramsey_d_smith:
Of time talking about it on the show. We had weighed on and a bunch of others, David and we had Bill bangin himself on the show a while back, and he shared some of the same things that you said. I think.

bruno_caron:
M.

ramsey_d_smith:
With To be fair, though, I think it’s a great sort of. I think it’s a great.

bruno_caron:
Oh.

ramsey_d_smith:
Sort of starting for a conversation like we all need, sort of like an anchor to start with. I think for that it has been.

paul_tyler:
Oh.

ramsey_d_smith:
Enormously valuable to the entire personal finance space, but to blindly rely on it as is intellectually lazy and and not.

bruno_caron:
M.

ramsey_d_smith:
Not responsible. so we definitely share your share thoughts.

david_lau:
M.

ramsey_d_smith:
On that.

paul_tyler:
Oh.

bruno_caron:
And.

david_lau:
Ah, and.

bruno_caron:
I.

david_lau:
I’ve been.

ramsey_d_smith:
M.

david_lau:
Go ahead.

bruno_caron:
No, I think you said it really well. It’s like well, just stomach the market. You.

david_lau:
A.

bruno_caron:
Can do that during the.

david_lau:
A.

bruno_caron:
Accumulation.

david_lau:
Ring.

ramsey_d_smith:
Yeah.

bruno_caron:
Phase and you have like many.

david_lau:
That’s.

bruno_caron:
Years.

david_lau:
Right.

bruno_caron:
To.

paul_tyler:
Oh.

bruno_caron:
Come.

ramsey_d_smith:
Yeah.

bruno_caron:
For the the accumulation.

ramsey_d_smith:
Yeah.

bruno_caron:
It’s.

david_lau:
Leave.

bruno_caron:
Completely.

ramsey_d_smith:
Oh.

bruno_caron:
A different story.

david_lau:
I.

paul_tyler:
Yah.

david_lau:
Yeah, it’s I mean.

ramsey_d_smith:
Yeah.

david_lau:
And and basically what it’s It really speaks to psychology right and not.

bruno_caron:
Yeah.

david_lau:
Only you know just.

paul_tyler:
Oh.

david_lau:
You know.

ramsey_d_smith:
Oh.

david_lau:
From the academics of it. Yeah, you have time and duration for the market recovery when you’re when you’re in accumulation, but you know the mentality when you become the retirement is totally different, which is you know why we’re such huge fans of know the work that now weighs done with Alex G on the retirement income.

ramsey_d_smith:
M.

david_lau:
Style awareness.

ramsey_d_smith:
M.

david_lau:
So.

ramsey_d_smith:
M.

david_lau:
You know it’s not.

ramsey_d_smith:
M.

david_lau:
The advisor of forcing upon the client. This is the way I’m going to manage your retirement.

ramsey_d_smith:
Oh.

david_lau:
Which is basically I’m going O use.

ramsey_d_smith:
Oh.

david_lau:
All investments in a four percent rule And don’t worry. That’s the way it goes, and I’m going to manage you through it. It’s not going to be. We’ll just cut back you’re spending. Maybe you’re gonna have to sell your vacation home. We’ll have to cut back on things if it doesn’t go well, but don’t worry. I’ve got you well. that’s not the only option. And like how about having a way of letting the client tell you how they.

ramsey_d_smith:
M.

david_lau:
Like this. You know again, let’s be focused on the client, not me as adviser.

ramsey_d_smith:
Oh.

david_lau:
And so huge fans of of the Rica.

ramsey_d_smith:
M.

david_lau:
We bring it out to our.

ramsey_d_smith:
M.

david_lau:
Members in promoting that heavily, and you know love it.

paul_tyler:
Well.

ramsey_d_smith:
Oh.

paul_tyler:
I love it too is. so does Ramsey, Ramsey. I think you were one of the first people to grab on to that whole.

ramsey_d_smith:
M.

paul_tyler:
Framework which is great. We are.

david_lau:
S.

paul_tyler:
Sort of nearing the top of the hour, David. I love, Love, To quote a couple of things, poked bear love that diversification is not.

ramsey_d_smith:
Yeah.

paul_tyler:
A risk management strategy any more. I don’t know. I think we may have had some. Has some good titles.

ramsey_d_smith:
Yeah.

paul_tyler:
Here, Hetisa.

ramsey_d_smith:
M, m.

paul_tyler:
What any last thoughts.

ramsey_d_smith:
M.

tisa_rabun_marshall:
Ah.

paul_tyler:
Questions.

tisa_rabun_marshall:
I think I would go back to.

ramsey_d_smith:
Oh.

tisa_rabun_marshall:
The psypsychology of it all that.

bruno_caron:
Oh.

tisa_rabun_marshall:
You were just talking about David. I think.

ramsey_d_smith:
M.

tisa_rabun_marshall:
You know.

bruno_caron:
Yeah.

tisa_rabun_marshall:
Whomever the financial professional is that you’re partnering with. How are you going to add more value if I’m goin to have the conversation Versus just show up with the plan and say here, here’s how we’re going to do it.

paul_tyler:
Yeah.

tisa_rabun_marshall:
I think the other.

ramsey_d_smith:
M.

tisa_rabun_marshall:
Thing that shifted is that.

ramsey_d_smith:
M.

tisa_rabun_marshall:
Idea.

bruno_caron:
Oh.

tisa_rabun_marshall:
Of sort of set it and forget it, model like, just set it up and it will be there when I get there.

david_lau:
Yep.

tisa_rabun_marshall:
It’s revisiting it. It’s adjusting it.

ramsey_d_smith:
M.

tisa_rabun_marshall:
It’s you know, goals shift, new products.

paul_tyler:
M.

tisa_rabun_marshall:
Come out.

ramsey_d_smith:
Oh.

tisa_rabun_marshall:
Mark.

bruno_caron:
Yah.

tisa_rabun_marshall:
Change that on going.

bruno_caron:
H.

tisa_rabun_marshall:
Conversation, and the more you can add the value right and have the relationship, you can show up every year.

bruno_caron:
Oh.

tisa_rabun_marshall:
Every few years, and kind of check in. I think.

bruno_caron:
Yeah.

tisa_rabun_marshall:
Really building that trust. that relationship.

bruno_caron:
Oh.

tisa_rabun_marshall:
Is probably that value that we’re all speaking about.

bruno_caron:
Oh.

tisa_rabun_marshall:
As far as behavior changed.

bruno_caron:
Yeah.

paul_tyler:
Yeah.

tisa_rabun_marshall:
So.

ramsey_d_smith:
M.

paul_tyler:
And Bruno. you’re.

ramsey_d_smith:
Oh.

paul_tyler:
You were kind of like. You got just a kindred spirit here who also.

tisa_rabun_marshall:
Yeah.

paul_tyler:
Read your book.

david_lau:
Yeah.

paul_tyler:
What do you think? What are the take aways here.

ramsey_d_smith:
M.

bruno_caron:
Oh. well, I think.

ramsey_d_smith:
M.

bruno_caron:
We can.

david_lau:
In.

bruno_caron:
Definitely say that we found.

paul_tyler:
Oh.

bruno_caron:
We have multiple ideas.

ramsey_d_smith:
The.

bruno_caron:
For.

david_lau:
Des.

bruno_caron:
The title of the episode.

david_lau:
Don’t.

bruno_caron:
So you get poked, the.

paul_tyler:
Yeah.

bruno_caron:
Barry.

ramsey_d_smith:
Oh.

bruno_caron:
Provocative technology.

david_lau:
I.

paul_tyler:
Uh.

bruno_caron:
Now, Seriously, thank you David for coming in. I think.

david_lau:
Oh.

ramsey_d_smith:
Yeah.

paul_tyler:
Oh.

bruno_caron:
The work you do is phenomenal for the the entire industry. We.

paul_tyler:
Oh.

bruno_caron:
Certainly appreciate it, and we certainly appreciate having you on the how.

paul_tyler:
Yeah.

david_lau:
Yeah. I appreciate being here and again. Like for me, this isn’t about annuity, Like is.

ramsey_d_smith:
M.

david_lau:
Isn’t about.

bruno_caron:
Yeah.

david_lau:
Annuities about delivering best outcomes for consumers doing what’s.

bruno_caron:
Yah.

david_lau:
Best for consumers. annuities have, unfortunately, A, Had you know this stigma.

paul_tyler:
Yeah.

david_lau:
Driven by the rift created by commission, You like commissions. You love the products. you didn’t like commissions. you didn’t like.

ramsey_d_smith:
Oh.

david_lau:
The products.

bruno_caron:
M.

david_lau:
But academics.

bruno_caron:
M.

ramsey_d_smith:
Oh.

david_lau:
People who study ret, I mean research, love annuity.

ramsey_d_smith:
M.

david_lau:
Retirement, income.

ramsey_d_smith:
M.

david_lau:
And retirement, love annuities. That’s pretty much universal, so let’s get rid of that conflict so the consumer can benefit. you know. Let’s let’s bring you more annuities.

bruno_caron:
Oh.

david_lau:
Out through more channels and more avenues because people need them and we didn’t.

ramsey_d_smith:
Oh.

david_lau:
Even touch on how they know. the fact that retirement is.

ramsey_d_smith:
Oh.

david_lau:
A way more difficult problem today than was twenty years ago. M.

ramsey_d_smith:
M.

david_lau:
Longevity, lack of pensions, lower interest rates. You know all kinds of issues with retirement, So again.

ramsey_d_smith:
M.

david_lau:
I could keep going on and I know we’re at time, so I really appreciate you guys having me on.

bruno_caron:
Oh.

paul_tyler:
Ramsey.

ramsey_d_smith:
So David. that means well.

david_lau:
Okay.

ramsey_d_smith:
We’ll just have to have you back on some.

bruno_caron:
Oh.

ramsey_d_smith:
Time sometimes soon so we can do. Chapter two.

bruno_caron:
Yeah.

ramsey_d_smith:
Um, look.

david_lau:
Happy to do it.

ramsey_d_smith:
Yeah, thanks very much for coming on. and as I said it was, it was long overdue I’m glad we made it happen. I personally think you’re.

paul_tyler:
Oh.

ramsey_d_smith:
Focus on process and on substance.

paul_tyler:
M.

ramsey_d_smith:
And not on product are super important. I think they’re bare. the poke everywhere, right on the insurance side and insurance distribution, certainly among in the in the advisor space. And so thank you for everything you’re doing.

paul_tyler:
Yah.

david_lau:
Thank you guys again.

ramsey_d_smith:
Yep.

david_lau:
You know for having me on.

ramsey_d_smith:
My.

david_lau:
And and uhyoukwe’ll.

ramsey_d_smith:
Yeah.

david_lau:
Keep fighting a good fight.

paul_tyler:
Yeah, David.

david_lau:
Oh.

paul_tyler:
Thank you as well. And what’s the best.

ramsey_d_smith:
Oh.

paul_tyler:
Way for people to connect with you or find out more about your firm.

ramsey_d_smith:
M.

david_lau:
Go to the website D, p l, f, p dot com, d, p l. financial partners dot com.

ramsey_d_smith:
My.

david_lau:
Um, and you can get access to our tools, You know we’ve got. We’ve got six or seven.

ramsey_d_smith:
Yeah.

david_lau:
Different.

paul_tyler:
Yeah.

david_lau:
You know tools that can help you find best products to comparisons. All kinds of stuff like that, and you know, and connect with one of our consultants if you like, talk to somebody.

paul_tyler:
All right, Listen, thank you. thanks. Tis a Ramsey Bruno great.

bruno_caron:
Oh.

paul_tyler:
Show And think we want to thank our listeners. Uh, give us feedback. Send us ideas.

bruno_caron:
Oh.

paul_tyler:
For guests. Share the episodes with your friends.

ramsey_d_smith:
Oh.

paul_tyler:
And we’ll be back again next week with another episode of that annuity show.

Episode 180: Planning for a Purpose with Joe Jordan

February 3, 2023 2023, Joe Jordan, Podcast, Retirement 1 comment

Our guest this week is Joe Jordan. Do I need to say more? But I will. In today’s episode, we discuss how the insurance industry has progressed from a focus on sales to a focus on planning. Joe explains why he thinks the next step will be to focus on helping create purpose for our clients in retirement.

