Laurence Black

Episode 176: Thoughtfully Recommending Indices with Laurence Black and Branislav Nikolic

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# 176 – Thoughtfully Recommending Indices with Laurence Black and Branislav Nikolic

Indices continue to proliferate within the fixed indexed annuity market. Yes, choice is good for the client but it can create a complicated environment for the agent or advisor. Laurence Black, Founder of the Index Standard and Branislav Nikolic join us again to talk about how their company makes providing good information easier.

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Episode Transcript

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.

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[paul_tyler]: hi

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[branislav_nikolic]: oh

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[paul_tyler]: this is paul tyler and welcome to
another episode of that annuity show bruno

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[branislav_nikolic]: yeah

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[paul_tyler]: welcome

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[bruno_caron]: thank you great to be here and
excited about

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[paul_tyler]: tessa

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[bruno_caron]: our guests

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[paul_tyler]: glad you got your yahyeahtisa good to
see you

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[bruno_caron]: yeah

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[tisa_rabun_marshall]: to see you good morning

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[paul_tyler]: yeah we’ve been

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[bruno_caron]: m

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[paul_tyler]: busy on a lot of fronts last
few weeks haven’t we

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[tisa_rabun_marshall]: i

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[paul_tyler]: and ramsey looks

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[ramsey_d_smith]: ah

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[paul_tyler]: like you’re i think you’re broadcasting from
an undisclosed location today

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[ramsey_d_smith]: indeed

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[paul_tyler]: correct

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[ramsey_d_smith]: looks kind of like a wine seller
doesn’t it but

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[paul_tyler]: yeah

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[tisa_rabun_marshall]: m

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[ramsey_d_smith]: it’s not

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[paul_tyler]: yeah ah

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[ramsey_d_smith]: a very

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[paul_tyler]: ah

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[ramsey_d_smith]: happy

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[tisa_rabun_marshall]: right

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[ramsey_d_smith]: to be here and really excited to
welcome lawrence black in the end standard uh

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[ramsey_d_smith]: the the index standard has been our
lead sponsor for the better part of the

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[ramsey_d_smith]: last year so we’re really excited to
have them on they’re doing a lot of

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[ramsey_d_smith]: very interesting things in and helping the
the index community unpack the best way to

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[ramsey_d_smith]: allocate industies and the best way to
understand their role in a broader portfolio so

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[ramsey_d_smith]: with that lawrence i want to start
out with you and you also have a

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[ramsey_d_smith]: special guest a new addition to your
team you’re going to want to introduce

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[branislav_nikolic]: m

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[ramsey_d_smith]: as well so i will pass it
on to you for that

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[laurence]: indeed so good morning every one it’s
great to join you so as you guys

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[laurence]: know it i’ve been with you a
couple of times in the past great to

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[laurence]: be back here again and i’m delighted
to introduce brand nicolitch who’s just joined us

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[laurence]: from from begpardon let me try a

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[branislav_nikolic]: m

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[laurence]: do that again hey good morning it’s
great to join you i’m delighted to introduce

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[laurence]: branslanicolich

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[ramsey_d_smith]: oh

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[laurence]: who’s just joined us from chanics he
was ahead of research and he was therefore

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[laurence]: about almost a decade and the index
standard we’ve got a lot of index expertise

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[laurence]: and it’s great to kind of expand
our capabilities

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[ramsey_d_smith]: ah

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[laurence]: with brand slabs in depth insurance knowledge

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[ramsey_d_smith]: fantastic

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[paul_tyler]: welcome yeah

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[branislav_nikolic]: thank you extremely

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[paul_tyler]: you want

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[branislav_nikolic]: happy to be here

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[paul_tyler]: yeah yeah tell us

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[ramsey_d_smith]: yeah

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[paul_tyler]: tell us it’s a little bit about
your back story how did how did you

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[paul_tyler]: get into the annuity space

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[ramsey_d_smith]: oh

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[branislav_nikolic]: so my story with annuities was polly
haphazard so old way through school i thought

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[branislav_nikolic]: i would end up on a trading
desk somewhere be a proper quant and i

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[branislav_nikolic]: had enormous luck to meet motinmilevsky extreme
early in my career and started working for

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[branislav_nikolic]: for his start up later joined chanics
which is again an industry leader on data

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[branislav_nikolic]: analytics for annuities spent good almost ten
years there leading research and really helping antics

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[branislav_nikolic]: build their capabilities in all sorts of
annuities in terms of platforms for exchanges that’s

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[branislav_nikolic]: how i lawrence and j and i
really saw the two missions extremely complimentary and

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[branislav_nikolic]: i always saw the index as a
fuel to the annuity and i always was

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[branislav_nikolic]: saying that it’s important these

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[ramsey_d_smith]: m

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[branislav_nikolic]: two things

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[ramsey_d_smith]: oh

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[branislav_nikolic]: evaluated together so we started talking and
i’m extremely happy to have joined the team

00:03:01,183 –> 00:03:03,608
[branislav_nikolic]: and to be side by side with
lawrence and j

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[ramsey_d_smith]: yeah

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[paul_tyler]: ah

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[branislav_nikolic]: oh

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[paul_tyler]: lawrence so actually we saw each other
in person it was it was tremendous i

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[laurence]: indeed

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[paul_tyler]: i made the very last minute decision
to tend naa this year and a f

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[paul_tyler]: a for those of you who were
wont to look at this up had their

00:03:20,432 –> 00:03:26,543
[paul_tyler]: conference in california showed up and lawrence
you were on a great platform talking about

00:03:27,104 –> 00:03:32,272
[paul_tyler]: kind of the landscape of product design
and industiesn maybe for our audience you could

00:03:32,312 –> 00:03:36,279
[paul_tyler]: just sort of give us talk to
us a little bit more about the problem

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[paul_tyler]: you’re solving and you know what’s taking
place in the market today

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[laurence]: sure thanks paul because you know a
lot is happening so let me just sort

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[laurence]: of give everyone little bit of background
about what we

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[ramsey_d_smith]: oh

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[laurence]: do so at the end of standard
we all know there’s so much complexity in

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[laurence]: this market with induces and the pay
offs so what we do at the end

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[laurence]: next standard which were really trying to
simplify decode and mystify all this complexity and

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[laurence]: we do it in a couple of
ways we’ve got a lot of research

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[ramsey_d_smith]: he

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[laurence]: that we help people giving them insights
as to what products and industries to select

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[laurence]: we also actually rate and evaluate every
single index used in the insurance space we

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[laurence]: give it a platinum gold silver bronze
rating and then we actually have some forward

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[laurence]: looking forecast to help people think about
the future because we all know the future

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[laurence]: is going to be different so we
have some forecast and then we’ve actually on

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[laurence]: the of these forecasts we’ve actually launched
some model allications so allicating

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[ramsey_d_smith]: yeah

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[laurence]: to an annuity can be really tough
with sort of fifteen crediting lines so we’ve

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[laurence]: actually built a tool to help people

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[ramsey_d_smith]: yeah

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[laurence]: a tough selection now i just want
to give you some background about the index

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[laurence]: industry so one interesting

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[ramsey_d_smith]: yeah

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[laurence]: fact it’s actually almost a trillion dollar
industry no one knows about it so i

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[laurence]: call it like a niche market

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[branislav_nikolic]: ah

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[laurence]: that’s a trillion dollars

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[ramsey_d_smith]: yeah

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[laurence]: so you know we see in the
u s insurance space there’s probably is the

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[laurence]: bulk of risk control industries probably about
half that but actually risk control industries are

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[laurence]: used in germany

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[ramsey_d_smith]: yeah

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[laurence]: and in switzerland

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[ramsey_d_smith]: oh

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[laurence]: actually used in the insurance

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[ramsey_d_smith]: ye

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[laurence]: space they use risk control industries in
mutual funds then another big portion is structure

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[laurence]: products we estimate there’s probably two hundred
and fifty billion in instructure products that actually

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[laurence]: are linked to these risk control industries
and then actually you have this of bank

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[laurence]: market where they’re doing direct transactions with
big institutions that’s probably another two hundred billions

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[laurence]: so in total we think it’s around
about a trillion dollar market

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[ramsey_d_smith]: so that’s incredible i mean one of
the things though that is

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[branislav_nikolic]: oh

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[ramsey_d_smith]: that has been interesting about the market
is it’s gotten it’s been characterized by a

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[ramsey_d_smith]: lot more choice and there’s a lot
of value in an adit a choice but

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[ramsey_d_smith]: with with those choices becomes many many
more complicated decisions

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[laurence]: yeah

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[ramsey_d_smith]: and you know so i guess a
question you know that that i have for

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[ramsey_d_smith]: you like so what sort of what
are your various target audiences i can see

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[ramsey_d_smith]: i can certainly see why retail retail

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[laurence]: m

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[ramsey_d_smith]: consumers would want to be able to
decode all the choices but i would imagine

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[ramsey_d_smith]: that institutions are almost similarly challenged so
what are your target audiences for your product

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[ramsey_d_smith]: lines yeah

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[laurence]: so we’re actually kind of targeting that
that whole gammit we want

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[ramsey_d_smith]: hm

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[laurence]: to help organizations with the selection and
due diligence of these industies want to help

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[laurence]: organizations who selling them that they can
use our reports to kind of position them

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[laurence]: and and in the end consumer i
mean the main reason i’m actually here and

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[laurence]: doing this is i want m and
ms smith who are buying these policies to

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[laurence]: do better right

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[ramsey_d_smith]: oh

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[laurence]: by building choosing

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[ramsey_d_smith]: oh

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[laurence]: better industries and building diverse portfolios and
let me just make one quick comment about

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[bruno_caron]: oh

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[laurence]: the industries because

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[tisa_rabun_marshall]: m

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[laurence]: you know i think we hear a
lot about the comp lexity but also on

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[laurence]: the sort of flip side is actually
it’s really wonderful because what we’re now

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[ramsey_d_smith]: m

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[laurence]: seeing is a lot of the users
are actually getting access to techniques that only

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[laurence]: used by hedge funds or big pension
funds i can give any example there’s a

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[laurence]: technique called mean verace optimization just a
fancy way of saying give me the best

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[laurence]: aplication to target a certain level of
risk that was kind of actually harry make

00:07:33,993 –> 00:07:37,562
[laurence]: its came up with that technique in
the late fifties he wanted no ball prize

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[laurence]: for up until a couple of years
ago you only had big pension funds and

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[laurence]: big hedge funds were using that ut
now amazingly that technique is an indusies and

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[laurence]: we can all access that so that’s
actually a really wonderful innovation that all of

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[laurence]: us can use that

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[branislav_nikolic]: oh

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[ramsey_d_smith]: yeah

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[laurence]: to do better

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[branislav_nikolic]: yeah m

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[bruno_caron]: that’s that’s wonderful and can you talk
you talk a little bit more about those

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[bruno_caron]: those actual metrics and in practice what
type of metrics it you used to rate

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[bruno_caron]: s

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[ramsey_d_smith]: oh

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[bruno_caron]: h i mean you list plenty in
terms of calculating and measuring those like like

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[bruno_caron]: capital risk metric efficiency metric return metric

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[ramsey_d_smith]: m

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[bruno_caron]: what are those metrics and what do
they mean

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[ramsey_d_smith]: m

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[bruno_caron]: for people who ultimately use them

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[laurence]: he great question bruno

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[bruno_caron]: yeah

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[laurence]: so we actually look at about thirty

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[bruno_caron]: yeah

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[laurence]: metrics and i’m going

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[branislav_nikolic]: ah

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[laurence]: to loosely break them down into

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[branislav_nikolic]: oh

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[laurence]: three groups so the first group is

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[bruno_caron]: yeah

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[laurence]: we really want to look at the
complex city of each

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[bruno_caron]: oh

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[laurence]: index how it’s designed and the availability
of the rules and who’s calculating that the

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[laurence]: key thing is is really that complexity
we’ll look at the dirt the diversification we’ll

00:08:51,366 –> 00:08:54,465
[laurence]: look and see if the rules are
available well look and see if there’s an

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[laurence]: independent index calculation

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[ramsey_d_smith]: oh

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[laurence]: agent and we like to see those
things and by the way what we prefer

00:09:00,615 –> 00:09:04,241
[laurence]: to see when we’re looking at an
index is simpler is better than an index

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[laurence]: with lots of no second category is
what you touched on

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[bruno_caron]: oh

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[laurence]: will look at a lot of

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[paul_tyler]: yeah

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[laurence]: metrics like such as returns and volatility
but there we want to kind of go

00:09:16,119 –> 00:09:20,685
[laurence]: under the hood and we look at
something called v which is v a r

00:09:20,986 –> 00:09:24,071
[laurence]: but it’s just simply a metric that
tells you how much you can possibly

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[ramsey_d_smith]: what does

00:09:24,151 –> 00:09:24,331
[laurence]: lose

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[ramsey_d_smith]: that spell

00:09:24,431 –> 00:09:24,652
[laurence]: so we

00:09:24,700 –> 00:09:24,801
[ramsey_d_smith]: out

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[laurence]: want

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[ramsey_d_smith]: to

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[laurence]: to look

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[ramsey_d_smith]: lawrence

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[laurence]: at that

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[ramsey_d_smith]: for those on our audience

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[laurence]: yeah

00:09:26,709 –> 00:09:26,950
[ramsey_d_smith]: who don’t

00:09:26,844 –> 00:09:26,864
[bruno_caron]: i

00:09:26,970 –> 00:09:27,070
[ramsey_d_smith]: know

00:09:27,025 –> 00:09:27,045
[bruno_caron]: i

00:09:27,090 –> 00:09:27,833
[ramsey_d_smith]: what that spells out

00:09:27,810 –> 00:09:28,013
[branislav_nikolic]: oh

00:09:27,814 –> 00:09:27,934
[laurence]: we’re

00:09:27,914 –> 00:09:27,994
[ramsey_d_smith]: to

00:09:27,974 –> 00:09:28,435
[laurence]: going to keep it

00:09:28,399 –> 00:09:28,700
[bruno_caron]: oh

00:09:28,495 –> 00:09:28,775
[laurence]: simple

00:09:28,907 –> 00:09:29,108
[ramsey_d_smith]: okay

00:09:29,116 –> 00:09:30,719
[laurence]: we just look under the hood and
we kind

00:09:30,627 –> 00:09:30,849
[ramsey_d_smith]: okay

00:09:30,759 –> 00:09:32,542
[laurence]: of figure out the max that you
could lose

00:09:32,698 –> 00:09:32,840
[ramsey_d_smith]: right

00:09:33,183 –> 00:09:37,531
[laurence]: we also look at you know the
number of months that the index has positive

00:09:37,591 –> 00:09:42,640
[laurence]: on negative returns look at another technical
measure that says have you got a propensity

00:09:42,720 –> 00:09:43,942
[laurence]: for positive returns

00:09:44,077 –> 00:09:44,097
[ramsey_d_smith]: m

00:09:44,974 –> 00:09:48,620
[laurence]: we also look at large big outliers
as well to see if you’ve got any

00:09:48,800 –> 00:09:53,969
[laurence]: positive or large negative outlines again that
tells us a lot and then the final

00:09:54,069 –> 00:09:58,338
[laurence]: categories we actually look forward and we
actually bring in some of our forecast to

00:09:58,419 –> 00:10:00,906
[laurence]: try and also have a forward looking

00:10:00,956 –> 00:10:01,556
[paul_tyler]: yeah

00:10:01,247 –> 00:10:04,699
[laurence]: so we score each nex out of
a hundred then we market on a bell

00:10:04,759 –> 00:10:11,059
[laurence]: shaped curve when we allocate platinum gold
silver bronze and then we also have watch

00:10:11,160 –> 00:10:12,583
[laurence]: and neutral as our worst categories

00:10:13,516 –> 00:10:17,723
[paul_tyler]: so lawrence if if i’m an advisor
selling one

00:10:17,677 –> 00:10:17,978
[ramsey_d_smith]: oh

00:10:17,743 –> 00:10:22,451
[paul_tyler]: of our one of our own companies
products to tsa and i’ve got the materials

00:10:22,511 –> 00:10:30,869
[paul_tyler]: in front of my the table because
the virtual table i have a lot of

00:10:30,929 –> 00:10:36,458
[paul_tyler]: personal risk at stake here right i
could recommend

00:10:35,986 –> 00:10:36,007
[ramsey_d_smith]: m

00:10:36,798 –> 00:10:40,505
[paul_tyler]: induces that creator the next two years

00:10:40,354 –> 00:10:41,014
[laurence]: yeah

00:10:41,326 –> 00:10:47,296
[paul_tyler]: um i could uh come over the
recommendations that are all kind of bunched up

00:10:47,356 –> 00:10:50,702
[paul_tyler]: in one in a couple i may
think i’ve diversified the actual

00:10:50,497 –> 00:10:50,780
[ramsey_d_smith]: oh

00:10:50,802 –> 00:10:57,895
[paul_tyler]: industries when in fact i’ve put all
her retirement into sort of one sector m

00:10:58,946 –> 00:11:04,736
[paul_tyler]: sometimes advisers simply default of saying look
tis just pick three or four of these

00:11:04,836 –> 00:11:09,624
[paul_tyler]: and let’s divide by that number and
put them in these industries oh and by

00:11:09,684 –> 00:11:13,571
[paul_tyler]: the way we now have best interest
standards now coming down the pike what

00:11:13,565 –> 00:11:13,686
[laurence]: yeah

00:11:13,591 –> 00:11:17,076
[paul_tyler]: does that process look like do i
spend more time with her lawrence do i

00:11:17,116 –> 00:11:22,205
[paul_tyler]: have better tools do i go in
with sort of pre set recommendations what does

00:11:22,245 –> 00:11:24,060
[paul_tyler]: that this looks like two or three
years from now

00:11:25,534 –> 00:11:30,139
[laurence]: you know that’s great let me answer
that in two parts and i would love

00:11:30,199 –> 00:11:31,760
[laurence]: to bring in brandon slave to answer

00:11:31,627 –> 00:11:31,647
[ramsey_d_smith]: m

00:11:32,641 –> 00:11:38,109
[laurence]: the second part here so you know
let me give you a couple of thoughts

00:11:38,350 –> 00:11:42,487
[laurence]: you know firstly i think the future
is going to be different from the past

00:11:42,727 –> 00:11:47,555
[laurence]: so always looking at these past historical
returns is probably not going to be optimal

00:11:48,216 –> 00:11:53,067
[laurence]: you know and let me give you
some some simple examples right firstly the last

00:11:53,168 –> 00:11:55,660
[laurence]: decade we had low inflation

00:11:55,627 –> 00:11:57,547
[ramsey_d_smith]: ye okay

00:11:57,074 –> 00:11:59,196
[laurence]: low interest rates no

00:11:59,331 –> 00:11:59,553
[ramsey_d_smith]: last

00:11:59,416 –> 00:12:00,017
[laurence]: tech

00:11:59,654 –> 00:11:59,815
[ramsey_d_smith]: week

00:12:00,377 –> 00:12:06,484
[laurence]: tail wins and globalization and it was
a great environment for large cap tech going

00:12:06,564 –> 00:12:11,933
[laurence]: forward i think everyone recognizes right we
see higher inflation we see higher rates we

00:12:12,074 –> 00:12:16,341
[laurence]: see dglobalization you know and the tech
is being regulated

00:12:15,900 –> 00:12:16,163
[branislav_nikolic]: oh

00:12:17,423 –> 00:12:23,192
[laurence]: beg pardon a recent big merger just
got blocked between microsopt and activision visit so

00:12:23,713 –> 00:12:26,938
[laurence]: that you know the world is going
to be different going forward so you know

00:12:26,958 –> 00:12:30,224
[laurence]: i think there are a lot of
people who are just alicating you know hundred

00:12:30,284 –> 00:12:34,933
[laurence]: percent to a bench mark index so
we want to encourage people to look forward

00:12:35,834 –> 00:12:38,887
[laurence]: so the way we do that at
the end ex standard we actually take the

00:12:38,947 –> 00:12:44,929
[laurence]: wisdom of wall street we actually go
and collect about thirty five asset managers and

00:12:45,029 –> 00:12:50,406
[laurence]: banks their ten year forward looking returns
and then what we do is we actually

00:12:50,446 –> 00:12:53,050
[laurence]: apply these these actual

00:12:52,800 –> 00:12:52,820
[branislav_nikolic]: m

00:12:53,230 –> 00:12:56,937
[laurence]: expected returns to each index and then
we’re able to produce

00:12:57,099 –> 00:12:57,120
[branislav_nikolic]: m

00:12:57,117 –> 00:12:59,942
[laurence]: a forward looking forecast for each index