Links mentioned in the show:

https://joejordan.com

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Episode Transcript

paul_tyler:
I, this is Paul Tyler and welcome to.

ramsey_d_smith:
Oh.

paul_tyler:
Another episode of that annuity show. Bruno. How.

bruno_caron:
Oh.

paul_tyler:
Are you.

bruno_caron:
I’m very good. thank you. How are you.

paul_tyler:
Good? Tis great.

bruno_caron:
Good.

paul_tyler:
To have you here again.

tisa_rabun_marshall:
Thanks. good morning. everyone.

paul_tyler:
Ramsey. We’ve got great show lined up with a great guest. Do you want to talk about? Do the intro.

ramsey_d_smith:
Sure, so, as always, very happy to be here and delighted to be joined by one of the lions of our industry. Joe Jordan, Joe is somebody that’s been in the industry a long time. He started on Wall Street, and then had a very long and illustrious career at Met Life, and now he travels the world talking about what it means to be in this business and facing customers, and really kind of tying together.

paul_tyler:
H.

ramsey_d_smith:
Both.

paul_tyler:
H.

ramsey_d_smith:
The qualitative and the qualitative. Sorry, the quality, the quantitative reasons that we do what we do, And so his message is an important one. He just was telling us how he variously was in in the Middle West, then in the Middle East, and then back in the Midwest again, all in the space of about five days. and that is the. that is the life of Joe Jordan, travelling the world and spreading the message. So Joe, very glad to have you on today.

paul_tyler:
Sorry.

joseph_jordan:
Thank.

paul_tyler:
Joe.

joseph_jordan:
You for having.

paul_tyler:
Middle East, was that Ohio.

ramsey_d_smith:
Yeah.

joseph_jordan:
No, Is bay, rude man.

ramsey_d_smith:
Ye. yeah.

joseph_jordan:
I went from up state, New York, to Bay route, then to then to Kansas, City, then to then to New.

ramsey_d_smith:
Oh.

joseph_jordan:
Jersey, and then to know Braska, So that was quite a trip.

ramsey_d_smith:
So where should we? Where should we get started here? Joe? tell us. tell us a little bit about. You know where you see where you see the state of the world. One of the things that you talk about a lot is how the role of the role of an advisor is is changing How it may be different in the next ten or twenty years than it’s been in the last ten or twenty years. What are some of the reasons for that and what some one thinks you’re like, the highlight and your your discussions.

joseph_jordan:
Well, you know, my background, as you have stated was, I was a life age and I ran insurance sales at Pain Webber, And.

ramsey_d_smith:
Oh.

joseph_jordan:
Then there’s a lot of young.

ramsey_d_smith:
M.

joseph_jordan:
People out there.

ramsey_d_smith:
Oh.

joseph_jordan:
That is okay. it was. It’s a wire house on Wall Street, And then I went to Met Life and built their annuity business and had all retail product development. And then I got involved in the financial Anning organization, so I had a very good scope of what financial services look like. An. Frankly when I did it, as I did it, I wasn’t very pleased with it. I didn’t think we were. I don’t think we were as clients centric as other other industries were, and I thought there’d be consequences for that. So the tact I took originally was years ago Was I wrote a book, living a.

ramsey_d_smith:
M.

joseph_jordan:
Life of significance. I don’t think that we talk enough in our culture About the impact that we have out there is the impact that we have on people and the importance of what we do. You know, it’s all about us, and he and I think that’s why you got De l and all those others, So I’m trying to. I was trying to change the culture and talking more about. You know the importance of as I said, what we do, and one of the things that I neglected. as I didn’t realize, So I wrote Life a significance for advisors. What I didn’t know was that’s what clients want.

ramsey_d_smith:
Yeah.

joseph_jordan:
And you have a couple of things converging. You have this longevity, Sami. that is coming together. You know to me that to me that’s the biggest biggest issue the planet faces. I don’t think it’s global whelming. It’s the aging population of the world. The fact that you have a huge number of people who are older and are very small, and you have few babies being born. So you have small working age population with this massive retirement, then I think that’s the major issue And so if you think.

bruno_caron:
Oh.

joseph_jordan:
About it, that’s what our business does. It addresses that major issue that that we have. So.

ramsey_d_smith:
M.

joseph_jordan:
Again, I thought that was there and the other. The other thing that finally came together. And the problem with me is I’m pretty much a futurist, so I know what’s going to happen ten years from now.

ramsey_d_smith:
Yeah.

joseph_jordan:
It’s just Wednesday that I have a problem, you know, so sometimes I’m.

ramsey_d_smith:
M.

joseph_jordan:
Too far out in front of it, But one of the things that I’ve been I’ve been been talking about is this idea of purpose driven retirement planning, and I’ll tell you how it came to me. It started coming to me because I had one part of the formula for So for the other part of the formula started with Mitch Anthony, I don’t know a lot of you. I mean, he’s really a great visionary. Back in May.

ramsey_d_smith:
Oh.

joseph_jordan:
Of eighteen, he was in Financial Advisor Magazine and he talked about emotion driven Planning will accelerate soon. he said, The old premises. You have enough money In the new premise is, are you managing.

ramsey_d_smith:
Oh.

joseph_jordan:
Your money in a way that improves your life.

ramsey_d_smith:
My.

joseph_jordan:
So he was putting a priority on the way people live. And so that got my wheels turning. This was.

ramsey_d_smith:
Oh.

joseph_jordan:
Back in eighteen, and then it’s the idea of purpose driven retirement planning in the basically states is that those that retire to something, so listen, those that retire to something are happier than those people who retire from something. So all of all of the impetus that’s put behind our programs and everything is talking about the money. It’s the left brain. It’s the dollars and sense, it’s not about what’s meaning and purpose that you’re going to have, And that was the thing I was trying to enboandstill do with advisers. To.

ramsey_d_smith:
Oh.

joseph_jordan:
Say you know, you’re really virtually.

ramsey_d_smith:
Oh.

joseph_jordan:
Critical to the people you deal with. not just now from a standpoint if someone dies early or dies too soon, But now it’s the idea of living too long and without your tutelage, How are they going to get through this thing with it with an age wave that we’ve never experienced before, and one of the things that I’ve seen was that people, some people think that retirement will be this one pleasurable experience.

ramsey_d_smith:
M.

joseph_jordan:
And you see all the commercials. You know. They’re walking on the beach. You know, looking at each other. I like you know. the real thing is, you know, after six months of that stuff, they’re ready to put a gun to the head. You know, they get bored stiff and it’s there you know. one of the astronits said. At best he said, If you think going to the moon is hard, try staying home so so think about that, you know, and.

ramsey_d_smith:
M.

joseph_jordan:
And and and and it gets there. And you know.

ramsey_d_smith:
M, oh.

joseph_jordan:
I shouldn’t be searching for pleasure because pleasure cannot be sustained beyond the activity sustaining it. but happiness and fulfilment are sustainable, and so I think that people in the future.

ramsey_d_smith:
M.

joseph_jordan:
Are going to be looking for more than just the numbers. And so you know, I never come to these conclusions. The bell goes off and there it is. It’s always this journey. I think I’m You know, when you’re inspired, you know what? when you’re motivated, you drive it. When you’re inspired it drives you. So then then I ran across this thing from Mackenzey. It was a report.

ramsey_d_smith:
Oh.

joseph_jordan:
Two thousand twenty, and Mackenzie, said Tenue, As advisers will gradually shed their role as investment managers and become more like integrated life wealth coaches. And so what I think is beginning to happen is where the business begins to mortis, a tighter relationship and more in line with the things about print, preparing people for the fact that you’re going to have a major change in your life, and at all ain’t goin to be pleasurable unless you’re doing something significant and worth while and have a purpose. So you know that was like a revelation to me. And and then what happened? as I spoke at Advisor Group and there I am this. Like three thousand reps in the Co, gets up and says, The thing I was.

ramsey_d_smith:
Yeah.

joseph_jordan:
Proudest of all of you during this pandemic, is.

ramsey_d_smith:
M.

joseph_jordan:
You operated more like life coaches than just numbers guys. So I really.

ramsey_d_smith:
Oh.

joseph_jordan:
Think that that’s kind of the future. So if you just think about it okay and so I’m really talking about the future. It’s not something.

ramsey_d_smith:
M.

joseph_jordan:
You should drop everything today, but I think we have to start evolving.

ramsey_d_smith:
M.

joseph_jordan:
To that. you know, the way.

ramsey_d_smith:
Oh.

joseph_jordan:
I saw it, I got started seventy four everything wash sales and I do not deprecate sales. Don’t get me wrong. You got to learn how to sell. You got to learn the words. You got to do all of those things. They have to be there. Then we went to a planning pardon, But a planning paradime is very much numbers oriented.

ramsey_d_smith:
Yeah.

joseph_jordan:
And it’s said it’s uh, you know, left brain kind of analytical thing, and people don’t connect with that. They don’t make decisions. you know, predicated on that and Paul, you, you saw it right, you know, there was great when we had.

ramsey_d_smith:
Oh.

joseph_jordan:
This thing and met life. It was the mature market institute. It was fabulous and got quoted all over the place. Of course we blew it up. You know, you know it works so well. We stopped doing it. You know.

paul_tyler:
Why not? Why.

joseph_jordan:
Why.

paul_tyler:
Not.

joseph_jordan:
Not.

paul_tyler:
Stop.

ramsey_d_smith:
M.

joseph_jordan:
Let’s blow that one of you know. well, say a million box and you know.

ramsey_d_smith:
Oh.

joseph_jordan:
Anyway. So.

ramsey_d_smith:
Oh.

joseph_jordan:
What what they did is? they measured, and I think it’s crucial that you know what clients are wanting where they’re going, and that’s why we have to go. So they were measuring the relative importance of four themes. The four themes were money, medicine, meaning and place. So what what they found out was that money is less important as people age. Now that meaning is most important no matter what age. And so you know that’s kind of leaving in that direction. So my advice to everyone on is you know people come up with these revelations and they’re not in the business itself, So now what the hell? O? I do? you know? Well, there’s a couple of books out there that I think everybody listening to this broadcast could get, and one of them.

ramsey_d_smith:
Yes.

joseph_jordan:
Is Mitch Anthony’s life.

ramsey_d_smith:
Oh.

joseph_jordan:
Scented planet, And I’ll tell you why it provides all the great information on how to alter your practice to the new paradox. It asks all the questions. He’s got it all done. the work he’s got to twist away from what your risk tolerance. How the hell do you know your.

ramsey_d_smith:
Yeah.

joseph_jordan:
Risk tolerance is? Well, I don’t want to lose on your mother, you know, so I mean.

ramsey_d_smith:
Oh.

joseph_jordan:
It’s not the way people talk to each other, so he’s got all of these.

ramsey_d_smith:
M.

joseph_jordan:
Things that are in there where you can start graduating the conversation towards what do you think you’re going to later in life? And so I urge everyone to get that he’s mapped it out for everybody. and it’s there Mitch Anthony, life centered planet. The other one is, I just bumped into this recently for clients to read Is by Garry crack, s, r, a k, and he.

ramsey_d_smith:
M.

joseph_jordan:
Is a A in Ohio with the Guardian and he wrote a book like this title How.

paul_tyler:
Oh.

joseph_jordan:
To retire and not die well.

paul_tyler:
Hey.

joseph_jordan:
As you.

paul_tyler:
By the way.

ramsey_d_smith:
M. Oh.

paul_tyler:
Joe, He was a.

joseph_jordan:
Yes.

paul_tyler:
Guest on our show.

joseph_jordan:
Oh Garry was.

paul_tyler:
We had.

joseph_jordan:
Oh.

paul_tyler:
Garry.

joseph_jordan:
Wow.

paul_tyler:
On.

joseph_jordan:
You guys. are.

paul_tyler:
Yeah.

joseph_jordan:
You know? I just got to throw you a compliment, Paul. I don’t know how the hell.

ramsey_d_smith:
Yeah.

joseph_jordan:
You pull this thing together when I was first looking, I said What the hell you’re doing? I know a lot of people who listen to this thing and it’s a valuable service and you know it’s a great place for people.

ramsey_d_smith:
Oh.

joseph_jordan:
To just discuss the stuff.

ramsey_d_smith:
Oh.

joseph_jordan:
Of what it is. So it’s there. I’m glad you got Garrion, because I love this book. You know, He’s a practitioner. Okay, So he’s He’s a guy who’s in the business. He’s been in it a long time, So he’s worked through.

ramsey_d_smith:
M.

joseph_jordan:
All of the people that he’s had clients for years, and he just discusses these stories and that that’s the major thing you know. this business is not is not a story of numbers. It’s the number of stories, because people can lock into that and understand what has happened. Don’t understand the number. You know. the denomoclature and all of the stuff like that. So what Garry talks about is the three peas and the three pies are. Passion is the first one and passion is what. So he’s preparing you. Now he’s preparing you and he’s talking. you know, to anybody who’s thinking about retiring is you should go by the three pies, and the first one is. Passion is what you do for you. Follow your bliss, Joseph Campbell’s famous quote, You know, Follow your bliss. And so that’s what he’s talking about, and he says, passion is what you do for yourself. This purpose is what you do for others. and I love that you know what I mean. This society is so wrapped up. It’s about mmmimimi all the time. and really it’s the idea of purpose is something that you do for someone else. I heard. I heard a great definition of purpose was at a million dollar round table. Sometimes you get hit with gems and they stick with you forever. and as a lady, and she said.

ramsey_d_smith:
M.

joseph_jordan:
Purpose is not the thing you do listen. purpose is the thing that purpose is not the thing you do. It’s what happens inside of others. You going to do what you do? So think about that, it’s not what. when you’re in purpose, it’s the idea of helping others and we got to get back to that you know as a.

ramsey_d_smith:
M.

joseph_jordan:
Society, and bind it together.

ramsey_d_smith:
Oh.

joseph_jordan:
And that’s your purpose to be there is to make that happened. he says, Plan is what people need.

ramsey_d_smith:
M.

joseph_jordan:
And that’s the thing that people don’t have. So before everyone was hitting you over the head saying you got a plan. You got a plan. You. For what.

ramsey_d_smith:
Oh.

joseph_jordan:
Well, the fact of the matter.

ramsey_d_smith:
Yeah.

joseph_jordan:
Is you got to prepare yourself now for retirement, Because people go lose things when they retire, you know.

ramsey_d_smith:
Oh.

joseph_jordan:
And they don’t believe it. Okay, they lose a routine, they lose an identity.

ramsey_d_smith:
M.

joseph_jordan:
They lose relations, they lose purpose and they lose power. I used to be in zoo. Now know one knows who the hell I am. I’m Doctor Robin. It, remember me, you know, So it’s a major thing and people.

ramsey_d_smith:
Oh.

joseph_jordan:
Don’t know that up front, you know. they just say I can’t wait till I play golf every day until I go nuts, so they need to really re invent themselves and look, I’ve seen it Okay. I’ve seen it. you know, I’m seventy one years old.

ramsey_d_smith:
Oh.

joseph_jordan:
So I know a lot of guys who retired now a while back, you know, and most of them are all picked off. You know, they talk about.

ramsey_d_smith:
Um.

joseph_jordan:
The job they didn’t get. You know. Seven.

ramsey_d_smith:
Oh.

joseph_jordan:
Years go like it happened yesterday, you know, and they’re all moping around and you see I’m out there. Get off my lawn. you know, so.

ramsey_d_smith:
Oh.

joseph_jordan:
I think that’s something that really is.

ramsey_d_smith:
M.

joseph_jordan:
I think the next move. So.

ramsey_d_smith:
Yeah.

joseph_jordan:
Also it differentiator. all of our.

ramsey_d_smith:
Oh.

joseph_jordan:
Products are commoditized. You know that they’re all commoditized. You’re walking to a financial.

ramsey_d_smith:
Oh.

joseph_jordan:
Services saying it’s all the same. How do you make it different? How do you make it different.

ramsey_d_smith:
M.

joseph_jordan:
So I think these two books. So I’m not just leaving your flat to try to figure it out on your own. Get the two bloody books and start moving in that direction, because inexorably, it’s moving that.

ramsey_d_smith:
M.

joseph_jordan:
As far as you know, as far as I’m concerned, so I would. I would tell people to go out and and get those two books. And I think I think that’s a great differentiator for us. There’s no one else well suited you know to that together. By the way, In Garry’s book, he talks about people. You know. Some of the people who are most well off and most successful are the most miserable in retirement. And you know what happened. The other thing that exaccibates this, The other thing that exaccibates This is isolation. isolation kills. Social media was supposed to bring us together. It actually has separated us. Okay, Yale, It a study and found out the more people use Facebook, the worse they feel no one post the dog died, Or you know they had. They had an automobile action or whatever. It’s all this stuff that everyone knows. It’s half right, you know, and it is not there. There’s a new thing to now. it’s pomo. Fear of missing out. people now are putting their whole self esteem predicated on what some other people say and social media says. Well, you’ll never be alone. How to hell figure what you’re going to do with your life? If you’re not alone, you know, I mean it. It’s contrary, so it hasn’t brought people together. It’s isolated them and medicine has found out that isolation is the new smoking. It’s equivalent to smoking fifteen cigarettes a day. People who feel isolated and don’t have meaning and purpose. What happens is is they follow and they die early, so that’s an issue. So to me, okay, this is a new thing. Financial Advisers to grab that role because no one could take it away from and no one is going to say so, Let.

bruno_caron:
Oh.

joseph_jordan:
Your fee. How much is? Of course you worked.

bruno_caron:
Okay.

joseph_jordan:
That. I’ll find that you know you didn’t perform so well this quarter. You know all. That’s so again. I don’t say, re invent yourself overnight. Get the books start. Go in that direction and that’s why I’m stoked. So I always believed in the idea of living a significant life. I just left clan. It’s out and meaning and purpose is important and I think we need to go somewhat in that direction.

bruno_caron:
Well, it’s I find it amazing that you know everything you started.

joseph_jordan:
A.

bruno_caron:
Off with. You know the demographic environment, demography, and people living longer, and having that new generation impacts not only the financial situation of every single individual but society. He’s and I’m not just saying, You know, in this in the Us. in in the Middle East, Europe everywhere, it is just uh. everything is. It is changing according to this to this new norm.

joseph_jordan:
Ah.

bruno_caron:
So how you know? what advice do you have for this younger generation of you know advisors who are coming in and are not necessarily you know. Here. Re definitely hearing the words of wisdom of the you know, the older generation.

joseph_jordan:
Okay, right.

bruno_caron:
But it’s a new environment. There’s new challenges both societal and financial were. obviously, I think the good place begin would be those. those two books are three if I include yours, But where else? and what else you have in mind there in order to have a a good fulfilled career for the young agents.

joseph_jordan:
I think this is it is that with this demographics is the future that can’t be changed. Okay, Japan is going to lose half its population by the end of the century and they can’t change it. And so that’s the stuff that’s going on. So those are the. Those are. That’s going to be the main driver. Think, look at China, this the first time that Pope, as down is going to fall like a rock. And you know the you know, Do you know that November of last year the eight billionth person was born, And you know what the Un said? It’s another carbon generating curse. They’re talking about him being. for Christ’s sake.

bruno_caron:
Uh.

joseph_jordan:
All of human history has been predicated on the idea of innovation overcoming.

bruno_caron:
M.

joseph_jordan:
Obstacles. They had, you know.

bruno_caron:
Oh.

joseph_jordan:
I’ll get back to your question again, but I’m just trying to gild the lily Are okay, The know that in the eighteen nineties there was a meeting of all of the people, high, high officials of different cities from all over the world, and they came to New York. You know what? that big problem was, horseman. It was all over the place, you know, and they’re trying to figure out how to clean it up. Well, what happened? We invented cars and that went away, and that created other problems. So we always create problems, and then we innovate and make it happen. In more people we have the better off we are. We’re not going to have that luxury going forward. So what that means and you’re going to live longer than you’re may not live healthily longer, so we’ve got to need someone like in a financial advice, so to be there, to be certain that you, as an individual, meaning a client right, will be able to weather that storm and do it so that I just think generates the importance of what we do. So I’m not saying that plannings out. No planning was the evolution from sales that used to be sales that go in. Have a couple of you know the words, and and then you buy the thing you know which you didn’t know. It was in context to other stuff, and people are saying. So that was the evolute and I saw it when, when I, when I, when I went to Pain Webber from home life, they wanted to sell insurance. not because of client need, they wanted to diversify their revenue. Strain. The fact of the matter, his clients want to deal with just one type one person. So I think the idea, and still, even though the demographics of aging is new, people do die. everyone dies. I did the research. I found it out, and sometimes people die young. Okay, so that has to be part of the plan, But that’s not the only product than you have to prepare for the future, and Nick Murray says Yo. yo. You’re on your own, so you’re going to see more and more of that because governments cannot keep up if they have the small working base. They’re not going to have the tax base to be able to do this. People are gonna have to be able to do on an individual basis, so I think this is the most important profession that someone can do because of the fact that you can prepare people and then make certain that they.

bruno_caron:
Oh.

joseph_jordan:
Have independence and dignity when they get older, and also protection. You know, they protect their families. It’s there and so all of the products have to be used.

ramsey_d_smith:
So I have. I have a question about how we get there so obviously.

bruno_caron:
Oh.

ramsey_d_smith:
There’s an evolution right, so it may be in a few things. It may mean that that the people wait bringing to this industry are different than the ones we had in the past. Um, so I’m curious what your thoughts are about about that? Like, what is the you know? are we? Does this mean that we’re going to be looking for different person alities and different skill sets in in this business going forward. And then I have a. I have a follow or question about some organizations you mentioned in a recent article.

joseph_jordan:
It’s an interesting. It’s an interesting comment. I don’t know if we need different people. I don’t know that.

ramsey_d_smith:
Yeah.

joseph_jordan:
Um, you know, people still have to survive to a people still have to.

ramsey_d_smith:
Oh.

joseph_jordan:
Survive through rejection.

ramsey_d_smith:
Oh.

joseph_jordan:
And.

ramsey_d_smith:
Hm.

joseph_jordan:
So that’s My thought was inspiring people to see the importance.

ramsey_d_smith:
M.

joseph_jordan:
Of what you do means that you got your meaning and purpose you could overcome that I don’t. I don’t know so much.

ramsey_d_smith:
M.

joseph_jordan:
If we need the types of people. I think we perhaps need a better position of what our business is. I think we need to bring in the fact of the stories of the impact we can have, and I know that sometimes people you know they’re starting out, You know that’s hard to really grasp at what have you? But I think we have to constantly repeat the importance of what we do because Congress doesn’t think we do it. The senator from Massachusetts doesn’t think we do it. Okay. They think we’re all a bunch hampson at, you know, and that’s that’s a big risk because you.

ramsey_d_smith:
Oh.

joseph_jordan:
Know what will happen is as they can legislate this thing so so much that.

ramsey_d_smith:
Yeah.

joseph_jordan:
It’s a question of control. so I mean, I have to think some more about that. I’m glad you brought it up. I don’t know that we need different types of people. I think we need different positionings in terms of what we do, and I also think we have to get ourselves off of the product bias. You know, we all seem to have an orientation And really it’s the plan that comes out. What. I, what I also think is we have to get more involved with story telling.

ramsey_d_smith:
Yeah.

joseph_jordan:
Just fact driven type of approaches. And so I think that’s another fundamental change that we need to do. I don’t know that we need different people, but you know.

bruno_caron:
M.

joseph_jordan:
Ramsey. I’m glad you brought that up because you got my wheels turn and I got to think about that.

ramsey_d_smith:
So one of the things that you mentioned in this this article that I thought was really interesting is you talked about some organizations that you speak to fraternal organizations, and.

joseph_jordan:
M.

ramsey_d_smith:
How they have a very different relationship there with the customers. And I thought about it. We’re trying to move this needle and change and change the process. It takes a lot doing it one client and one agent at a time. But if you can affiliate with organization that’ve already cracked this code, there’s something there, so tell us about what you see in fraternal organizations that feels different than what you see in the broader, the broader sort of world here.

joseph_jordan:
Well, I work.

ramsey_d_smith:
Yeah.

joseph_jordan:
With some of them and you know.

ramsey_d_smith:
Hm.

joseph_jordan:
Like nights at Columbus, you know, and.

ramsey_d_smith:
Yeah.

joseph_jordan:
A thriving.

ramsey_d_smith:
No.

joseph_jordan:
And there’s a group called G. B. That’s There’s hundreds of these things are all over the place and you get underneath their. So they have insurance products. He sell investments. You know that’s that’s part of their own. They have all of these other programs that you know.

ramsey_d_smith:
M.

joseph_jordan:
So for example, and I’m talking about the idea of.

ramsey_d_smith:
Yeah.

joseph_jordan:
Health having.

ramsey_d_smith:
Oh.

joseph_jordan:
Meaning and purpose. you know.

ramsey_d_smith:
Yeah.

joseph_jordan:
The.

ramsey_d_smith:
Uh.

joseph_jordan:
Nights at Columbus store.

ramsey_d_smith:
H.

joseph_jordan:
You know, Have these different programs you know, Giving coach to kids. They already have built in a number of programs that they have. It also helps people, so it’s like a one stop shop. Oh, not that everybody would gravitate towards the things they do, but they’re there. there they exist. There’s a group out there called G B U. and they have this thing that. if you go to a righteous charitable organization, they match your contribution up to a certain amount, so think about that. Okay, So you give two thousand dollars to the soup kitchen Okay in Minnesota, and making it up they match it so man doesn’t. So there’s a motivation there for someone to start doing something that’s outside of themselves. I mean that’s that’s that’s That’s really the essence of what a human being is is the idea of your ability to impact others. And and so they do that. And and I don’t think they’ve grasped how important that is. And perhaps Ramsey, as you’re saying, that might be other things that other organizations might start to do, is to come up with some of these is that would push people towards the idea of being in a given mode. I, either the matching and what it is? So I think that the fraternal organizations have got built them. I don’t. I don’t think they. really. It’s how important that is, and I would hate to see them miss the mark. And perhaps in terms of your question, not so much different people, but may be different, different, um different offerings that, but some of.

ramsey_d_smith:
Ah.

joseph_jordan:
The companies would have.

tisa_rabun_marshall:
So I want to.

ramsey_d_smith:
Thank you.

tisa_rabun_marshall:
Thinks, Um, interesting, Ramsey about needing different.

ramsey_d_smith:
Oh.

tisa_rabun_marshall:
People or different profile of agent. I want to talk a little bit about kind of what that tool or that work sheet might look like not to skirt around reading the books you recommend. But can you help the listeners think a little bit about how they would re frame the question? So you talked about. You know, we don’t want to ask about the risk tolerant, but don’t want to ask about. at least not lead way or start with. You know we don’t want to ask about how much money you need in retirement. What how do those.

joseph_jordan:
Yeah.

tisa_rabun_marshall:
Questions sound differently? Like If we’re looking to drive people to start thinking about their passion or their purpose, can.

joseph_jordan:
Well.

tisa_rabun_marshall:
We.

joseph_jordan:
I.

tisa_rabun_marshall:
Re.

joseph_jordan:
Think.

tisa_rabun_marshall:
Frame.

joseph_jordan:
You do have to ask people.

tisa_rabun_marshall:
Give some examples of some of those questions, or what that tool or work sheet might look like.

joseph_jordan:
When you.

tisa_rabun_marshall:
To walk.

joseph_jordan:
Retire.

tisa_rabun_marshall:
Them though.

joseph_jordan:
What.

tisa_rabun_marshall:
The discussion.

joseph_jordan:
Are you going to do? How are.