00:13:00,330 –> 00:13:00,591
[branislav_nikolic]: oh

00:13:00,763 –> 00:13:03,529
[laurence]: so hand of the brands who is
going to talk about one of our latest

00:13:03,589 –> 00:13:07,858
[laurence]: innovations on what we’ve been doing around
kind of making that more useful for an

00:13:07,978 –> 00:13:09,942
[laurence]: f i a over over to you

00:13:10,470 –> 00:13:14,477
[branislav_nikolic]: thank you laurence so so again the
key for me and one thing that i’m

00:13:14,537 –> 00:13:18,904
[branislav_nikolic]: extremely passionate about is how does this
to your point all get sold or how

00:13:18,944 –> 00:13:24,457
[branislav_nikolic]: is this presented over virtual or actual
kitchen table right because again who are the

00:13:24,497 –> 00:13:30,322
[branislav_nikolic]: buyers of annuities or pre retires or
early retires and you have two motives when

00:13:30,462 –> 00:13:35,871
[branislav_nikolic]: one is guaranteed income for life one
is the accumulation with a protected protected downside

00:13:36,252 –> 00:13:41,521
[branislav_nikolic]: either or you are looking for your
index more often than not to provide basis

00:13:41,601 –> 00:13:46,048
[branislav_nikolic]: of growth if you’re looking on the
accumulation side obvious if you’re looking on the

00:13:46,108 –> 00:13:50,976
[branislav_nikolic]: income side you have more and more
products coming in with the ability to harvest

00:13:51,137 –> 00:13:56,184
[branislav_nikolic]: some of that index growth and trans
laded into um cost of living adjustment on

00:13:56,244 –> 00:13:59,728
[branislav_nikolic]: your income going forward one way or
the other you have to understand the annuity

00:14:00,068 –> 00:14:03,845
[branislav_nikolic]: which i will which i like to
think of as like as an engine or

00:14:03,885 –> 00:14:06,993
[branislav_nikolic]: a car and you have to think
of an index which i like to think

00:14:07,053 –> 00:14:11,902
[branislav_nikolic]: of as a fuel you can have
like perfect grade fuel you put in a

00:14:11,922 –> 00:14:16,908
[branislav_nikolic]: bad engine doesn’t go you have a
perfect car put put a basic gasoline in

00:14:16,989 –> 00:14:21,526
[branislav_nikolic]: it sant go either like it starts
to cling you need the best combination and

00:14:21,566 –> 00:14:27,315
[branislav_nikolic]: this is where i believe that looking
into forecasts first of all coming from a

00:14:28,217 –> 00:14:33,526
[branislav_nikolic]: lawrence was mentioning with of all street
transformed into how these indessinduscis will do going

00:14:33,586 –> 00:14:38,434
[branislav_nikolic]: forward putting down through the annuities to
achieve something that we call it in stand

00:14:38,834 –> 00:14:43,883
[branislav_nikolic]: the net forecast yield basically trying to
what would the annuity with a given crediting

00:14:43,963 –> 00:14:49,011
[branislav_nikolic]: strategy on a given index provide over
over the next ten years and then on

00:14:49,092 –> 00:14:54,080
[branislav_nikolic]: top of that now look into all
of these options and see which two three

00:14:54,260 –> 00:15:00,150
[branislav_nikolic]: five options will give you the highest
expected return going forward so again thinking about

00:15:00,410 –> 00:15:05,178
[branislav_nikolic]: the design of the engine whether it’s
a strategy whether it’s a parameters are you

00:15:05,238 –> 00:15:09,283
[branislav_nikolic]: paying a fee it or not what
type of index are you putting to it

00:15:09,363 –> 00:15:12,926
[branislav_nikolic]: if it’s a bench mark you’re usually
getting a fraction of a return if it’s

00:15:12,966 –> 00:15:18,276
[branislav_nikolic]: a volatility control you get a multiple
now let’s say that you get ten per

00:15:18,356 –> 00:15:22,591
[branislav_nikolic]: cent return on a bench marine dex
and you get half of it okay ten

00:15:22,651 –> 00:15:26,056
[branislav_nikolic]: percent are we going to get ten
per cent next year the year after i

00:15:26,097 –> 00:15:30,324
[branislav_nikolic]: don’t know but if you get well
till controlled index and you get two three

00:15:30,464 –> 00:15:36,613
[branislav_nikolic]: times of it even if it returns
two three percent you’re already doing doing much

00:15:36,653 –> 00:15:40,778
[branislav_nikolic]: better all of this has to be
taken taken into context the other one is

00:15:40,838 –> 00:15:48,860
[branislav_nikolic]: that probably the truth lies somewhere in
between looking into the history and seeing high

00:15:48,940 –> 00:15:54,562
[branislav_nikolic]: returns are you going to see these
going forward no you’re going to see exactly

00:15:54,602 –> 00:15:59,430
[branislav_nikolic]: what’s happening in the forecast probably not
but i think these two are perfect basis

00:15:59,470 –> 00:16:03,396
[branislav_nikolic]: for conversation one for legal legal reasons
you got to do it because that’s how

00:16:03,437 –> 00:16:08,821
[branislav_nikolic]: you sell the annuity and the other
one is to basically show that up done

00:16:08,881 –> 00:16:13,149
[branislav_nikolic]: some thinking outside of the box in
terms of due diligence and what could happen

00:16:13,269 –> 00:16:17,536
[branislav_nikolic]: and again use this as a cheat
cheat to show how well you understand the

00:16:17,596 –> 00:16:20,672
[branislav_nikolic]: whole car plus the fee on a
race track

00:16:24,297 –> 00:16:25,660
[ramsey_d_smith]: so a quick question here

00:16:25,596 –> 00:16:26,766
[tisa_rabun_marshall]: oh

00:16:26,141 –> 00:16:29,586
[ramsey_d_smith]: so this this makes a lot of
sense right for a variety of

00:16:29,580 –> 00:16:30,720
[branislav_nikolic]: yeah

00:16:29,646 –> 00:16:36,718
[ramsey_d_smith]: reasons and the question is has anybody
done this before has there been has there

00:16:36,778 –> 00:16:41,615
[ramsey_d_smith]: been primarily a focus on history and
in particular back testing

00:16:42,934 –> 00:16:45,197
[laurence]: yeah i think there’s been such

00:16:45,180 –> 00:16:46,440
[branislav_nikolic]: oh

00:16:45,278 –> 00:16:50,346
[laurence]: a focus in on the industry and
back testing and listen it has a place

00:16:50,506 –> 00:16:50,647
[laurence]: but

00:16:50,529 –> 00:16:50,692
[ramsey_d_smith]: yeah

00:16:51,147 –> 00:16:52,369
[laurence]: what we like to say is

00:16:52,448 –> 00:16:52,468
[ramsey_d_smith]: i

00:16:53,071 –> 00:16:57,324
[laurence]: take the back test and take the
all cast and sort of think about the

00:16:57,538 –> 00:16:57,619
[ramsey_d_smith]: no

00:16:57,625 –> 00:17:01,912
[laurence]: using it together let me give you
like a common sense example that we we’ve

00:17:01,952 –> 00:17:07,662
[laurence]: been thinking about so right now some
of the large cap tech industries have the

00:17:07,722 –> 00:17:13,595
[laurence]: last ten years historical returns of sixteen
per cent so let’s kind of apply common

00:17:13,675 –> 00:17:15,116
[laurence]: logic and let’s take apple

00:17:14,910 –> 00:17:15,578
[branislav_nikolic]: yeah

00:17:15,576 –> 00:17:20,601
[laurence]: apples the largest constituent of a lot
of pig teck industries so apple the market

00:17:20,661 –> 00:17:25,256
[laurence]: cap right now is about two point
four trillion so if i take that two

00:17:25,316 –> 00:17:29,624
[laurence]: point four trillion and i’m going to
compound it at sixteen percent like many

00:17:29,647 –> 00:17:29,667
[ramsey_d_smith]: m

00:17:30,025 –> 00:17:34,858
[laurence]: is shown in the the software illustrations
actually that means in ten years time apple

00:17:34,898 –> 00:17:40,558
[laurence]: is going to have to have a
market cap of ten trillion dollars now maybe

00:17:40,598 –> 00:17:40,919
[laurence]: that’s going

00:17:40,957 –> 00:17:41,617
[ramsey_d_smith]: yeah

00:17:40,959 –> 00:17:41,940
[laurence]: to happen but

00:17:41,850 –> 00:17:42,630
[branislav_nikolic]: yeah

00:17:42,000 –> 00:17:42,762
[laurence]: like let me give you some

00:17:42,660 –> 00:17:42,942
[branislav_nikolic]: yeah

00:17:42,802 –> 00:17:49,112
[laurence]: context the german g p is three
point eight trillion so it might happen right

00:17:49,413 –> 00:17:50,214
[laurence]: but that’s we

00:17:50,280 –> 00:17:50,300
[branislav_nikolic]: m

00:17:50,414 –> 00:17:54,842
[laurence]: want to encourage people to be diverse
because you know i was just saying i

00:17:54,882 –> 00:17:58,187
[laurence]: think it’s going to be a decade
of discomfort right we’ve seen the end of

00:17:58,248 –> 00:18:02,238
[laurence]: globalization is going to be difficult so
i think you want to be diverse right

00:18:03,114 –> 00:18:07,821
[laurence]: look at emerging markets there their historic
or returns for the last ten years kind

00:18:07,861 –> 00:18:11,326
[laurence]: of like about zero maybe they’re going
to do better right you want to put

00:18:11,367 –> 00:18:11,387
[laurence]: a

00:18:11,409 –> 00:18:11,430
[branislav_nikolic]: m

00:18:11,427 –> 00:18:15,433
[laurence]: little bit of money in there right
now everyone’s so bearish about europe but maybe

00:18:15,473 –> 00:18:19,200
[laurence]: you want to sprinkle a little bit
in there too so we just think being

00:18:19,260 –> 00:18:26,051
[laurence]: diversified is really important and with our
innovation of helping people to choose across complicated

00:18:26,452 –> 00:18:31,360
[laurence]: crediting strategies that brands have just outlined
we take that complicated choice between they say

00:18:31,761 –> 00:18:35,669
[laurence]: choosing fifty percent of a bench mark
index or two hundred per cent in a

00:18:35,730 –> 00:18:40,530
[laurence]: risk control index just make that into
an apples to apples conversation where we can