tisa_rabun_marshall:
Hm.

joseph_jordan:
You going to spend your time? I’m going to play golf when I would advise you that that might not be the most you’re going to do because you can get really bored. you know. I mean, you been doing this that. and the other thing, What interest do you have? And what is it you really like doing and people, probably people have never really asked that question. You know, What is it.

tisa_rabun_marshall:
Hm.

joseph_jordan:
You really enjoy doing and what is it you absolutely hate doing to make an exploration of that type of stuff? I mean, I think that’s part of the question you see, Because then I think that people get more engaged than that. You know. I really hate writing the notes and doing all of what else do you hate? You know. So I think that really brings people closer together. They have to find out what is it that they really enjoy doing And what is it they don’t? What is it? What is it? They absolut we love. And what is it? They absolutely hate and they should probably not do much of what they hate and do what they what they love doing. But most people haven’t explored that on a personal basis. they might have run a bit this and found out how that ran. But and they probably have some idea of what they’d like to do and what they don’t like to do. Why not segment that out? What’s the thing that really gives you? You know meaning and purpose, And so people haven’t asked that question of themselves. And so I think.

tisa_rabun_marshall:
Yes.

joseph_jordan:
That those are the types of questions and those.

bruno_caron:
Oh.

joseph_jordan:
Are laced in. Certainly in Garry’s book, and I think they’re also in Mitchesbook To against it. See what it does it brings. That brings the relationship a little bit close. You know what I mean, and I think you have.

tisa_rabun_marshall:
M.

joseph_jordan:
A competitive edge because you’ve asked things that probably others haven’t And.

tisa_rabun_marshall:
Hm.

paul_tyler:
Yeah.

joseph_jordan:
M, and they don’t understand the financial stuff. In the end of the day, they don’t understand the technothterminologies that we come out with, and they like it to go up. They don’t like it when it goes down, and if it stays the same, they’re not as happy. But you know it’s really the idea. And that was Mitch Anthony’s first quote. Was They want to say how they’re gonna improve their lives, So they haven’t spent the time in the episode of finding out what it is. They really want to do what they really hate doing and get rid of that and do the stuff that they want to do. And so that’s getting back to the fraternal organization. You know, you know, Did you notice if I’m a fraternal guy? right, I’m going to. we have this thing coach for kids, and whatever ye, I should, you know, And then they’re actually doing stuff for others and they have a meaning. Have a place to go and we have it. so I think I think that’s where it starts out, and I think those are the types of questions that people would be asking.

paul_tyler:
Yeah, Joe. it almost feels. In some ways, questions, kind of cheapens it. It’s more. conversation may be a very long conversation. Now, I think you mentioned first word about sales than we’re about plans. Now we’re about a dialogue. that that may change over time When Garry was on here Was interesting. He talked about. as you remember, that conversation almost sounded like he kind of stumbled on to this.

joseph_jordan:
Yeah.

paul_tyler:
After these conversations After due Joe the financial plan. So.

joseph_jordan:
Yeah.

paul_tyler:
You came to me and said, Can I do this? Okay? great, Ere’s your plan, But what else.

ramsey_d_smith:
Oh.

paul_tyler:
Do you want to do? It was almost like an ad on. You Think I could actually start with that conversation.

ramsey_d_smith:
Oh.

paul_tyler:
Or you know, do I? Is that something that I can only do after a longer relay ship with a person.

joseph_jordan:
My sense is you could start it out like that again. It’s like being a life health of a life wealth coach, you know. And and so yeah, that’s what happened. All of the people who really take off do this thing bump into it And it’s not. That’s the point. It’s not part of the training. It’s not part of the direction you know, and it’s not perfected yet. but, but I think you can start off with those conversations because they be a lot more engaging. I think so you know. the other thing that’s important because you, you hit on an important point, right, And it’s the idea of one of the reasons I wrote Life is significant. I read a M. one of those surveys, gallop, gallop, and I looked at the look at Two Thousand Flow, looked at the ethics and believability of different professions.

bruno_caron:
Oh.

joseph_jordan:
And the only ones that were above us below us. Excuse me, we’re car salesman and Congress, And you know what the number one was? I can get two thousand twelve.

paul_tyler:
No idea.

bruno_caron:
Oh.

joseph_jordan:
Nurses.

paul_tyler:
Interesting.

joseph_jordan:
Isis.

paul_tyler:
Two thousand.

joseph_jordan:
Was the number.

paul_tyler:
Twelve.

tisa_rabun_marshall:
M.

joseph_jordan:
One profession that’s before the.

ramsey_d_smith:
Oh.

joseph_jordan:
Now.

tisa_rabun_marshall:
M.

joseph_jordan:
Ovid, right, So you can imagine where it is now. All of the other ones that were just below it.

ramsey_d_smith:
Oh.

joseph_jordan:
All service organizations, service organizations operate on two foundations. Okay, humility.

ramsey_d_smith:
Yeah.

joseph_jordan:
Maturity, humble people don’t think necessarily, humble people don’t necessarily think less.

ramsey_d_smith:
M.

joseph_jordan:
Of themselves. They just think of themselves. S if your people aren’t necessarily all, if they see things from another person’s perspective, So it’s that it’s that client engagement now. Do I have it perfected now? No, But as you saw, Garry just bumped into it. Garry could.

ramsey_d_smith:
Oh.

joseph_jordan:
Probably put it in front. I think Mitch Anthony is one who has really seen it, You know for there. And and they’re trying to enrich people’s lives, and you can’t commoditize that. So that’s some of the cultural things that I think there. I mean, they’re kind.

ramsey_d_smith:
Yeah.

joseph_jordan:
Of pioneers, and I’m I’m exposing it because again you cannot continue a regulatory point of view of the way people you have to overcome so many things that people have that attitude towards your profession and what you do. I think that’s what we have to overcome, And that’s where I thought a.

bruno_caron:
Oh.

joseph_jordan:
Vanguard could be.

bruno_caron:
Yeah.

joseph_jordan:
You know, the fraternal organizations, but I think they’re overwhelmed with trying to be the other way, and I think they have the magic in their back yard. I don’t think they.

paul_tyler:
Yeah.

joseph_jordan:
All understand it.

paul_tyler:
Well, listen ere at the near the top of our time. you know Bruma. Do you have like last question or thought for for Joe.

bruno_caron:
Sure. last question and I think that you know you’ve been very vocal on on the income part that’s required in retirement. You know that’s through annuities through social security, delaying it as much as.

joseph_jordan:
Yeah.

bruno_caron:
You can. All of that concept about income is really at the forefront relative to obviously, the assets or wealth, or however you want to, you.

joseph_jordan:
Oh.

bruno_caron:
Want to describe it. Where do you see or how do you see the income part of retirement as an opportunity for all the professionals and advisors in.

joseph_jordan:
Oh.

bruno_caron:
The financial, the financial services space.

joseph_jordan:
Well, I think it’s essential. you know, we’re in an accumulation paradime, And that’s what drove That sounds like demographics. To me, Baby boom was the.

bruno_caron:
Uh.

joseph_jordan:
Biggest lug When you’re thirty.

bruno_caron:
Uh.

joseph_jordan:
Three years old. You want to talk about self security? I don’t think so.

bruno_caron:
Um.

joseph_jordan:
You know, and then well, you know, Paul. You saw this right when we started the legislative birth dates. everyone’s saying delay so security. What you’re crazy? it’s going away. Take it now. no one had that mind set. so once again and it’s demographics, in terms of the baby boom.

bruno_caron:
M.

joseph_jordan:
Is the pick through the Python right, getting to the point where all of a sudden it’s there needs and everything changes So you know an accumulate on phase is subsilively different from an income stage. You know you don’t have much stuff to come back towards. You have to have some form of guaranteed income. There’s a new thing called mortality credits, which a lot of financial you know, the brokers and the stock brokers and stuff have difficulty dealing with because it’s not a stock and bond is not an interest rate. You know, it’s the idea is measuring human life and the ability to provide you with a guaranteed income for life. And as I said, the whole idea of how much money you have dictates your wealth is the recent phenomena, you know, Jane Austin Rights. He wrote all of those books, the early eighteen hundreds, you know, and was Pride and prejudice you know. Noticed the way she described Mer Darcy, who was the rich guy? She said, she didn’t say At a million pounds, she said, I got ten thousand a year. Historical perspective of wealth has always been on the place.

bruno_caron:
Oh.

joseph_jordan:
The reliability of the income. That’s the new R. L. right. it’s not R. Rather not return on investment of reliability income. So it’s all of these alien tools that are not so much known in the accumulation parade coming there, being driven by what ohdemographics, so demographics again is the future that cannot be changed. We now have to regulate its more towards the idea of the income side and all of the new, the new risks that that brings with it you know, the the what quality segments return sequence of return stuff. Look, in the old days, you.

bruno_caron:
Right.

joseph_jordan:
Retired at sixty five. You took a boat to Ireland. You came back and your debt at sixty eight. Okay, okay, but.

bruno_caron:
Uh.

joseph_jordan:
Now your living.

paul_tyler:
Ye.

joseph_jordan:
To eighty. So the fact of the matter is is that.

bruno_caron:
Oh.

joseph_jordan:
You got to put something together to make that happen. so the product lines change and having access to a buffer asset that you can set money aside. Or maybe you use a reverse mortgage, or maybe you use a loan, a life insurance policy, So everything you know starts to change And that’s that’s an influence and most people are more interested on making certain that they have a stable retirement income than increasing their wealth. And that’s what the majority of people are saying So so and that’s very. it’s very hard. change a look, Paul, you know this right back in night, Two thousand, For who is the only person out there saying delay. So security was made, You know because I was trying to get people to begin thinking about the idea of using annuities to have a guaranteed lifetime income as a base. And and so you know, it takes a long time. so in two thousand for as a voice in the wilderness. Now you know it’s It’s all over the place. So.

paul_tyler:
Well, and it’s only I think the deal Joe is only going to get better because you know we’ve.

joseph_jordan:
Yet.

paul_tyler:
Been talking to people who’ve said. It won’t be uncommon for people to live to hundred and five. You know, there’s a scientist or a couple of group of scientists who said the first person to live to a hundred and fifty has already been born.

joseph_jordan:
Yeah.

paul_tyler:
About that to you. So what do you tink? Should we? should we change some of our market materials and web pages.

tisa_rabun_marshall:
Yeah, I mean, it’s definitely kind of re framing how we think about retirement. For sure. I’m still sort of stuck on this idea of isolation. you know, being the new, the new chronic issue.

joseph_jordan:
It’s.

tisa_rabun_marshall:
Or.

joseph_jordan:
Here.

tisa_rabun_marshall:
The new.

joseph_jordan:
And.

paul_tyler:
Ifteen.

joseph_jordan:
People.

paul_tyler:
Packs.

joseph_jordan:
People don’t.

paul_tyler:
Fifteen.

tisa_rabun_marshall:
Well.

joseph_jordan:
Reconat.

paul_tyler:
Packs of cigarettes.

tisa_rabun_marshall:
Yeah, well.

joseph_jordan:
Ah.

tisa_rabun_marshall:
And and I guess I think about all ages and how we reacted to quarantine right for the.

joseph_jordan:
Right.

tisa_rabun_marshall:
Twelve months or so where we were all feeling very isolated. So there’s a proof point right there, Just thinking through the solutions for the aging population and the seniors, because I’ve seen it first hand, Isolation is literally.

joseph_jordan:
Yeah.

tisa_rabun_marshall:
A killer, So.

joseph_jordan:
Got.

tisa_rabun_marshall:
You can.

joseph_jordan:
It.

tisa_rabun_marshall:
Have Ll the money. All the money in the.

joseph_jordan:
Yeah.

tisa_rabun_marshall:
World right, do all the.

joseph_jordan:
Right.

tisa_rabun_marshall:
Right things you think through. You’re passing your purpose, But at some point if your day to day is just you on the that’s that’s not very fulfilling. So.

paul_tyler:
Ramsey.

joseph_jordan:
My point is is I want to provide.

paul_tyler:
Yeah.

ramsey_d_smith:
Yeah.

joseph_jordan:
A broader context to what our stuff is, and it’s built around.

tisa_rabun_marshall:
Hm.

ramsey_d_smith:
Yeah.

joseph_jordan:
The life and how things have changed. And and you know, most people who are in the middle of the thing don’t see the forest from the trees, and and isolations. And so that’s what another thing that benefits are. But I’m not celebrating. Million people died, but people really want to sit down and talk to somebody. Everybody thought computers would do this thing like that, You know you. Just, it’s just the way humans are, so I think the future is really bright.

ramsey_d_smith:
Oh.

joseph_jordan:
Again. I started.

ramsey_d_smith:
Oh.

joseph_jordan:
Talking to two thousand Four about delaying social security. How long did that.

tisa_rabun_marshall:
M.

joseph_jordan:
Take right? It took like fifteen years before. Now Every you know, it’s all there, so I think it’s another fifteen years with this stuff. I’m talking about a start and a start is to be talking more about what are people going to do when they retire And then again, my message to Froternals is you guys got one stop shop, So you know, jump on it. And and perhaps I think some of the offerings change over time.

paul_tyler:
Ramsey.

ramsey_d_smith:
So just a couple quick things and one I was going to say that, I think that this notion.

joseph_jordan:
Oh.

ramsey_d_smith:
Of a more of a service services, I should say, orientation in our business, I think is good. I think it’s it translates into better customer experience. I think it’s actually, I think it’s an economic opporty, ity, and I also think it’s great for risk management. I actually think that we treat services and our business s expenses, when in fact there are assets and valuable tools. I think I think we can actually have an entire additional show about that, So Joe, maybe we’ll talk about that the next.

joseph_jordan:
Yeah.

ramsey_d_smith:
Time. But one thing that I wanted that to make sure we did not miss before we go is is taking us through the Ben Franklin close. I thought that was great.

joseph_jordan:
Yeah.

ramsey_d_smith:
That was at the tail end of your tail end of your article. I thought that was a very simple way to help people think about what the value propositi is of what we, what we all in this industry do.

joseph_jordan:
Ah, so so that was? That was the You put the premium down, and then you list of benefits That would.

ramsey_d_smith:
Exactly.

joseph_jordan:
Okay right.

ramsey_d_smith:
Make a tea, But the premium in one.

joseph_jordan:
Right.

ramsey_d_smith:
On one side and on the other side, you list all the benefits.

joseph_jordan:
Right.

ramsey_d_smith:
And then there was there was a punch.

joseph_jordan:
Sure.

ramsey_d_smith:
Line.

paul_tyler:
Oh.

joseph_jordan:
So what it simply is is you know you do the brand Franklin crows. You do a t line and then look down in the middle and then then the first one says your meaning, your obligation, and then on the aside you put ours. So your list. the print. I’m gonna make this up. You know, you give someone.

ramsey_d_smith:
M.

joseph_jordan:
You give us.

ramsey_d_smith:
M.

joseph_jordan:
Thousand dollars a year, and or let’s say ten thousand dollars a year, and what we’ll do is we’ll put a step aside a million dollars at it. For some reason you died, your family would get it, and then the other thing we do is we guarantee that if for some reason you got sick and disabled that premium.

ramsey_d_smith:
Oh.

joseph_jordan:
Of ten thousand dols, it would continue to pay, and it would, the program would continue to build, and you’d have that, Kay, the other, the other, The other thing is that if you got sick or disabled as a way of taking some of those.

ramsey_d_smith:
M.

joseph_jordan:
Some of the money out of the policy and being able to provide you with with with with benefit, you know that happens, and you know the living benefits. Now See that’s like.

ramsey_d_smith:
M.

joseph_jordan:
A new thing that popped up. You know, I have a whole thing on living benefits and I was a woman and I’ll never forget man. You talk about it and you see, she’s a young woman and she’s talking about. she. She lives with the parents, but she’s the sole support of the parents and she has a kid and she’s a single mom. She got attacked in a garage and they set up arty on fire. Okay, they really screwed her up and she, she had up a policy and she thought ahead of time and she was able to get four thousand.

ramsey_d_smith:
M.

joseph_jordan:
Dollars out of it to pay all those medical expenses to keep the family in tact o smoke. So that’s that’s like some of the new services you know that comes to that. So you know we could do that and we also can lend you money when you need it at a very low interest rate and on a tax free base. And so, if you’re invested in the stock market, might use it as a buffer asset when the stock market goes down, so that you know so. O. I list all of these different benefits that it has, And then I said.

ramsey_d_smith:
M.

joseph_jordan:
However, so so so one has as ten thousand, and the other has like six or seven or eight or nine of them. However, if you don’t do, don’t do your obligation. You put an x on it, you go over to R, and you put, or it’s your obligation to fulfill all these things, So I think that puts it into perspective. You know, you know the benefits are there, but again, I think the idea of living benefits is another kind of service orientation type thing that’s starting to happen, but it’s got. I think the offerings have to go beyond just products. We have other stuff, but I think you’re on to something, Ramsey.

paul_tyler:
Yeah, well, Joe. thanks.

ramsey_d_smith:
Oh.

paul_tyler:
I think we do your Ben Franklin to what we get for Joe.

joseph_jordan:
Oh.

paul_tyler:
What you cost and what you deliver.

ramsey_d_smith:
M.

joseph_jordan:
Uh.

bruno_caron:
Oh.

paul_tyler:
Joe. It’s.

ramsey_d_smith:
M.

paul_tyler:
I don’t.

joseph_jordan:
Uh.

paul_tyler:
Want to be on my own.

joseph_jordan:
Oh.

paul_tyler:
We do not want to be in our own here. so hey, listen.

ramsey_d_smith:
M.

paul_tyler:
Thanks so much, Joe. We’re gonna have you.

bruno_caron:
M.

paul_tyler:
Back. Okay, we’ll have you.

bruno_caron:
Oh.

paul_tyler:
Back in a couple of months. We think this.

joseph_jordan:
Yeah.

paul_tyler:
Is great. We’ll put the links to your books.

joseph_jordan:
Yeah.

paul_tyler:
And.

ramsey_d_smith:
Oh.

paul_tyler:
Your sight. O people, stay in touch with you and listen. Just thanks for all you’re doing. Really.

joseph_jordan:
Yeah.

paul_tyler:
Appreciate.

ramsey_d_smith:
Ah.

paul_tyler:
It.

joseph_jordan:
Thanks. I really.

paul_tyler:
And Bruno.

bruno_caron:
Thank you.

joseph_jordan:
I really enjoyed. This is.

ramsey_d_smith:
Thanks.

joseph_jordan:
As.

ramsey_d_smith:
Joe.

joseph_jordan:
A good. It’s a good venue. It’s a good place because I know a lot of people.

tisa_rabun_marshall:
Oh.

joseph_jordan:
You come to see this And why not to.

bruno_caron:
Yeah.

joseph_jordan:
Tell people how many people view your stuff.

paul_tyler:
We ad. Let’s see. I think.

ramsey_d_smith:
Oh.

paul_tyler:
I do a hundred thousand people close to.

joseph_jordan:
Yeah.

paul_tyler:
A.

ramsey_d_smith:
M.

paul_tyler:
Downloadthe show since we started. So.

ramsey_d_smith:
M.

paul_tyler:
Joe, you listen. If we. if we changed a few lives or changed.

ramsey_d_smith:
M.

paul_tyler:
Let me put it away. changed a few.

ramsey_d_smith:
M.

paul_tyler:
Converts Asians with advisors to change and address the needs you just describe to that woman. That’s that’s success. So.

joseph_jordan:
Better than me standing on a corner talking like.

paul_tyler:
Ah.

joseph_jordan:
Me in.

paul_tyler:
All.

bruno_caron:
M.

joseph_jordan:
Jail.

paul_tyler:
Right.

bruno_caron:
Hm.

paul_tyler:
Artis.

bruno_caron:
Hm.

ramsey_d_smith:
Right.

tisa_rabun_marshall:
Right.

paul_tyler:
Thanks and listen.

tisa_rabun_marshall:
Hm.

bruno_caron:
Oh.

ramsey_d_smith:
Oh.

paul_tyler:
Give us feedback. Tell us. Tell us who you like to see on this show and listen.

joseph_jordan:
Yeah.

paul_tyler:
Join us again next week. For another.

joseph_jordan:
You know, just keep me abreast If you get some feedback. you know.

paul_tyler:
Ye will. we will. we will. So.

joseph_jordan:
Okay.

paul_tyler:
Hey, listen, join us next time and we’ll we’ll have another great episode for you, Thanks.

joseph_jordan:
Thank you.

Episode 179: Predicting the 2023 Balance Sheet for the Annuity Industry with Scott Hawkins

January 27, 2023 2023, Podcast, Retirement, Scott Hawkins No comments

Last week we looked back at 2022. This week we’re looking ahead at 2023 with Scott Hawkins, Managing Director and Head of Insurance Research for Conning. Scott will also be a keynote speaker at our upcoming Retiretech conference in NYC on March 27th. More details will follow.

Links mentioned in the show:

https://www.linkedin.com/in/scott-hawkins-b787bb1a/

https://www.conning.com

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Episode Transcript

paul_tyler:
i this is paul tyler and welcome to another episode of that annuity show no good to see you oh

bruno_caron:
good to see you paul

paul_tyler:
isa welcome again

tisa_rabun_marshall:
morning paul

paul_tyler:
ramsey

bruno_caron:
yeah

paul_tyler:
good morning

ramsey_d_smith:
always glad to be here and very excited about today’s conversation

paul_tyler:
as am

bruno_caron:
yeah

paul_tyler:
i so last episode if you didn’t listen to it you

bruno_caron:
m

paul_tyler:
should we went did a really kind of i thought we did a good job

tisa_rabun_marshall:
m

paul_tyler:
talking through some

bruno_caron:
oh

paul_tyler:
of the themes and topics that were of significant importance in twenty twenty two and i think when

bruno_caron:
yeah

paul_tyler:
we did these some of these shows we didn’t realize they would be as important as they would and timing was

ramsey_d_smith:
m

paul_tyler:
perfect okay our guests is r scott hawkins who is the managing director

bruno_caron:
oh

paul_tyler:
and head of insurance research for conny scott welcome

scott_hawkins:
good morning welcome everybody

paul_tyler:
yeah

scott_hawkins:
glad to be here

paul_tyler:
it has been it was been two years since we had you on our show

scott_hawkins:
two years since i was last on here

ramsey_d_smith:
wow

scott_hawkins:
yeah

paul_tyler:
unbelievable so well first of all thanks for coming back and we’re also looking forward to an event you will be key

scott_hawkins:
m

paul_tyler:
noting for us in march we’re going to be doing another retirement innovation program called retire tech i think we’ll call it retire tech i don’t know three dot

ramsey_d_smith:
m

paul_tyler:
ramsey to i don’t know two

ramsey_d_smith:
sure

paul_tyler:
point five three

bruno_caron:
yeah

paul_tyler:
o

scott_hawkins:
a

paul_tyler:
but first and foremost scott maybe you can just tell us

ramsey_d_smith:
m

paul_tyler:
first

ramsey_d_smith:
yeah

paul_tyler:
you know we talk about

ramsey_d_smith:
yeah

paul_tyler:
this just briefly before the show tell people um who exactly is conning and then let’s talk about your

scott_hawkins:
yeah

paul_tyler:
rolling and a dive into what

ramsey_d_smith:
oh

paul_tyler:
this year

scott_hawkins:
sure

paul_tyler:
may bring

scott_hawkins:
so for those of you who don’t know conning is a global asset manager been in business for over a hundred and ten years primary headquarters in hartford

bruno_caron:
yeah

scott_hawkins:
so from that you get the sense that our primary focus in is true is servicing the general account assets of insurance companies life annuity p c and health that said over a hudreteen years we

ramsey_d_smith:
m

scott_hawkins:
become global wearing hong kong type the u k cologne outside of denmark one of the ways we have been differentiating ourselves for at least fifty plus years in the market place against other

bruno_caron:
yea

scott_hawkins:
asset managers

paul_tyler:
yeah

scott_hawkins:
is providing really top levels t g research aimed at the sea level

ramsey_d_smith:
m

scott_hawkins:
executive to help them understand what’s going on in their market in their

ramsey_d_smith:
m

scott_hawkins:
products and what’s striving profit ability and what’s changing the risk they’re facing in terms of profitabil so we’ve been producing this research for our set management clients we also make it available on a stand alone basis for non asset management clients but but the ultimate aim is to help that executive understand what on in their market place why should they be focusing on and how does it affect their bottom line because for an insurance company at the end of the day bottom line is what matters

bruno_caron:
and it goes

ramsey_d_smith:
and

bruno_caron:
far beyond that of course i mean the

scott_hawkins:
m

bruno_caron:
asset application it’s not just you know one check the box item for every insurance company it’s it’s there the key fundamental of to your point of bottom line but also of balance sheet strength company strength

scott_hawkins:
yeah

bruno_caron:
capital requirement and

ramsey_d_smith:
yeah

bruno_caron:
that that drives many of

ramsey_d_smith:
m

bruno_caron:
the stories and

ramsey_d_smith:
m

bruno_caron:
that’s going to be a good seguin for our conversation today

ramsey_d_smith:
m

scott_hawkins:
and to your point bruno you kno if you’re managing the assets that you’ll hear the phrase asset liability matching that that’s the approach to insurance companies generally take but for the asset manager you have to understand those liabilities are

ramsey_d_smith:
m

bruno_caron:
uh

scott_hawkins:
how they’re changing those liabilities

bruno_caron:
ah

scott_hawkins:
vary by the types of investments that you have as well as the types of products your offering and the risks

paul_tyler:
oh

scott_hawkins:
associated with those products and ultimately need to come up with an asset strategy that matches those liabilities for that individual insure which may be different from another client that you

ramsey_d_smith:
oh

scott_hawkins:
have

ramsey_d_smith:
so scott

scott_hawkins:
oh

ramsey_d_smith:
one of the things that we were talking about ahead of this discussion was

bruno_caron:
yeah

ramsey_d_smith:
really about

bruno_caron:
oh

ramsey_d_smith:
trends in the market trends in the annuity market and you know it could

bruno_caron:
okay

ramsey_d_smith:
al element around that is one of capacity so

scott_hawkins:
hm

bruno_caron:
yes

ramsey_d_smith:
very very interested to hear you can share with our audience you know where you think

bruno_caron:
yeah

ramsey_d_smith:
the market is in terms of capacity and how what sorts of trends were seeing to increase capacity in the life and annuity