00:18:40,581 –> 00:18:40,682
[branislav_nikolic]: oh

00:18:40,630 –> 00:18:43,718
[laurence]: say maybe you’re gonna get five here
and maybe you goin to get eight here

00:18:44,199 –> 00:18:45,782
[laurence]: to build a diversified portfolio

00:18:46,560 –> 00:18:50,887
[branislav_nikolic]: one thing lawrence that i would like
to add again lawrence being an expert to

00:18:50,927 –> 00:18:54,433
[branislav_nikolic]: what i call fuel and industries again
like its great great insight but again looking

00:18:54,493 –> 00:18:59,241
[branislav_nikolic]: into just these strategies that you get
in these annuities strategies they are built to

00:18:59,681 –> 00:19:04,469
[branislav_nikolic]: harvest the sharp growth you have strategies
that give you cap return so basically you’re

00:19:04,489 –> 00:19:08,316
[branislav_nikolic]: looking for a pause that have some
they’re looking for just positive return and then

00:19:08,356 –> 00:19:13,765
[branislav_nikolic]: you’re good you have those they are
looking for consistently positive return without any volatility

00:19:13,865 –> 00:19:14,085
[branislav_nikolic]: in them

00:19:14,947 –> 00:19:15,667
[ramsey_d_smith]: oh

00:19:15,328 –> 00:19:19,094
[branislav_nikolic]: how to know again you can have
your view of the market have your outlook

00:19:19,695 –> 00:19:23,782
[branislav_nikolic]: but how exactly you know where to
put on so if your money you don’t

00:19:23,822 –> 00:19:27,087
[branislav_nikolic]: have to you don’t have to know
that’s why it’s good to diversify that’s why

00:19:27,167 –> 00:19:33,518
[branislav_nikolic]: it’s good to diversify strategies crsindusties and
basically get all of these tools available to

00:19:33,578 –> 00:19:37,056
[branislav_nikolic]: you working for the for the end
user which is the most important piece

00:19:38,589 –> 00:19:38,710
[paul_tyler]: this

00:19:38,745 –> 00:19:38,825
[ramsey_d_smith]: and

00:19:38,771 –> 00:19:38,831
[paul_tyler]: is

00:19:38,886 –> 00:19:38,906
[ramsey_d_smith]: a

00:19:38,891 –> 00:19:38,912
[paul_tyler]: a

00:19:38,946 –> 00:19:39,067
[ramsey_d_smith]: key

00:19:38,972 –> 00:19:39,455
[paul_tyler]: complicated

00:19:39,168 –> 00:19:39,732
[ramsey_d_smith]: element of this

00:19:39,959 –> 00:19:40,362
[paul_tyler]: problem

00:19:42,447 –> 00:19:46,313
[ramsey_d_smith]: it’s gonna say a key element of
this is that um figuring

00:19:46,050 –> 00:19:46,736
[branislav_nikolic]: oh

00:19:46,433 –> 00:19:50,480
[ramsey_d_smith]: out how diversified you are not a
simple problem right so it’s not just

00:19:50,580 –> 00:19:50,863
[branislav_nikolic]: yeah

00:19:51,241 –> 00:19:52,944
[ramsey_d_smith]: um you know joe the advisor

00:19:52,740 –> 00:19:53,610
[branislav_nikolic]: yeah

00:19:53,144 –> 00:19:57,291
[ramsey_d_smith]: saying i’d like i’d like so i’d
like some europe i’d like like some us

00:19:57,331 –> 00:20:02,340
[ramsey_d_smith]: exposure et cetera because there are there
are correlations across those various assets as well

00:20:02,440 –> 00:20:04,343
[ramsey_d_smith]: so it’s i think

00:20:04,294 –> 00:20:04,520
[laurence]: oh

00:20:04,383 –> 00:20:09,091
[ramsey_d_smith]: that folks in the audience that would
they’re using a platform like this it’s important

00:20:09,131 –> 00:20:14,199
[ramsey_d_smith]: to understand that that it’s you can’t
really do it properly unless you have a

00:20:14,240 –> 00:20:21,027
[ramsey_d_smith]: pretty sophisticated engine under the hood to
be able to capture not just the obvious

00:20:21,087 –> 00:20:25,654
[ramsey_d_smith]: sources of diversification but also the less
obvious places where you may be is not

00:20:25,694 –> 00:20:26,696
[ramsey_d_smith]: as diversified as you think

00:20:27,959 –> 00:20:28,100
[paul_tyler]: yeah

00:20:28,795 –> 00:20:29,596
[laurence]: that’s a great point

00:20:29,400 –> 00:20:29,542
[branislav_nikolic]: ye

00:20:29,817 –> 00:20:33,743
[laurence]: and you know we do work with
chanics to get some of the data and

00:20:33,843 –> 00:20:39,493
[laurence]: brands joined us from them and actually
on our staff we’ve got mostly quits you

00:20:39,533 –> 00:20:43,079
[laurence]: know we have j watson who’s one
of our other partners he’s got a quant

00:20:43,199 –> 00:20:47,847
[laurence]: background we’ve got trent mckenna who also
has masters in finance j has a ph

00:20:47,887 –> 00:20:47,907
[laurence]: d

00:20:48,067 –> 00:20:48,087
[ramsey_d_smith]: m

00:20:48,107 –> 00:20:51,232
[laurence]: and brand slave has masters and working
on his ph d so

00:20:51,420 –> 00:20:51,643
[branislav_nikolic]: yeah

00:20:51,994 –> 00:20:53,236
[laurence]: i’ve only got an m b a
so i’m

00:20:53,160 –> 00:20:53,402
[branislav_nikolic]: yeah

00:20:53,296 –> 00:20:53,416
[laurence]: like

00:20:53,317 –> 00:20:53,521
[ramsey_d_smith]: yeah

00:20:53,496 –> 00:20:54,999
[laurence]: i feel you know these guys are

00:20:55,470 –> 00:20:56,790
[branislav_nikolic]: yeah

00:20:55,860 –> 00:21:00,187
[laurence]: the smart guys that we have here
and yeahit’it’s very complicated and we spend a

00:21:00,368 –> 00:21:00,528
[laurence]: lot

00:21:00,476 –> 00:21:01,166
[paul_tyler]: oh

00:21:00,568 –> 00:21:04,074
[laurence]: of time modeling that out but the
key thing is we want to make it’s

00:21:04,234 –> 00:21:06,095
[laurence]: simple for people and present an

00:21:06,057 –> 00:21:06,077
[branislav_nikolic]: m

00:21:06,276 –> 00:21:09,659
[laurence]: apples to apples comparison we want to
help people and boil it down just what

00:21:09,699 –> 00:21:13,542
[laurence]: do you need to know here’s the
apples to apples comparison and here is a

00:21:13,582 –> 00:21:14,303
[laurence]: way to allocate

00:21:14,786 –> 00:21:15,071
[paul_tyler]: yeah

00:21:15,150 –> 00:21:15,170
[branislav_nikolic]: a

00:21:15,164 –> 00:21:16,491
[laurence]: this industry is too complicated

00:21:17,110 –> 00:21:17,252
[paul_tyler]: look

00:21:17,432 –> 00:21:21,599
[branislav_nikolic]: lawrence one thing that you touched on
and i think it’s important in ramsey asked

00:21:21,639 –> 00:21:24,944
[branislav_nikolic]: this like has anyone done any of
this before and i think that we are

00:21:25,004 –> 00:21:29,712
[branislav_nikolic]: trying basically to raise the tide i
think that this industry requires all the parties

00:21:29,772 –> 00:21:34,921
[branislav_nikolic]: to collaborate and i think this is
where we get again great data and some

00:21:35,021 –> 00:21:37,645
[branislav_nikolic]: simple calculations for mechanics we have our
our index

00:21:38,617 –> 00:21:38,878
[ramsey_d_smith]: yeah

00:21:38,747 –> 00:21:40,910
[branislav_nikolic]: index forecast we have our

00:21:40,826 –> 00:21:40,987
[ramsey_d_smith]: yeah

00:21:41,010 –> 00:21:42,031
[branislav_nikolic]: model locations

00:21:42,343 –> 00:21:42,506
[ramsey_d_smith]: yes

00:21:42,431 –> 00:21:45,054
[branislav_nikolic]: we are willing to work with others
because at the end of the day i

00:21:45,114 –> 00:21:49,678
[branislav_nikolic]: think this is a tide and i
think that shift has to happen it’s important

00:21:49,738 –> 00:21:55,141
[branislav_nikolic]: for it to happen again for again
for the end user it’s the most important

00:21:55,181 –> 00:22:01,606
[branislav_nikolic]: that this ship happens and legal point
of view will catch up the illustrations their

00:22:01,686 –> 00:22:06,514
[branislav_nikolic]: legal requirements the important part of it
but they don’t tell a full story and

00:22:06,594 –> 00:22:11,322
[branislav_nikolic]: we are trying to augment that story
that makes it more palatable and easier to

00:22:11,362 –> 00:22:16,751
[branislav_nikolic]: have as a conversation today but two
years from now if things don’t turn out

00:22:17,413 –> 00:22:20,397
[branislav_nikolic]: like what was shown in illustration that’s
the most important bit

00:22:20,887 –> 00:22:21,109
[ramsey_d_smith]: oh

00:22:21,256 –> 00:22:25,924
[paul_tyler]: yea let me talk a little bit
more about what diversity actually means

00:22:25,777 –> 00:22:26,038
[ramsey_d_smith]: yah

00:22:26,805 –> 00:22:27,266
[paul_tyler]: i like the

00:22:27,186 –> 00:22:27,307
[ramsey_d_smith]: yah

00:22:27,306 –> 00:22:32,795
[paul_tyler]: fact lawrence you say we encourage people
to look at back tested returns against four

00:22:32,956 –> 00:22:36,401
[paul_tyler]: acid returns there’s also a time factor
right because

00:22:37,276 –> 00:22:37,297
[ramsey_d_smith]: m

00:22:37,804 –> 00:22:43,874
[paul_tyler]: if you think about possible outcomes you
may have one fund that appears to have

00:22:44,490 –> 00:22:44,993
[branislav_nikolic]: oh

00:22:44,495 –> 00:22:50,605
[paul_tyler]: highest likelihood or industry of great returns
but there are also some outliers right through