scott_hawkins:
oh

ramsey_d_smith:
space

scott_hawkins:
so ran one of the things that we produce as i mentioned the types of research one of them is a three year forecast

ramsey_d_smith:
oh

scott_hawkins:
for all the major lines of business property casually life and an annuity so what that means is we’re looking at three years down the road right now through twenty twenty four of the full income statement for

ramsey_d_smith:
oh

scott_hawkins:
the individual annuity line at an aggregate level right and that’s based upon statutory data from years before we keep track of all that

ramsey_d_smith:
a

scott_hawkins:
so in our forecast that we produce at the end of the year we’re looking at at the individual net market and we’re really seeing a market that’s really being set up for growth and profitability overall when you look at the factors driving premium there’s a lot of them that are really positive that we see

ramsey_d_smith:
hm

scott_hawkins:
a lot of them you’ve talked about on your show in the past there’s a demographic wave that’s coming in for the senior market as

ramsey_d_smith:
m

scott_hawkins:
more

ramsey_d_smith:
oh

scott_hawkins:
people are retiring they’re gonna be looking to somehow

ramsey_d_smith:
m

scott_hawkins:
generate

ramsey_d_smith:
oh

scott_hawkins:
a secure retirement income from their accumulated

ramsey_d_smith:
m

scott_hawkins:
i r a four one k assets you certainly have secure act two point o that’s come into play which is really attractive for a lot of the younger plan members that’s going to open up a whole new opportunity for them when you look at d b plan members you know we’re

ramsey_d_smith:
yeah

scott_hawkins:
looking at the possibility of

ramsey_d_smith:
m

scott_hawkins:
continued growth

bruno_caron:
oh

scott_hawkins:
for pension rest transfers coming in all of which comes in at a time when interest rates are improving and when interest rates are improving the spreads on fixed income annuities fixed annuities index annuities are improving so that’s where you’re seeing the growth and crediting rates those products that also means that the insurers are making a little bit more

ramsey_d_smith:
yeah

scott_hawkins:
profit on the net investment income

ramsey_d_smith:
oh

scott_hawkins:
net investment income for instance accounts about twenty five per cent on average of the total revenue that an annuity cut it generates on a year and year out basis the fees on separate accounts or about another ten per cent

bruno_caron:
m

scott_hawkins:
so we’re looking at a situation over the next three years where there’s a really strong potential for growth in p you start to see a bit of that this year and twenty twenty two we think that’s going to continue which means ultimately a profit ability but the thing about

ramsey_d_smith:
yeah

scott_hawkins:
the insurance industry is a regulated environment we’re adding these liabilities on these guarantees investment returns the ability to pay a

ramsey_d_smith:
m

scott_hawkins:
income stream for life if you have a spa that you’ve

ramsey_d_smith:
m

scott_hawkins:
purchase um and if you’re going a have a wrapped product guarantee the ability

paul_tyler:
oh

scott_hawkins:
pull those withdraws out all of those create a certain amount of risk which the insurance company bears and in order to remain solvent the regulators wisely created a capital structure referred to this risk base capital that sort of reflects the risk that the insurance company has assumed in terms of investment risk and product risk and insurers have to maintain capital levels in order to remain solvent and make sure that the regulators don’t come in and for us to your point about pacity if you look at the size of the opportunity created by secure

ramsey_d_smith:
m

scott_hawkins:
created by the fact that there are boomers looking to retire and monetize their iras now you’re talking about a multi trillion dollar opportunity and right now the industry the individual annuity industry is leveraged at about ten to one

bruno_caron:
yeah

scott_hawkins:
which means there’s about a dollar of allocated capital

ramsey_d_smith:
yeah

scott_hawkins:
every ten dollars general account annuity liabilities right so there’s about one point nine

bruno_caron:
oh

scott_hawkins:
trillion dollars of general account annuity liabilities is what we’ve estimated

bruno_caron:
ye

scott_hawkins:
and when you compare with the opportunity that could come in from all of these factors that are really positive for growth that

ramsey_d_smith:
oh

scott_hawkins:
leads us to the question is there enough capital to support

ramsey_d_smith:
m

scott_hawkins:
that if it all happened all at once and that’s an area we’ve been looking at since starting in two thousand eleven i first did a study on that

paul_tyler:
yeah

scott_hawkins:
when the first boomer turned sixty five so we think that

paul_tyler:
yes

scott_hawkins:
this issue around capacity

ramsey_d_smith:
m

scott_hawkins:
is going to be resolved but there’s gonna be a wide variety of ways that that’s going happen and we’ve already seen some of them emerge over the last decade so

bruno_caron:
yes

scott_hawkins:
i’ll pause ere if there’s

ramsey_d_smith:
ye

scott_hawkins:
any questions

ramsey_d_smith:
oh

bruno_caron:
so how did you react it i mean she started that that study back in two thousand eleven

scott_hawkins:
hm

bruno_caron:
we all know the inflow of capital that has been taking place in the last let’s say twelve years in the period how did that

ramsey_d_smith:
oh

bruno_caron:
stack up against

ramsey_d_smith:
ye

bruno_caron:
your you know our forecast prediction

ramsey_d_smith:
oh

bruno_caron:
of capital availability in the market

scott_hawkins:
yeah in

ramsey_d_smith:
m

scott_hawkins:
two thousand leven the conclusion that i made in that study was that we were looking then so this is pretty

ramsey_d_smith:
yeah

scott_hawkins:
secure act but we were just looking

ramsey_d_smith:
m

scott_hawkins:
at the demographic wave of boomers

bruno_caron:
h

scott_hawkins:
moving in

bruno_caron:
m

scott_hawkins:
and we said if everythin were to happen there wasn’t enough capital to support that as a result our conclusion was the annuity industry and annuity insures we’re going to have to look outside their traditional

bruno_caron:
oh

scott_hawkins:
pattern of capita growth which is the operating results to find third party capital

ramsey_d_smith:
oh

scott_hawkins:
to come into the market that would be attracted

bruno_caron:
oh

scott_hawkins:
to come in

ramsey_d_smith:
oh

scott_hawkins:
and sure enough a couple of years later

ramsey_d_smith:
m

scott_hawkins:
you start to see the emergency

ramsey_d_smith:
yeah

scott_hawkins:
of these asset manager in private equity back re insurers who are coming in and either doing reinsurance treaties or issuing new paper out there in the marketplace and that influx of third party capital as been continuing

ramsey_d_smith:
oh

scott_hawkins:
and the dynamics of that market shifting um were talking little bit earlier that one of the changes is that we’ve seen the rise of all these new players in terms of sales ranking because there actively out there trying to grow liabilities while some of the established players are looking perhaps scaled back because they have large blocks of business so clearly bringing new capital in was what we included we’ve certainly seen that happen and we’ve been tracking that ever since then with a multiple series of reports

ramsey_d_smith:
yeah

scott_hawkins:
and this year what i’m really

ramsey_d_smith:
m

scott_hawkins:
looking at in terms of

ramsey_d_smith:
ye

scott_hawkins:
new solutions that’s emerging on the life annuity side is the use of side cars which have been very prevalent on the property casually side for a long time and if you’re all familiar with a side car and how that’s working

paul_tyler:
yea

scott_hawkins:
out

bruno_caron:
yeah

paul_tyler:
why do you explain it

ramsey_d_smith:
at

paul_tyler:
to

scott_hawkins:
yeah

paul_tyler:
listeners because of course we are experts on side cars scott with a wink

bruno_caron:
yeah

paul_tyler:
said

scott_hawkins:
so

paul_tyler:
with a wink

scott_hawkins:
so if you think from

bruno_caron:
yeah

scott_hawkins:
the property casually world right

bruno_caron:
yeah

scott_hawkins:
they’re insuring a lot of natural catastrophe risk so the issue around how do you

paul_tyler:
yeah

scott_hawkins:
make sure that you have a capital capacity

ramsey_d_smith:
yeah

scott_hawkins:
when you have a cat five hurricane hit florida h one of the solutions that p c industry over time came up with was insurance link securities where they could bundle up risks and sell them off to the capital markets but also what’s known as a side car now in a way a side car is a way that third party capital institutional investors can participate in the reinsurance space without actually forming a re insure or investing directly in the insurance company so what happen is there will be a reinsurance company created and then there will be a third party institution apollo’s created one global’s created one cuvari recently created one where they go out and they raise capital from other institutional investors along with some of their own capital to supply additional capital support to that re insure as it takes on more business and then if you’re a

paul_tyler:
yeah

scott_hawkins:
primary insurer if you’re out there writing

bruno_caron:
yeah

scott_hawkins:
new annuity contracts or if you have a block of existing fixed annuities or index annuities that you want to move off your balance sheet so that your existing

bruno_caron:
yeah

scott_hawkins:
capital can be re deployed you can move that to that reinsurance company and that reinsurance company then can tap the capital in that side car that’s why it’s often

ramsey_d_smith:
oh

scott_hawkins:
referred to as a side car the investors over time you know they

bruno_caron:
yeah

scott_hawkins:
their return on the investment and the profitability of the reinsurance company

bruno_caron:
oh

scott_hawkins:
and for that institutional investor they’re not fully tied to the underlying success of the insurance company if they want to liquidate their part of the side car at some point in the future they can so it’s it’s a more liquid structure for an institutional investor who wants to assume some of the insurance risk in return without directly investing in an insurance company or a re insure long

ramsey_d_smith:
yeah

scott_hawkins:
way of saying it’s it’s a new source of getting capital it’s been around on the p n c side for a long time the last couple of years were now i move into the annuity space

paul_tyler:
i

scott_hawkins:
and we think that that

tisa_rabun_marshall:
yeah

scott_hawkins:
will be a very attractive opportunity for institutional investors and provides another way to bring

bruno_caron:
oh

scott_hawkins:
third party

tisa_rabun_marshall:
oh

scott_hawkins:
capital into the annuity space to support

ramsey_d_smith:
yeah

scott_hawkins:
the growth opportunity

paul_tyler:
yeah

ramsey_d_smith:
so

paul_tyler:
this business is just as scott as you know so counter intuitive ramsey bruno tis a

bruno_caron:
oh

paul_tyler:
right it’s

tisa_rabun_marshall:
oh

paul_tyler:
oh interest rates going up are a good thing oh they went up too fast that

bruno_caron:
uh

paul_tyler:
was a bad in

ramsey_d_smith:
yah

tisa_rabun_marshall:
m

scott_hawkins:
yeah

paul_tyler:
our bonds

tisa_rabun_marshall:
m

ramsey_d_smith:
hm

paul_tyler:
just got marked down

ramsey_d_smith:
m

paul_tyler:
no so

ramsey_d_smith:
hm

paul_tyler:
it’s my mental

ramsey_d_smith:
m

paul_tyler:
model scott

bruno_caron:
yeah

paul_tyler:
is generally there’s some good things that happen to this business

ramsey_d_smith:
m

paul_tyler:
but if anything happens even

scott_hawkins:
hm

paul_tyler:
a good thing it happens too quickly it’s usually

ramsey_d_smith:
m

paul_tyler:
a bad thing so

tisa_rabun_marshall:
kay

paul_tyler:
what are some of the quick shifts we could see in this market maybe we can play out a few scenarios one is interest rates get you know recession hits hard and interest rate spike even more than we’ve seen we see

bruno_caron:
oh

paul_tyler:
what are the implications here for you know the

ramsey_d_smith:
m

paul_tyler:
annuity outlook if that’s if that pins

scott_hawkins:
so for the for the annuity outlook you know you could look for for the retail investor you’re probably going to see an increase in crediting rates to attract business right that would go up to your point if a particular company gets too far ahead and starts really seeing an influx of new sales you know they have to reserve for that they have to have the capital

bruno_caron:
yes

scott_hawkins:
capacity

ramsey_d_smith:
m

scott_hawkins:
to support that

bruno_caron:
ahead

scott_hawkins:
so they’ll be mine during that

ramsey_d_smith:
m

scott_hawkins:
at an individual

bruno_caron:
a

scott_hawkins:
company level right before their assets you know that creates some pressure on them because his interest rates go up most of the holdings of an asset and a life company are in fixed income securities interest rates go up your existing portfolio values go down a bit there’s reserves to help offset some of that that’s the good news aroun that the other challenges is you know you’re looking at what

ramsey_d_smith:
a

scott_hawkins:
we refer to as the overall portfolio rate which we’ve been

bruno_caron:
ah

scott_hawkins:
since two thousand ten and eleven we started

bruno_caron:
okay

scott_hawkins:
tracking the portfolio rate for the individual annuity

bruno_caron:
oh

scott_hawkins:
business

bruno_caron:
yeah

scott_hawkins:
which is you know we say actuaries on our teams were to say here’s what’s rolling off at an aggregate level in terms of liabilities and here’s what new sales are coming on and here’s what the interest rates for the tin ear are and that gives

ramsey_d_smith:
m

scott_hawkins:
us an india ation is sort of where the portfolio rates are headed when you look at like philly fed surveys until this year at the end of this year that portfolio forecast had always been going down and it was like i know you’ve talked about the low interest rate environment that puts pressure

ramsey_d_smith:
m

scott_hawkins:
on insures to be able to afford to offer

ramsey_d_smith:
m

scott_hawkins:
fixed incommanuities or

ramsey_d_smith:
m

scott_hawkins:
media annuities because they were under spread pressure now we’re seeing