00:22:50,665 –> 00:22:51,607
[paul_tyler]: some cases where

00:22:51,541 –> 00:22:51,994
[laurence]: hm

00:22:52,829 –> 00:22:57,977
[paul_tyler]: wow tsa could get zero she might
get twenty and return she might get a

00:22:58,078 –> 00:22:59,700
[paul_tyler]: zero now if she’s

00:22:59,677 –> 00:22:59,800
[laurence]: yeah

00:22:59,760 –> 00:23:02,785
[paul_tyler]: about to retire two years from now
and start to pull money

00:23:02,786 –> 00:23:02,806
[laurence]: a

00:23:02,946 –> 00:23:06,331
[paul_tyler]: out how do i factor in the

00:23:05,949 –> 00:23:05,990
[laurence]: a

00:23:06,492 –> 00:23:08,575
[paul_tyler]: that there might be a zero here

00:23:09,444 –> 00:23:13,871
[laurence]: yeah right there’s so so much in
what you’ve asked me that

00:23:13,980 –> 00:23:15,030
[branislav_nikolic]: yeah

00:23:14,292 –> 00:23:15,333
[laurence]: d love to talk about so

00:23:15,300 –> 00:23:15,563
[branislav_nikolic]: oh

00:23:16,155 –> 00:23:22,004
[laurence]: you know great thought so the first
thing is i think everyone really expect bench

00:23:22,084 –> 00:23:27,089
[laurence]: mark industries to give positive returns right
the last ten years accepted this year we’ve

00:23:27,129 –> 00:23:30,692
[laurence]: just seen positive return so people have
been treated and we all have this recency

00:23:30,812 –> 00:23:35,409
[laurence]: bias now this year we’re probably going
to see a negative on many of the

00:23:35,449 –> 00:23:40,136
[laurence]: major bench marks and next year if
you look at some of the one year

00:23:40,237 –> 00:23:43,462
[laurence]: forecasts that some of the investment banks
put out a couple of investment banks are

00:23:43,522 –> 00:23:44,644
[laurence]: calling for negative

00:23:44,400 –> 00:23:44,420
[branislav_nikolic]: m

00:23:44,684 –> 00:23:48,550
[laurence]: returns so i think people are going
to be shocked so what you really want

00:23:48,611 –> 00:23:53,058
[laurence]: to do is find industries that ying
and yang when you know one is up

00:23:53,358 –> 00:23:56,408
[laurence]: the other one’s down and vice versa
right so that’s what you got to find

00:23:56,568 –> 00:23:57,892
[laurence]: industries that yang and yang

00:23:58,249 –> 00:23:58,469
[bruno_caron]: oh

00:23:59,054 –> 00:24:03,178
[laurence]: then you want to blend them in
now why is this important i got to

00:24:03,258 –> 00:24:06,801
[laurence]: tell you i think the most important
thing in finance that we all tend to

00:24:06,862 –> 00:24:13,190
[laurence]: forget is compounding compounding is the magic
in finance right just by eking out a

00:24:13,230 –> 00:24:18,239
[laurence]: little positive return each year the next
year you’re compounding on a higher number so

00:24:18,740 –> 00:24:23,267
[laurence]: if you can get your client even
two or three and versus zero that

00:24:23,284 –> 00:24:23,367
[bruno_caron]: ah

00:24:23,367 –> 00:24:25,110
[laurence]: next year you’re going to start at
one o three

00:24:25,020 –> 00:24:25,890
[branislav_nikolic]: yeah

00:24:25,711 –> 00:24:27,093
[laurence]: kind of compound that return so

00:24:27,480 –> 00:24:27,765
[branislav_nikolic]: yeah

00:24:27,594 –> 00:24:30,960
[laurence]: compounding is the magic that’s what you
want to do is just get your clients

00:24:31,140 –> 00:24:34,110
[laurence]: a little positive return and you can
build wealth like that

00:24:34,980 –> 00:24:37,484
[branislav_nikolic]: lawrence i would like to kind of
add to that a bit and i think

00:24:37,504 –> 00:24:40,068
[branislav_nikolic]: this is an important one so when
you look into bench mark industries in the

00:24:40,128 –> 00:24:44,355
[branislav_nikolic]: last thirty years let’s say you would
see that we had like periods there will

00:24:44,415 –> 00:24:47,701
[branislav_nikolic]: last like seven or ten years and
then we have a correction so there was

00:24:47,761 –> 00:24:51,908
[branislav_nikolic]: no period of twenty years that you
had like positive high positive return there was

00:24:52,028 –> 00:24:56,315
[branislav_nikolic]: always something happening in the middle that
would kind of take us back and then

00:24:56,335 –> 00:24:57,657
[branislav_nikolic]: you have like the star

00:24:57,709 –> 00:24:57,830
[bruno_caron]: ye

00:24:57,738 –> 00:24:59,882
[branislav_nikolic]: grow look at a history of those

00:24:59,749 –> 00:25:00,014
[bruno_caron]: oh

00:25:00,222 –> 00:25:04,431
[branislav_nikolic]: you had periods in thirties forties fifties
even sixties

00:25:04,240 –> 00:25:04,341
[bruno_caron]: ah

00:25:04,512 –> 00:25:07,618
[branislav_nikolic]: that they had like a constant seven
percent return so if we are

00:25:08,134 –> 00:25:08,154
[laurence]: m

00:25:08,490 –> 00:25:10,914
[branislav_nikolic]: we can go back at a time
i think that

00:25:11,584 –> 00:25:11,888
[laurence]: oh

00:25:11,655 –> 00:25:15,281
[branislav_nikolic]: our conversation today will be obsolete if
you have a index returning seven percent year

00:25:15,421 –> 00:25:19,869
[branislav_nikolic]: over here here we are talking about
people thinking of averages but the sequence of

00:25:19,929 –> 00:25:23,712
[branislav_nikolic]: returns there’s a lot and then that’s
what i think will lawrence is saying i

00:25:23,752 –> 00:25:29,057
[branislav_nikolic]: would try to relate to the annuity
folks a little bit different is basically saying

00:25:29,097 –> 00:25:33,346
[branislav_nikolic]: that if you have a seven or
ten year annuity are you better off getting

00:25:34,670 –> 00:25:36,954
[branislav_nikolic]: solid returns three five

00:25:36,919 –> 00:25:36,939
[bruno_caron]: m

00:25:37,014 –> 00:25:41,441
[branislav_nikolic]: or seven out of out of ten
years or you should get positive return in

00:25:41,521 –> 00:25:45,107
[branislav_nikolic]: all ten of them and again depending
how these are using the plan if you’re

00:25:45,187 –> 00:25:50,236
[branislav_nikolic]: living of interest or or that a
fixed fixed credit you want it every year

00:25:50,416 –> 00:25:53,221
[branislav_nikolic]: and you want to be able to
plan so i guess it really matters how

00:25:53,301 –> 00:25:58,249
[branislav_nikolic]: you’re putting this into into into the
annuity as well another thing that became apparent

00:25:58,005 –> 00:25:58,026
[bruno_caron]: a

00:25:58,349 –> 00:25:59,912
[branislav_nikolic]: as ere doing the research for the

00:25:59,749 –> 00:26:00,010
[bruno_caron]: oh

00:25:59,972 –> 00:26:04,820
[branislav_nikolic]: of location was that there are some
strategies when you look on a forecast a

00:26:04,900 –> 00:26:08,266
[branislav_nikolic]: basis they don’t even bee to fix
rate again fixed rate a year ago we

00:26:08,286 –> 00:26:12,132
[branislav_nikolic]: wouldn’t be even talking about it but
today it is like three or four five

00:26:12,212 –> 00:26:12,693
[branislav_nikolic]: percent

00:26:13,031 –> 00:26:13,444
[laurence]: hm

00:26:13,294 –> 00:26:14,136
[branislav_nikolic]: and you have a strategy

00:26:13,789 –> 00:26:14,072
[bruno_caron]: yah

00:26:14,216 –> 00:26:15,197
[branislav_nikolic]: they have a forecast that

00:26:15,288 –> 00:26:15,349
[bruno_caron]: ah

00:26:15,297 –> 00:26:20,807
[branislav_nikolic]: any yield or return less than that
now that begs the question why at all

00:26:20,887 –> 00:26:26,674
[branislav_nikolic]: participate why don’t ye some of the
security of the high fixed rates going forward

00:26:27,094 –> 00:26:31,579
[branislav_nikolic]: and combine that with some with some
other industries again what five per cent will

00:26:32,360 –> 00:26:35,605
[branislav_nikolic]: keep you up with inflation of seven
i don’t think so but i don’t think

00:26:35,665 –> 00:26:39,431
[branislav_nikolic]: inflation of seven is going to be
year after year so a lot of a

00:26:39,491 –> 00:26:43,618
[branislav_nikolic]: lot of things to unpack and it’s
why i think that locating across everything that’s

00:26:43,658 –> 00:26:54,384
[branislav_nikolic]: available within annuity looking into this is
the recification strategy versification banking on historically high

00:26:54,765 –> 00:26:58,658
[branislav_nikolic]: rates i think there’s a lot a
lot to consider

00:26:59,714 –> 00:27:03,200
[laurence]: and actually barn said there’s also another
complexity you sort of people have the choice

00:27:03,260 –> 00:27:06,546
[laurence]: sort i choose a one year point
to point or two year or three year

00:27:06,766 –> 00:27:10,933
[laurence]: up to a six year right and
that’s another complexity that we look at and

00:27:10,993 –> 00:27:13,821
[laurence]: try figure that out so yeah there’s
a lot going on in these in these

00:27:13,881 –> 00:27:14,142
[laurence]: products

00:27:16,919 –> 00:27:17,400
[bruno_caron]: a lot’s going

00:27:17,377 –> 00:27:17,618
[ramsey_d_smith]: oh

00:27:17,480 –> 00:27:21,587
[bruno_caron]: on to say the least and i
think there’s a lot of material in what

00:27:22,489 –> 00:27:24,292
[bruno_caron]: to unpack and what you just said

00:27:25,050 –> 00:27:25,920
[branislav_nikolic]: yeah

00:27:25,113 –> 00:27:34,108
[bruno_caron]: in terms of decumulation the sequence of
return uh and all that diversification um if

00:27:34,268 –> 00:27:39,657
[bruno_caron]: we put all the pieces together you
you mentioned that

00:27:39,547 –> 00:27:39,807
[ramsey_d_smith]: oh

00:27:39,797 –> 00:27:48,852
[bruno_caron]: yeah you’re launching this the model application
for for f i as um first of