ramsey_d_smith:
oh

scott_hawkins:
that portfolio rate swing positive and start to recover so in that scenario interest rate spike the insurance that will be bringing the end will be investing at higher rates rather than at lower rates even as older fixed income securities roll off so that will be positive for investment spreads enabling them to support more profitable products may encourage them to actually go out and write more business

paul_tyler:
so so

ramsey_d_smith:
yeah

paul_tyler:
the

bruno_caron:
it

paul_tyler:
new

scott_hawkins:
that’s

paul_tyler:
is so the new

scott_hawkins:
that’s

paul_tyler:
end

scott_hawkins:
the rising interest rate

paul_tyler:
yeah

scott_hawkins:
scenario

paul_tyler:
so so that scenario will probably favor some of these companies we haven’t heard of until last two years the ones with a smaller

bruno_caron:
oh

paul_tyler:
enforced block in there

ramsey_d_smith:
oh

paul_tyler:
y’re writing de novo scott

bruno_caron:
yeah

paul_tyler:
is

scott_hawkins:
yep

paul_tyler:
it

ramsey_d_smith:
so we could i want to put i want

bruno_caron:
yeah

ramsey_d_smith:
to put further lens on that because i think that’s that’s it’s super important it so we have a lot of factors that are going to translate into much much greater demand there is sort

scott_hawkins:
hm

ramsey_d_smith:
of this historical capital onstraint um you’ve got legacy legacy players who are structurally more inclined or structurally philosophically more inclined to grow in a more measured way and then you have these new these new entrance that are that are incentivized to grow much more aggressively and

bruno_caron:
yeah

ramsey_d_smith:
quickly now what’s interesting is that sometimes depend you talk to in the industry you know there are different attitudes the different attitudes about the new third party capital providers there are some that would say well they take too much risk in their portfolios there’s

bruno_caron:
oh

ramsey_d_smith:
there’s there’s

scott_hawkins:
hm

ramsey_d_smith:
various today some of it’s marketing noise some of it’s some of its reasonable sort of questions but i think that the overriding theme here is

bruno_caron:
oh

ramsey_d_smith:
that we don’t have any choice like for this business to work let me know if you you know you think would agree with this statement or if i’m overplaying but it doesn’t seem like at this works at we that the industry reaches its full potential unless we have those the third party providers like we need them full stop is that fair

scott_hawkins:
absolutely

ramsey_d_smith:
yeah

scott_hawkins:
that that was what we saw in two thousand

ramsey_d_smith:
yeah

scott_hawkins:
eleven it still holds true today

ramsey_d_smith:
yeah

scott_hawkins:
and it’s even more so because if you think two thousand eleven we’re just looking at the potential retirement of the boomers and that that you

ramsey_d_smith:
m

scott_hawkins:
know silver sunamiiswher

bruno_caron:
m

scott_hawkins:
were referring to

ramsey_d_smith:
yeah

scott_hawkins:
it back then coming down what would that happen

ramsey_d_smith:
oh

scott_hawkins:
if their assets started to anuitize now you’ve got secure act which has opened up a whole new avenue of growth as well as pensioners

ramsey_d_smith:
m

scott_hawkins:
transfers which have been a growing business as d v plans look off load their retires

ramsey_d_smith:
oh

scott_hawkins:
liability on to an annuity company true that’s usually done on a group basis

ramsey_d_smith:
yeah

scott_hawkins:
but still that consumes capital

bruno_caron:
uh

scott_hawkins:
so to your point there’s great

bruno_caron:
h

scott_hawkins:
potential

bruno_caron:
oh

scott_hawkins:
ahead for growth the constraint is going to be will there be enough capital if the solution to that is you’re going to have to figure out a way to

ramsey_d_smith:
oh

scott_hawkins:
effectively tap third party capital institutional investors to come in and yes these these new companies these new entrance there’s people that like them people that are concerned about them to your point some of that concern valid thers though might be for their own reasons

bruno_caron:
m

scott_hawkins:
why they’re against it things like these side cars though are another way

ramsey_d_smith:
oh

scott_hawkins:
of doing it because

ramsey_d_smith:
oh

scott_hawkins:
when you just look at the overall if all you were going to do is grow based up your organic

ramsey_d_smith:
m

scott_hawkins:
profit ability and the individual annuity line overall is has been profitable about at an aggregate level and that’s about on a staff basis about eighteen nineteen billion a year on average years a ittle bit more some years little bit less but that’s not enough to support the opportunity and and you know you can sort of say well not everybody’s in for one case immediately on to move

ramsey_d_smith:
oh

scott_hawkins:
everything in not everybody and ira

bruno_caron:
yeah

scott_hawkins:
is going to immediately go out and buy a spear that that’s certainly true

bruno_caron:
oh

scott_hawkins:
but just the amount of assets in those areas some of those will and they’re gonna be encouraged to do so by by financial advisors by plan sponsors by

bruno_caron:
m

scott_hawkins:
the broader media as you’re retiring to think about how are you going to generate a guaranteed retirement income off of some of your assets and you go that’s going to lead and open up the discussion around well maybe we should consider an annuities somehow and that’s even before you start thinking about the people in who are younger employees joining

tisa_rabun_marshall:
m

scott_hawkins:
a for one if there into a annuity like product because i see a lot of innovation coming along there and i’m not quite certain what

bruno_caron:
m

scott_hawkins:
that will look like but that’s why i refer to him as annuity like those types of assets will start to build over time as well so i think this issue around capital

tisa_rabun_marshall:
oh

scott_hawkins:
could be a big constraining factor on this really strong opportunity we see for growth

ramsey_d_smith:
m

tisa_rabun_marshall:
other question

bruno_caron:
well that was

tisa_rabun_marshall:
go ahead bron

bruno_caron:
go ahead please

tisa_rabun_marshall:
so kind of on that theme of the constraint of capital and growth and the new products out there

bruno_caron:
ye

tisa_rabun_marshall:
i guess i wanted to go back on this idea of the generations right so you talked about two thousand eleven being important as the first boomer turned sixty five so now we’re like you know ten eleven years into that so my question is as we look at the boomers maybe approaching that age eighty the oldest boomers right like what does that picture look like what are the demands there they’ve been living in retirement for about a decade they’re reaching older ages maybe there’s health care concerns medical cost those kinds of things

scott_hawkins:
hm

tisa_rabun_marshall:
and right behind them right oldest gen x r is starting to hit retirement or has maybe five to seven years left a plan better for retirement given what has happened in the last ten years so you know products trends like do both generations have the same demand or is everyone focused on that guaranteed income or does the product types type to start to shift based on the generations

scott_hawkins:
there is a definite generation difference the for that older age group mean one of the areas we look at is we refer to it’s the senior market which is a combination of risks and insurance based solutions that are offered

tisa_rabun_marshall:
m

scott_hawkins:
their income solutions or one but long term care

tisa_rabun_marshall:
hm

scott_hawkins:
medic care supplements or advantage products around there and there’s distributors coming into that space and advisors to help that group understand that and that carries its own set of risks and challenges as well from a consumer point of view know you’ve done podcasts around you know some of the health and issues of dealing with an older age consumer as an adviser you know but we see that as for the for the boomers that’s going to be a growing are and we treat that more broadly and in the sense of all these others things that there needed to really meet that generational demand with the secure two point o act which we’ve been looking at pretty intensely over the last couple of months really trying to now that it’s out there really what that means is you can really start looking at generation x the millennial gen season you know would sure there’s a dip in gen x in terms of absolute numbers but the millennials and gin zese are as large if not larger than the baby boomers and secure two point o now opens up an annuity opportunity through in plan annuities in those four or one case

bruno_caron:
oh

scott_hawkins:
spaces to those younger consumers and they’ll start building assets some of them will those those annuities which is creating a whole new opportunity for advisors and insurance companies

bruno_caron:
oh

scott_hawkins:
to figure out how do we provide services to that age group which traditionally not perhaps been target for a annuity sale because they hadn’t accumulated the assets at that point in time

bruno_caron:
oh

scott_hawkins:
and we think those

ramsey_d_smith:
oh

scott_hawkins:
generations will start to attract some of the attention those obviously they have always been a factor

bruno_caron:
oh

scott_hawkins:
look the life insurance business those younger consumers are usually the prime buying age twenty four to fifty four to sixty four

tisa_rabun_marshall:
m

scott_hawkins:
for buying life insurance and traditionally to have been associated with life stages you know getting married buying a home having a child interestingly enough when you look at those life stages that are key financial decision moments those are getting pushed later and later people are getting married later they’re buying homes later they’re having children

ramsey_d_smith:
yeah

scott_hawkins:
later and if you look ahead that will have

ramsey_d_smith:
m

scott_hawkins:
to have to have life insures thinking about when are we approaching people when are they going to be receptive to

bruno_caron:
oh

scott_hawkins:
buying an insurance policy probably the same is a little bit true for the annuities but the four one k

bruno_caron:
oh

scott_hawkins:
an plan annuity sort of eases them

tisa_rabun_marshall:
yeah

scott_hawkins:
into the idea of i’m accumulating money for for retirement on an income basis

ramsey_d_smith:
oh

tisa_rabun_marshall:
a little earlier

scott_hawkins:
i hope that helps a little

ramsey_d_smith:
you

scott_hawkins:
bit

ramsey_d_smith:
are you

tisa_rabun_marshall:
yeah

ramsey_d_smith:
are you are so preaching to the choir

tisa_rabun_marshall:
oh

ramsey_d_smith:
here at least i’ll

bruno_caron:
uh

ramsey_d_smith:
speak

scott_hawkins:
o

ramsey_d_smith:
for myself so and definitely

bruno_caron:
uh

ramsey_d_smith:
have a clear vision of what that might look like um

bruno_caron:
oh

ramsey_d_smith:
the interesting

bruno_caron:
yeah

ramsey_d_smith:
thing though is like um it’s just sort of the adoption cycle the adoption cycle has not been as quick as as i think many of us would like it to see and there’ve been some there’ve been some providers if you will that have been trying to do this for ten years so uh a lot of it comes down to who the decision makers are so in some sense it’s planned participants for in plan but really the often the keep so it’s going to be person or persons that’s going to be the the investment committee or the the manager that’s in charge of the that’s in charge of the defined contribution plan and so i’m is in your travels right in the work that you’re doing at conning um are you having those conversations yet are you are you seeing plant sponsors sort of start to to examine that is that is that is that a conversation that you’ve been involved because i think i think that over time it’s one that but that intellectually you should be involved in because you guys have the you guys have the you guys have valuable information and perspective that i think would be useful for plan sponsors i’m curious if they are if they are part of your client base yet

scott_hawkins:
uh so they’re not part of our client based

ramsey_d_smith:
hm

scott_hawkins:
but the people we

ramsey_d_smith:
yeah

scott_hawkins:
talk with

ramsey_d_smith:
yeah

scott_hawkins:
and the way we’ve been viewing this is especially true for secure to point out uh secure point one gave the fiduciary safe harbor rule for selecting which was

ramsey_d_smith:
oh

scott_hawkins:
a big stumbling block

ramsey_d_smith:
hm

scott_hawkins:
right secure two point really does a lot more

ramsey_d_smith:
oh

scott_hawkins:
and what we’ve been hearing in our converse ation um is the changes required to implement these so think are now perhaps a stumbling block for full adoption let me give ou an example so

ramsey_d_smith:
oh

scott_hawkins:
suppose you’re a plan sponsor and a record eeper

ramsey_d_smith:
oh

scott_hawkins:
and you now want to put an annuity product

ramsey_d_smith:
oh

scott_hawkins:
inside your four one offering well you’ve got an infrastructure built on being able to do all the record keeping and trans transaction stuff with a mutual fund company right you’ve got data standards in place that makes that efficient

ramsey_d_smith:
m

scott_hawkins:
and effective to do you’ve got to build all that to go to an annuity company and those are probably going to be different and if you have multiple annuity companies you’re dealing with is there a standard inter face for all of those do you have to build one for each time

ramsey_d_smith:
hm

scott_hawkins:
these are all new questions that we think plan sponsors and record keepers are having to think through and

paul_tyler:
yeah

scott_hawkins:
come up with with answers and solutions to that and i know

paul_tyler:
yeah

scott_hawkins:
from conversation i know thing is spark is

ramsey_d_smith:
m

paul_tyler:
yeah

scott_hawkins:
is trying to work out

ramsey_d_smith:
oh

scott_hawkins:
on their own because there’s going to be demand from plan members to sort of say

bruno_caron:
oh

scott_hawkins:
you know how much of my you know be hearing about this my financial wellness apse telling me i should be thinking about this my statement saying here’s what my retirement income could be based on this is there some sort of annuity like solution for that so the opportunities there i think i’m not seeing a reluctance from you know philosofh fecal reluctance now to include it it’s more of a technical operational issue

ramsey_d_smith:
so can you

scott_hawkins:
and that that will be resolved but its gonna take a little bit of time

ramsey_d_smith:
for our audience can you tell them who spark is

scott_hawkins:
so spark is a association

bruno_caron:
m

scott_hawkins:
for plan record keepers so they deal you know is primarily everybody that you know between the

ramsey_d_smith:
m

scott_hawkins:
plan

ramsey_d_smith:
oh

scott_hawkins:
sponsor a defined contribution plan and then

ramsey_d_smith:
oh

scott_hawkins:
the fund companies all those records that have to be kept of your account balances