00:27:48,893 –> 00:27:53,200
[bruno_caron]: all can you tell us a little
bit of you know some of the uh

00:27:53,661 –> 00:28:00,452
[bruno_caron]: the time line behind that and what
does that mean ultimately for for the consumer

00:28:00,592 –> 00:28:04,681
[bruno_caron]: and how are they going to be
able to use that that’s past to

00:28:06,314 –> 00:28:10,361
[laurence]: thanks bruno so we’ve we’ve been working
on this for the last year it’s taken

00:28:10,441 –> 00:28:16,291
[laurence]: us some time to model out more
than three thousand crediting strategies and then figure

00:28:16,371 –> 00:28:17,613
[laurence]: out an application so

00:28:17,580 –> 00:28:17,820
[branislav_nikolic]: yeah

00:28:17,794 –> 00:28:19,837
[laurence]: you’re going to be launching in january

00:28:20,169 –> 00:28:20,349
[branislav_nikolic]: yeah

00:28:20,578 –> 00:28:24,565
[laurence]: um you know we’re starting to tell
people and in fact we’re grateful to be

00:28:24,645 –> 00:28:27,910
[laurence]: here on on the on the podcast
right now and that’s part of our mission

00:28:27,990 –> 00:28:32,658
[laurence]: to tell people and so through the
course of december we’ll be letting a lot

00:28:32,698 –> 00:28:37,727
[laurence]: of our partners insurance carriers know and
then mid mid to end of jane we’ll

00:28:37,767 –> 00:28:41,172
[laurence]: be launching formally going to market and
telling everyone about it

00:28:41,311 –> 00:28:41,351
[branislav_nikolic]: m

00:28:41,633 –> 00:28:42,454
[laurence]: make and available

00:28:42,579 –> 00:28:42,600
[branislav_nikolic]: m

00:28:42,955 –> 00:28:47,300
[laurence]: we’ve already got one or two partners
who’ve signed on so we’re excited because it

00:28:47,340 –> 00:28:49,503
[laurence]: helps our mission we want to see
people do better

00:28:52,717 –> 00:28:53,217
[ramsey_d_smith]: so i was

00:28:53,160 –> 00:28:53,381
[branislav_nikolic]: yeah

00:28:53,638 –> 00:29:03,211
[ramsey_d_smith]: i was recently in a conversation with
listen fairly sizable financial institution in you know

00:29:03,271 –> 00:29:09,019
[ramsey_d_smith]: in the advisory space i’ll say and
they were trying to figure out different ways

00:29:09,139 –> 00:29:15,510
[ramsey_d_smith]: to to incorporate more annuities into their
their platform and one of the challenges was

00:29:15,570 –> 00:29:21,240
[ramsey_d_smith]: that increasingly the advisors were being asked
less and less to make investment decisions and

00:29:21,260 –> 00:29:25,647
[ramsey_d_smith]: they were more focused on relationship management
and so the implication of that is that

00:29:25,687 –> 00:29:25,787
[ramsey_d_smith]: the

00:29:25,944 –> 00:29:26,089
[laurence]: yeah

00:29:26,308 –> 00:29:32,703
[ramsey_d_smith]: that the investment strategies the acid application
strategies actually come from a central source right

00:29:33,085 –> 00:29:36,087
[ramsey_d_smith]: and the centralized sources need to use

00:29:36,157 –> 00:29:36,342
[laurence]: yeah

00:29:36,568 –> 00:29:41,617
[ramsey_d_smith]: rely on models that use a lot
of data and so you think about use

00:29:41,717 –> 00:29:47,587
[ramsey_d_smith]: cases what you’re building here lawrence and
brandaslav is that you’re bringing you’re bringing robt

00:29:47,748 –> 00:29:53,204
[ramsey_d_smith]: data you know where it didn’t exist
before so that it can potentially be used

00:29:53,384 –> 00:29:57,231
[ramsey_d_smith]: at a you know at a sort
of an entity level

00:29:57,137 –> 00:29:57,281
[laurence]: kay

00:29:57,331 –> 00:30:01,117
[ramsey_d_smith]: if you will i like to call
it factory settings right at an entity level

00:30:01,698 –> 00:30:07,067
[ramsey_d_smith]: nd level for larger financial institutions so
that at the end of the day know

00:30:07,347 –> 00:30:11,094
[ramsey_d_smith]: the advisor the advisor will be able
to rely on something that’s been fully veded

00:30:11,655 –> 00:30:15,581
[ramsey_d_smith]: at an institutional level but in order
for all that to work you know you

00:30:15,641 –> 00:30:20,109
[ramsey_d_smith]: have to have reliable data and to
your point earlier it didn’t really didn’t exist

00:30:20,469 –> 00:30:27,830
[ramsey_d_smith]: across the whole sort of spectrum of
offerings until guys launch this product so grat

00:30:30,174 –> 00:30:34,061
[laurence]: yeah thank you know i’ll make a
remark and then see if brandon has anything

00:30:34,121 –> 00:30:38,268
[laurence]: to add you know one of the
things we see having worked for a large

00:30:38,328 –> 00:30:42,876
[laurence]: financial institution in my in my prior
life one of the key things is everyone

00:30:42,956 –> 00:30:44,920
[laurence]: wants some kind of forecast

00:30:45,007 –> 00:30:45,108
[paul_tyler]: ah

00:30:45,301 –> 00:30:50,912
[laurence]: expected returns expected volatility what’s the correlation
they need those to plug into their model

00:30:52,064 –> 00:30:55,369
[laurence]: and in the annuity space there’s been
nothing now with what we do at the

00:30:55,429 –> 00:31:00,758
[laurence]: ende standard we’re able to provide expected
returns expected volatility and we know the correlation

00:31:00,838 –> 00:31:06,330
[laurence]: so we can help feel those those
dis sons that these institutions are having we

00:31:06,390 –> 00:31:12,104
[laurence]: can provide the imputs and i think
my final observation is this that i think

00:31:12,144 –> 00:31:17,473
[laurence]: if you were to use some of
the expect to expected returns we see i

00:31:17,553 –> 00:31:21,901
[laurence]: think the annuities would get a bigger
allocation than they have been because you know

00:31:21,981 –> 00:31:26,369
[laurence]: they have no downside risking case of
fear arilayouknow it’s kept and some

00:31:26,400 –> 00:31:26,640
[branislav_nikolic]: oh

00:31:26,409 –> 00:31:30,416
[laurence]: of the expected returns might be three
four five six very consistent so i think

00:31:30,437 –> 00:31:33,082
[laurence]: they get a larger allocation and that
would surprise

00:31:32,802 –> 00:31:32,967
[branislav_nikolic]: yeah

00:31:33,142 –> 00:31:34,744
[laurence]: a lot of people brand left

00:31:35,852 –> 00:31:40,440
[branislav_nikolic]: yeah i think there’s there’s like to
two levels of this conversation one is how

00:31:40,480 –> 00:31:44,667
[branislav_nikolic]: do you incorporate is in the broader
porfolia and when lawrence mentioned knowing what this

00:31:44,727 –> 00:31:50,597
[branislav_nikolic]: could return at what level of i
think would make advisors more comfortable again we

00:31:50,677 –> 00:31:55,565
[branislav_nikolic]: have a generation of advisors who grew
up in a in a bull market right

00:31:55,705 –> 00:32:02,256
[branislav_nikolic]: and would you ever consider an annuity
a safe investment downside when you never had

00:32:02,356 –> 00:32:06,183
[branislav_nikolic]: to now i think we are getting
to that realization that that that that’s goin

00:32:06,223 –> 00:32:11,652
[branislav_nikolic]: to start happening and again a lot
of great too is available out there a

00:32:11,712 –> 00:32:18,643
[branislav_nikolic]: lot of a lot of parties providing
phenomenal either end to end processes or optimal

00:32:18,784 –> 00:32:25,398
[branislav_nikolic]: product locations or simulators of how well
you do where you lock should locate your

00:32:25,498 –> 00:32:31,701
[branislav_nikolic]: assets the key is that no one
knew how to project ger quotes the annuity

00:32:31,781 –> 00:32:32,943
[branislav_nikolic]: going forward and i

00:32:33,013 –> 00:32:33,034
[laurence]: m

00:32:33,023 –> 00:32:36,487
[branislav_nikolic]: think this is this is important piece
that we that we bring bring bring to

00:32:36,547 –> 00:32:36,627
[branislav_nikolic]: the

00:32:36,561 –> 00:32:36,643
[paul_tyler]: ah

00:32:36,667 –> 00:32:44,366
[branislav_nikolic]: table again something that it’s showing not
only in the retail market but

00:32:44,376 –> 00:32:45,516
[tisa_rabun_marshall]: yeah

00:32:44,447 –> 00:32:49,495
[branislav_nikolic]: more importantly now spilling over into an
institutional market as well the people are adopting

00:32:49,555 –> 00:32:55,685
[branislav_nikolic]: these concepts d c pension plan level
that really kind of add the validity to

00:32:55,765 –> 00:33:00,493
[branislav_nikolic]: it and it kind of adds to
the eds conversation that if super conservative folks

00:33:00,694 –> 00:33:02,637
[branislav_nikolic]: and legal kind of legally aware

00:33:03,146 –> 00:33:03,896
[paul_tyler]: oh

00:33:04,361 –> 00:33:09,062
[branislav_nikolic]: are considering adding these into the mix
had to be a good thing so so

00:33:09,162 –> 00:33:12,846
[branislav_nikolic]: so at a lot a lot is
happening and we we we love to be

00:33:13,006 –> 00:33:15,049
[branislav_nikolic]: to be a part of part of
that conversation for sure

00:33:14,946 –> 00:33:15,127
[tisa_rabun_marshall]: oh

00:33:15,786 –> 00:33:20,534
[paul_tyler]: no i honestly think you could be
the next morning star right in the

00:33:20,670 –> 00:33:21,270
[branislav_nikolic]: oh

00:33:21,055 –> 00:33:23,919
[paul_tyler]: space i don’t know if that infringes
on cope

00:33:23,820 –> 00:33:24,265
[branislav_nikolic]: oh

00:33:24,040 –> 00:33:24,540
[paul_tyler]: rites but

00:33:24,484 –> 00:33:24,705
[laurence]: oh

00:33:25,101 –> 00:33:25,602
[paul_tyler]: lawrence that’s what

00:33:25,590 –> 00:33:25,870
[branislav_nikolic]: oh

00:33:25,642 –> 00:33:25,983
[paul_tyler]: i call you

00:33:26,631 –> 00:33:26,872
[branislav_nikolic]: yeah

00:33:26,684 –> 00:33:30,711
[paul_tyler]: so you know ve been doing so
much work with you know agents helping themselves

00:33:30,791 –> 00:33:31,232
[paul_tyler]: digitally

00:33:30,999 –> 00:33:31,200
[branislav_nikolic]: yeah

00:33:31,312 –> 00:33:33,495
[paul_tyler]: tell a story talking to consumers

00:33:33,345 –> 00:33:33,366
[tisa_rabun_marshall]: m

00:33:34,016 –> 00:33:39,525
[paul_tyler]: you know what goes through your mind
when you think about trying explain something this

00:33:39,626 –> 00:33:43,439
[paul_tyler]: complex on a website in a brosirt
in a video

00:33:43,609 –> 00:33:48,051
[tisa_rabun_marshall]: hm yeah i mean when i think
lawrence i heard you talk about you know

00:33:48,292 –> 00:33:51,196
[tisa_rabun_marshall]: the mer and missus smith or the
generic consumer

00:33:51,630 –> 00:33:52,710
[branislav_nikolic]: yeah

00:33:51,757 –> 00:33:57,648
[tisa_rabun_marshall]: are retiring out there thinking about planning
and de mystifying the idea of an annuity

00:33:57,709 –> 00:34:04,512
[tisa_rabun_marshall]: and the complexities of what we’re talking
about how does your presentation or or the

00:34:04,933 –> 00:34:08,679
[tisa_rabun_marshall]: educational tools at you’re offering how does
it break it down for them to kind

00:34:08,719 –> 00:34:14,849
[tisa_rabun_marshall]: of combat the emotional side of the
decision right um you’ve talked about the changing

00:34:15,911 –> 00:34:18,896
[tisa_rabun_marshall]: interest rates and inflation and all the
things that are ahead and a lot of

00:34:18,936 –> 00:34:23,183
[tisa_rabun_marshall]: the unknowns that are on head ahead
how does the tool kind of speak to

00:34:23,223 –> 00:34:23,384
[tisa_rabun_marshall]: that

00:34:23,454 –> 00:34:23,596
[laurence]: yeah

00:34:23,564 –> 00:34:26,688
[tisa_rabun_marshall]: emotional side oh i’ll say fear but

00:34:27,314 –> 00:34:27,743
[laurence]: damn

00:34:27,469 –> 00:34:30,953
[tisa_rabun_marshall]: at least sort of that uncertainty that’s
ahead and that agent or advisor bringing him

00:34:31,013 –> 00:34:32,875
[tisa_rabun_marshall]: through those conversations

00:34:32,190 –> 00:34:33,090
[branislav_nikolic]: yeah

00:34:34,354 –> 00:34:39,723
[laurence]: i think in a couple ways so
firstly what we do is for each index

00:34:39,943 –> 00:34:44,010
[laurence]: we evaluated so we’ll put a platinum
gold and silver

00:34:43,746 –> 00:34:43,908
[tisa_rabun_marshall]: okay

00:34:44,070 –> 00:34:44,992
[laurence]: and so on so that

00:34:45,028 –> 00:34:45,495
[tisa_rabun_marshall]: got reading

00:34:45,392 –> 00:34:48,718
[laurence]: you can add glance see what that
index is doing so it

00:34:48,722 –> 00:34:49,236
[tisa_rabun_marshall]: hm

00:34:48,758 –> 00:34:52,604
[laurence]: might be a little bit unfamiliar but
you get our sort of stamp of whether

00:34:52,644 –> 00:34:57,292
[laurence]: we think it’s a robust and well
designed index now the other thing we do

00:34:57,733 –> 00:35:03,445
[laurence]: is we all know finance is complex
and people love to use complicated

00:35:03,330 –> 00:35:03,596
[branislav_nikolic]: yeah

00:35:03,505 –> 00:35:04,368
[laurence]: language so we actually

00:35:04,290 –> 00:35:05,460
[branislav_nikolic]: yeah

00:35:04,448 –> 00:35:06,052
[laurence]: have a copy writer on our staff

00:35:06,177 –> 00:35:06,360
[tisa_rabun_marshall]: okay

00:35:06,714 –> 00:35:10,484
[laurence]: and we try and use straight forward
and clear language so i give you the

00:35:10,544 –> 00:35:16,560
[laurence]: example the way we would describe a
risk control index we just say cushions and

00:35:16,620 –> 00:35:17,102
[laurence]: it’s smooth

00:35:18,369 –> 00:35:18,512
[tisa_rabun_marshall]: yeah

00:35:18,504 –> 00:35:22,472
[laurence]: and then the final thing that we
do is we have our forecasting reports

00:35:22,800 –> 00:35:23,041
[branislav_nikolic]: yeah

00:35:23,804 –> 00:35:26,711
[laurence]: and we very clearly show here that
the last ten

00:35:26,639 –> 00:35:26,820
[branislav_nikolic]: yeah

00:35:26,771 –> 00:35:32,121
[laurence]: years maybe you got let’s say six
per cent and then here is what how

00:35:32,201 –> 00:35:35,206
[laurence]: we applied the wisdom of wall street
to that index and maybe you’re gonna get

00:35:35,867 –> 00:35:40,415
[laurence]: seven eight or nine or maybe you
got sixteen in history and we think you’re

00:35:40,435 –> 00:35:44,181
[laurence]: going to get full but we have
very clear bar chart so we try and

00:35:44,261 –> 00:35:52,475
[laurence]: provide people with visual simple language and
easy to understand demonicaswgoald platinum and

00:35:52,466 –> 00:35:53,156
[paul_tyler]: yeah

00:35:52,535 –> 00:35:52,836
[laurence]: so on

00:35:52,827 –> 00:35:53,256
[tisa_rabun_marshall]: hm

00:35:53,217 –> 00:35:55,683
[laurence]: to really help people when they’re making
those decisions

00:35:55,976 –> 00:35:56,436
[tisa_rabun_marshall]: yeah the gold

00:35:56,317 –> 00:35:56,500
[paul_tyler]: yeah

00:35:56,476 –> 00:35:58,578
[tisa_rabun_marshall]: silver plate that’s you know those are
the star

00:35:58,556 –> 00:35:58,879
[paul_tyler]: oh

00:35:58,678 –> 00:35:59,579
[tisa_rabun_marshall]: reviews rights really

00:35:59,486 –> 00:35:59,707
[paul_tyler]: oh

00:35:59,679 –> 00:36:00,140
[tisa_rabun_marshall]: at a glance

00:36:00,990 –> 00:36:01,231
[branislav_nikolic]: yah

00:36:01,261 –> 00:36:02,662
[tisa_rabun_marshall]: here’s the top middle and maybe

00:36:02,899 –> 00:36:03,039
[branislav_nikolic]: yah

00:36:03,142 –> 00:36:03,282
[tisa_rabun_marshall]: not

00:36:03,326 –> 00:36:03,694
[paul_tyler]: oh

00:36:03,382 –> 00:36:04,383
[tisa_rabun_marshall]: so good

00:36:04,755 –> 00:36:05,159
[laurence]: exactly

00:36:05,216 –> 00:36:05,396
[paul_tyler]: yeah

00:36:05,700 –> 00:36:06,143
[branislav_nikolic]: oh

00:36:05,765 –> 00:36:06,105
[tisa_rabun_marshall]: thank you

00:36:06,918 –> 00:36:06,938
[paul_tyler]: i

00:36:07,006 –> 00:36:07,027
[ramsey_d_smith]: m

00:36:07,058 –> 00:36:09,320
[paul_tyler]: love it bruno you know we’re close
to the top

00:36:09,318 –> 00:36:09,339
[branislav_nikolic]: a

00:36:09,360 –> 00:36:09,881
[paul_tyler]: of the hour i mean

00:36:09,937 –> 00:36:10,139
[ramsey_d_smith]: oh

00:36:09,941 –> 00:36:11,622
[paul_tyler]: what are your what

00:36:11,557 –> 00:36:11,738
[ramsey_d_smith]: oh

00:36:11,662 –> 00:36:11,863
[paul_tyler]: are your

00:36:11,860 –> 00:36:11,940
[bruno_caron]: ah

00:36:11,883 –> 00:36:13,464
[paul_tyler]: thoughts questions observations

00:36:14,324 –> 00:36:14,544
[bruno_caron]: well

00:36:14,846 –> 00:36:15,626
[paul_tyler]: oh

00:36:15,085 –> 00:36:16,307
[bruno_caron]: number one i think it’s

00:36:16,567 –> 00:36:16,811
[ramsey_d_smith]: oh

00:36:17,469 –> 00:36:18,391
[bruno_caron]: it’s wonderful

00:36:18,307 –> 00:36:18,327
[ramsey_d_smith]: m

00:36:18,511 –> 00:36:23,138
[bruno_caron]: that we’re going back or at least
you guys are going back to some of

00:36:23,319 –> 00:36:28,828
[bruno_caron]: basic some of the textbook concepts i
mean we live in a world of headlines

00:36:29,189 –> 00:36:29,489
[bruno_caron]: and you

00:36:29,460 –> 00:36:29,763
[branislav_nikolic]: yeah

00:36:29,509 –> 00:36:33,516
[bruno_caron]: know this is going on this is
going to just the fact that you’re framing

00:36:33,556 –> 00:36:38,524
[bruno_caron]: it that you’re actually putting it in
to a um some sort of framework some

00:36:38,584 –> 00:36:44,494
[bruno_caron]: sort of boundaries and sort of ratings
and in perspective with with the rest of

00:36:44,514 –> 00:36:49,242
[bruno_caron]: the economy i think that adds significant
value and i think that’s a that’s a

00:36:49,302 –> 00:36:52,386
[bruno_caron]: really that’s a very useful set for
for the industry

00:36:52,216 –> 00:36:52,237
[ramsey_d_smith]: m

00:36:54,138 –> 00:36:54,499
[paul_tyler]: ramsey

00:36:54,205 –> 00:36:54,512
[laurence]: thank you

00:36:55,057 –> 00:36:55,341
[ramsey_d_smith]: oh

00:36:55,112 –> 00:36:55,377
[branislav_nikolic]: thank you

00:36:55,423 –> 00:36:56,126
[paul_tyler]: you want you want to bring

00:36:56,174 –> 00:36:56,317
[ramsey_d_smith]: yeah

00:36:56,187 –> 00:36:56,448
[paul_tyler]: us some

00:36:57,027 –> 00:37:02,195
[ramsey_d_smith]: yeah so i wholeheartedly agree this is
this is an area that’s expanded