ramsey_d_smith:
m

scott_hawkins:
beneficiaries transactions all that those are those services that do that and it’s a scale business so they have to

paul_tyler:
yeah

scott_hawkins:
be very efficient at doing that and they’re

paul_tyler:
oh

scott_hawkins:
you know being asked because of this great opportunity now we have to really start plugging into a whole new set of product providers solution providers that we’ve never really done that before

ramsey_d_smith:
m

paul_tyler:
yeah interest

bruno_caron:
and

ramsey_d_smith:
go ahead bruno

bruno_caron:
interest yeah interesting and that’s a lot to look forward to but i want to get back on the on the balance sheet and

ramsey_d_smith:
yeah

bruno_caron:
you mentioned you know that that ten to one ratio liabilities to capital h makes perfect sense it’s very very consistent to

ramsey_d_smith:
m

bruno_caron:
everything i’ve observed you have deferred annuities in tex annuities pension risk transfers spas all of those you now require

ramsey_d_smith:
oh

bruno_caron:
roughly speaking ten percent

ramsey_d_smith:
yeah

bruno_caron:
capital for for for liability block um and of course i don’t want to dump down risk adjusted caitalization to this i mean there’s there’s a lot

scott_hawkins:
yeah

bruno_caron:
more on the asset side on the liability side that goes into the risk adjusted capitalization and um but what i’m really interested is the other thing is those liabilities are fairly straightforward as well again i don’t want to jump down all the actuorial work that is out there present

scott_hawkins:
yeah

bruno_caron:
you have future benefits present value of future premiums you have you know you have a liability if if we switch that into the context

ramsey_d_smith:
yeah

bruno_caron:
of variable

ramsey_d_smith:
yeah

bruno_caron:
annuity with living benefits now

scott_hawkins:
hm

bruno_caron:
these have been issued you know a few decades ago now we’re in time when you know technically policy holders

ramsey_d_smith:
oh

bruno_caron:
can and should utilize them um those liabilities and those capital requirements for those particular benefits are not as clear as you know some of those those

scott_hawkins:
yeah

bruno_caron:
other or more straightforward annuities do you have any sense or any any views on

ramsey_d_smith:
yes

bruno_caron:
how those policies are

ramsey_d_smith:
oh

bruno_caron:
going to play out

ramsey_d_smith:
m

bruno_caron:
over next decade

scott_hawkins:
well

bruno_caron:
oh

scott_hawkins:
first of all you’reactulutely right to sort of carve out the variable annuity space because you know a plain vanilla va without any of those imbedded garran would typically have

ramsey_d_smith:
ye

scott_hawkins:
a lower capital charge because all the investment risk which is a big risk factor on a immediate or fixed deferetinuity that’s assumed by the contract holder but the moment

bruno_caron:
m

scott_hawkins:
you put a guaranteed

bruno_caron:
m

scott_hawkins:
minimum

bruno_caron:
oh

scott_hawkins:
withdrawal benefit or a death benefit any of those guaranteed benefits the insurance company s assumed some level of risk and if you look at the v a bus this and i cut my teeth in it in the in the mid eighties um

ramsey_d_smith:
oh

scott_hawkins:
it’s been those

ramsey_d_smith:
yeah

scott_hawkins:
changes in

ramsey_d_smith:
oh

scott_hawkins:
those equity linked guarantees

ramsey_d_smith:
yeah

scott_hawkins:
that have

bruno_caron:
my

scott_hawkins:
really led to massive reserve try just when equity markets went down after

ramsey_d_smith:
m

scott_hawkins:
the insure tech bust in the

ramsey_d_smith:
m

scott_hawkins:
tech bust in two thousand two thousand eight currently with all the equity market volatility in response all of the insurance companies that are in that space have really had to up there their risk management game in terms of their hedging very dynamic hedging to maintain that to your now if people start

ramsey_d_smith:
m

scott_hawkins:
using those guaranteed benefits

ramsey_d_smith:
m

scott_hawkins:
so i’m pulling out say i have a guaranteed minimum withdraw benefit ten per cent and i am actually going to start executing that that has to factor into how they’re managing all their options and risk management that’s going around that i think it’s also why you might be seeing i might have seen as we mentioned earlier some of those more established players ing back because they had you know a lot of them had very large va blocks

ramsey_d_smith:
m

scott_hawkins:
business even though they were scaling that back nd they’re still on their books and they’re trying to figure out what can we do with those risks and a lot of these new reinsurance companies have been focusing on blah s have closed fixed deferred annuities or maybe some index annuity flow re insurance but it’s only recently that we’ve seen any meaningful

bruno_caron:
hm

scott_hawkins:
reinsurance deals and i

ramsey_d_smith:
yeah

scott_hawkins:
think the reason is if you’re going to be

bruno_caron:
yes

scott_hawkins:
taking on those types of liabilities from a v a with all those imbedded guarantees you’ve got to have as that re insure you’ve got to have a really strong risk management game and when you look at the two companies that have been involved as the re insure

bruno_caron:
yeah

ramsey_d_smith:
oh

scott_hawkins:
they spun out of companies that had very very large va blocks to begin with

bruno_caron:
oh

scott_hawkins:
and they had that capability in house not all of these

bruno_caron:
yah

scott_hawkins:
new reinsurance companies have been formed over last decade have that level of capability which is not to say they couldn’t do it but you know to the extent that there are those that can do it there’s a lot of opportunity for insures primary insures

ramsey_d_smith:
yes

scott_hawkins:
to re structure

ramsey_d_smith:
oh

scott_hawkins:
their balance sheet by removing

ramsey_d_smith:
h

scott_hawkins:
those that gets back to the pacity issue that freeze up capital they can deploy elsewhere

bruno_caron:
oh

scott_hawkins:
but it’s gonna be interesting to see if people do start to to utilize their gmwbs or some of the other imbedded guarantees how that plays out

paul_tyler:
let me just pull that thread

bruno_caron:
m

paul_tyler:
a little bit

ramsey_d_smith:
yeah

paul_tyler:
i do think generally people criticize the insurance business for not delivering enough value but then

bruno_caron:
oh

paul_tyler:
when you always look back ten years

bruno_caron:
yeah

paul_tyler:
late for some of these products there was too much value in there and we end up with a lot of hangovers you know disability hang overs long term care hangover

ramsey_d_smith:
m

scott_hawkins:
m

paul_tyler:
v a hangovers now you mentioned the lifetime guarantee benefit

ramsey_d_smith:
m

paul_tyler:
writers now

ramsey_d_smith:
m

paul_tyler:
on another podcast

ramsey_d_smith:
m

paul_tyler:
that we do called prime life which is

bruno_caron:
m

paul_tyler:
focused on consumers where been interviewing a lot of people focused on longevity and how long will people and can people really live and you know the technology scot you know is changing dramatically

scott_hawkins:
yep

paul_tyler:
people are changing a lot of people are doing the right things exercise diet

bruno_caron:
oh

paul_tyler:
changing

bruno_caron:
oh

paul_tyler:
behavior that it’s just common sense but we’ve got new drugs on the horizon um medical technology is improving dramatically what happens if you know the action estimates of

ramsey_d_smith:
m

paul_tyler:
of our life’s span are wrong the say we live ten years longer what kind of impact does that have with our current generation products as your team looked at this yet yes

scott_hawkins:
we haven’t looked at in terms of annuities now but you know where if you’re looking for a parallel for that scenario look at individual long term care when that product came out there were assumptions about

ramsey_d_smith:
m

scott_hawkins:
longevity and

ramsey_d_smith:
m

scott_hawkins:
utilization as well as interests that were baked into the pricing and while you know they’re on like an annuity you’re paying ongoing premiums uh and those assumptions for longevity those assumptions around utilization didn’t play out the way it was thought when those

ramsey_d_smith:
m

scott_hawkins:
products were first designed

paul_tyler:
eh

scott_hawkins:
there was a lot more utilization than was

ramsey_d_smith:
m

scott_hawkins:
expected there was much stronger increase in a longevity than was

bruno_caron:
yah

scott_hawkins:
expected and as a result if you follow that

paul_tyler:
yeah

scott_hawkins:
space you know that those insurance with those blocks quit writing the business and those that are that had blocks were still in there they’re going back and saying i need a significant rate increase from the insurance commissioners in their respective

bruno_caron:
oh

scott_hawkins:
states and getting pushed back

paul_tyler:
oh

scott_hawkins:
and now think about the v a space when they’re coming up with those imbedded options ten fifteen years ago selling those products there were certain assumptions based on longevity and usual satan and if those don’t play out that

paul_tyler:
m

scott_hawkins:
increases the risk for the insurer because

paul_tyler:
ah

scott_hawkins:
they made the guarantee

bruno_caron:
oh

scott_hawkins:
that you’re gonna be able to do that

paul_tyler:
right

scott_hawkins:
and it leads back to sort of

paul_tyler:
oh

scott_hawkins:
okay what does that do to profit ability and also

ramsey_d_smith:
oh

scott_hawkins:
for capital

paul_tyler:
hey well listen we’re near the top of the

bruno_caron:
oh

paul_tyler:
end of our time

ramsey_d_smith:
yeah

paul_tyler:
bruno any final

ramsey_d_smith:
oh

paul_tyler:
thoughts questions for scott

bruno_caron:
i mean

ramsey_d_smith:
oh

bruno_caron:
i mean in terms of you know where capitals is going where liabilities

ramsey_d_smith:
m

bruno_caron:
are going i think that’s a could be a topic for for another

ramsey_d_smith:
yeah

bruno_caron:
episode but no

ramsey_d_smith:
oh

bruno_caron:
thank you appreciate you coming in and

paul_tyler:
yeah

bruno_caron:
and commenting

ramsey_d_smith:
m

bruno_caron:
on on those those difficult issues

tisa_rabun_marshall:
yes

paul_tyler:
yeah it’s

scott_hawkins:
yeah

paul_tyler:
scott is great you know we always think specifically

ramsey_d_smith:
m

paul_tyler:
about products we don’t really don’t think about the acid the balance for the industry

bruno_caron:
oh

paul_tyler:
you know fascintine topic

ramsey_d_smith:
m

scott_hawkins:
i think that you know and

bruno_caron:
oh

scott_hawkins:
i listen to the show and and the way i view if you’re a distributor if you’re an advisor if you’re a consultant

ramsey_d_smith:
m

scott_hawkins:
you’re absolutely right you’re focused

tisa_rabun_marshall:
oh

scott_hawkins:
on product differences how the playing out and all

tisa_rabun_marshall:
oh

scott_hawkins:
of that but ultimately your client may come back to you and say you know i have this annuity that’s now just been re insured by somebody else i’m trying to understand why things are happening and as an advisor knowing the products knowing how they

bruno_caron:
oh

scott_hawkins:
play out crucial but also understanding what’s going on in the broader market affecting the issue of that annuities is crucial so

paul_tyler:
tis a what do you think

tisa_rabun_marshall:
yes ah well it’s a pleasure to meet you scott thanks for all of the insights and i think we have

paul_tyler:
yeah

tisa_rabun_marshall:
the title of today’s episode

paul_tyler:
ye

tisa_rabun_marshall:
the industry’s balance sheet so wait

bruno_caron:
ye

tisa_rabun_marshall:
paul you just

ramsey_d_smith:
m

tisa_rabun_marshall:
you just came up with

ramsey_d_smith:
m

tisa_rabun_marshall:
it as we were

bruno_caron:
yeah

tisa_rabun_marshall:
as we

paul_tyler:
yeah

tisa_rabun_marshall:
were wrapping up

ramsey_d_smith:
m

paul_tyler:
yeah

ramsey_d_smith:
yeah

paul_tyler:
ramsey

ramsey_d_smith:
yeah so many things because it touches on so many areas of interest

bruno_caron:
oh

ramsey_d_smith:
for me i think just a number of things one is i think we live in a world where

bruno_caron:
a

ramsey_d_smith:
the

bruno_caron:
yeah

ramsey_d_smith:
the difficulty of basically providing the risk coverage and getting the capital capacities under appreciated by the market right and i hope that the big people that are listening to this and other sort of understand how difficult it is to price

bruno_caron:
oh

ramsey_d_smith:
risk and you know and ultimately provide what is critical services for for this country and beyond that you know how much how much third party capital we need to come into the space in order to essentially meet you know are americas need if you will and so i’m very hopeful and excited

bruno_caron:
oh

ramsey_d_smith:
about what the future holds and really appreciate the perspective you gave on how we need to get there

scott_hawkins:
you

paul_tyler:
yeah thank scott for for people who want to learn more about conning get access to your research connect with you what’s the best way

scott_hawkins:
you can go to conning dot

ramsey_d_smith:
oh

scott_hawkins:
com and there will be a link right down to our research which will tell you how to get hold of us either v phone call or

ramsey_d_smith:
m

scott_hawkins:
through email

paul_tyler:
excellent all right well scott we look forward to having you on center stage at our event in new york march

ramsey_d_smith:
yeah

scott_hawkins:
looking forward to that

paul_tyler:
march twenty seventh more details to follow um bruno

ramsey_d_smith:
oh

paul_tyler:
thanks tis a

bruno_caron:
oh

paul_tyler:
thanks ramsey thanks as usual and listen give us feedback and look forward to having you join us again next week for another episode of that annuity show thanks m

scott_hawkins:
yes

bruno_caron:
oh

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