00:37:03,026 –> 00:37:03,312
[paul_tyler]: oh

00:37:03,187 –> 00:37:06,652
[ramsey_d_smith]: dramatically and again the choices expanded

00:37:06,656 –> 00:37:06,923
[paul_tyler]: oh

00:37:06,753 –> 00:37:10,859
[ramsey_d_smith]: much more quickly than the analytical framework
behind it and

00:37:10,925 –> 00:37:10,946
[paul_tyler]: m

00:37:11,200 –> 00:37:15,447
[ramsey_d_smith]: you know we live in a we
live in an environment where the elytics

00:37:15,390 –> 00:37:15,755
[branislav_nikolic]: yeah

00:37:15,487 –> 00:37:18,112
[ramsey_d_smith]: are important they’re important for legal reasons
they’re important for

00:37:18,101 –> 00:37:18,202
[branislav_nikolic]: ah

00:37:18,432 –> 00:37:23,801
[ramsey_d_smith]: just helping people make the make the
right decision they’re important for helping people feel

00:37:23,921 –> 00:37:30,552
[ramsey_d_smith]: comfortable with their decisions and you know
as as i mentioned before i think it’s

00:37:30,592 –> 00:37:36,562
[ramsey_d_smith]: going to be useful certainly at the
consumer level at the advisor level i think

00:37:36,742 –> 00:37:42,249
[ramsey_d_smith]: very importantly at the institutional level where
you know the burdens of the burdens of

00:37:42,870 –> 00:37:46,513
[ramsey_d_smith]: proof if you will are very high
i think that this is this is this

00:37:46,573 –> 00:37:51,327
[ramsey_d_smith]: is going to be very important and
and it’s something that gets asked about a

00:37:51,407 –> 00:37:53,871
[ramsey_d_smith]: lot of meetings when you’re if you’re
talking to

00:37:53,824 –> 00:37:54,454
[laurence]: oh

00:37:53,971 –> 00:37:57,497
[ramsey_d_smith]: larger insurance companies and this is something
that comes up a lot this isn’t this

00:37:57,537 –> 00:38:02,265
[ramsey_d_smith]: has been an unanswered question so i
think this is this is this is this

00:38:02,325 –> 00:38:03,106
[ramsey_d_smith]: is a great initiative

00:38:05,656 –> 00:38:07,900
[paul_tyler]: yeah lawrence you know you saw

00:38:08,107 –> 00:38:08,408
[ramsey_d_smith]: yeah

00:38:08,180 –> 00:38:08,841
[paul_tyler]: afa on

00:38:08,880 –> 00:38:09,750
[branislav_nikolic]: yeah

00:38:09,602 –> 00:38:10,163
[paul_tyler]: that discussion

00:38:10,140 –> 00:38:10,321
[branislav_nikolic]: ye

00:38:10,243 –> 00:38:11,926
[paul_tyler]: panel how much

00:38:12,157 –> 00:38:12,379
[ramsey_d_smith]: yeah

00:38:12,780 –> 00:38:13,620
[branislav_nikolic]: oh

00:38:13,248 –> 00:38:14,491
[paul_tyler]: independent marketing organizations

00:38:14,122 –> 00:38:14,286
[branislav_nikolic]: yeah

00:38:14,891 –> 00:38:18,577
[paul_tyler]: need this type of tool for their
marketers and for their agent so i think

00:38:18,617 –> 00:38:23,382
[paul_tyler]: the time couldn’t be better what’s the
best way for people to find out more

00:38:23,462 –> 00:38:26,024
[paul_tyler]: about your product or reach out to
you personally

00:38:27,034 –> 00:38:33,965
[laurence]: sure so our website has a lot
of greater information and that’s the index standard

00:38:34,025 –> 00:38:38,854
[laurence]: dot com and you can email us
at info at the index standard dot com

00:38:39,475 –> 00:38:44,062
[laurence]: i’m also pretty active on linked in
so brandon slab please follow us we also

00:38:44,122 –> 00:38:48,229
[laurence]: have linked in at the index standard
follow us and we kind of put some

00:38:48,429 –> 00:38:51,786
[laurence]: our insights there and of course our
newsletter as well with with you guys

00:38:52,516 –> 00:38:55,721
[paul_tyler]: excellent all right well listen thanks so
much for joining us we

00:38:55,770 –> 00:38:56,011
[branislav_nikolic]: yeah

00:38:55,781 –> 00:39:00,509
[paul_tyler]: want to thank all our listeners and
you know please give us feedback comments and

00:39:00,649 –> 00:39:02,412
[paul_tyler]: as long as they’re good bruno i

00:39:02,400 –> 00:39:02,701
[branislav_nikolic]: oh

00:39:02,492 –> 00:39:02,713
[paul_tyler]: actually

00:39:02,644 –> 00:39:02,726
[laurence]: ye

00:39:02,733 –> 00:39:04,676
[paul_tyler]: had somebody coming on my audio

00:39:04,661 –> 00:39:04,681
[branislav_nikolic]: m

00:39:04,796 –> 00:39:05,518
[paul_tyler]: editing skills and

00:39:06,319 –> 00:39:09,769
[bruno_caron]: uh

00:39:06,720 –> 00:39:06,981
[branislav_nikolic]: yah

00:39:07,601 –> 00:39:08,462
[paul_tyler]: a lack thereof

00:39:08,688 –> 00:39:08,889
[branislav_nikolic]: yah

00:39:09,244 –> 00:39:10,826
[paul_tyler]: so we we welcome all

00:39:10,710 –> 00:39:10,930
[branislav_nikolic]: yeah

00:39:11,067 –> 00:39:13,050
[paul_tyler]: and you know listen join us again

00:39:13,058 –> 00:39:13,078
[bruno_caron]: h

00:39:13,150 –> 00:39:16,316
[paul_tyler]: week for another episode of that annuity

00:39:16,419 –> 00:39:16,479
[branislav_nikolic]: ah

00:39:16,436 –> 00:39:17,242
[paul_tyler]: show thanks

00:39:20,767 –> 00:39:21,007
[ramsey_d_smith]: oh

00:39:33,487 –> 00:39:37,409
[ramsey_d_smith]: oh oh oh

Nick DesrocherEpisode 176: Thoughtfully Recommending Indices with Laurence Black and Branislav Nikolic
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Retire Inspired

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Join retirement expert Mary Beth Franklin and experts from Athene and The Index Standard for strategies that take the focus off current challenges and put it back on what clients want for their future.

October 31, 2022

Yes, you can help clients navigate a path toward the retirement they envision, even with the significant headwinds that have emerged. In this season of the Retirement Repair Shop podcast series, experts from Athene and The Index Standard speak with retirement income expert Mary Beth Franklin at smart ways to plan around inflation, strategies for handling the recent increase in market volatility, the threat of recession, and more!

Watch and listen here:

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Show Sponsors

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.

Nick DesrocherRetire Inspired
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Indexes must evolve with inflation, rising rates, says NAFA panel

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By John Hilton

Many popular indexes supporting annuities and life insurance today might not work as well in a recessionary, high-inflation, and rising interest rate environment.

Those indexes underpin many big-selling products through a strong historical performance record. With the market on a strong 15-year growth run, most of the historical periods chosen for sales tools like illustrations show nothing but positive news.

Until recently.

To summarize the situation the industry finds itself in, Sarah Garrity recalled a quote from the 1988 movie, “Hoosiers”: “Don’t get caught watching the paint dry,” she said during a recent panel discussion at the National Association for Fixed Annuity’s Annuity Leadership Forum in Washington, D.C.

“I think that’s where we are right now in terms of product development and what we’re thinking about the future, that it’s not a time to stand still,” said Garrity, director of national sales for the annuity distribution team within BlackRock’s Retirement Group. “A lot of custom indices were perfectly positioned for outcomes of the past. And they, quite frankly, don’t address the challenge of inflation or the opportunity of rising rates.”

During a conference session last month in Washington, D.C., a similar panel posited that rising rates could open the door for annuities sold with risk-controlled indexes. These types of products will utilize, for example, a heavy bond component in order to reduce the risk elements.

Garrity agreed that volatility controlled indexes are sure to increase going forward. “There is no protection without performance with inflation where it is,” she said. “So I think that’s the first thing that we’re seeing in terms of how is this affecting product design.”

Inflation hedge

Industry veteran Sheryl Moore noted the growth of indexes during a recent Wink, Inc. webinar. When Moore started Wink, a industry intelligence firm, 17 years ago there were a dozen indexes. Today, there are at least 150 different indexes, many of them proprietary indexes developed by major carriers.

Most of these indexes are a mix of different indexes, and other assets like bonds. A standard index, such as the S&P 500, has a lengthy history of returns, upon which a reasonable projection can be made simply by looking back. Most proprietary indexes do not have this type of history.

Phillip Brzenk is global head of multi-asset indices at S&P Dow Jones Indices. He told the NAFA audience that gold is a great inflation hedge to have in an index mix.

“Gold is positive year to date 3% or 4% last time we checked,” he said. “So it’s thinking about how can you incorporate something like that into a broader benchmark to actually have that exposure, actually have a more direct inflation hedge in your index.”

Laurence Black is founder of The Index Standard, a firm that provides ratings on indexes. In a changing environment, indexes need to change as well, he said. Black used the analogy of a family who owns an SUV for when it’s raining, a sedan for country driving and a convertible for casual outings in nice weather.

“In the past, what maybe you had was one index that could cope with one environment,” he explained. “Unfortunately, we live in a much more complex world today. So I think what everyone needs to look for is more diverse packages. So if you think about an FIA, maybe what you want to see is different types of indices.

“Maybe what you want to see is a bunch of diverse indices that you can select that can give you those better outcomes.”

Themed indexes more popular

The panel agreed that “themed” indexes are resonating with conscientious investors. The most common example is environmental, social and governance (ESG) investments. Clients are asking specifically for ESG options, Brzenk said.

“I’ll tell you in the U.S., it’s definitely not going to be as prominent as in Europe,” he added. “In Europe, what we’re seeing is you basically need to have an ESG tilt in your offering, otherwise it won’t be looked at. I don’t think the U.S. will ever get to that point, but we definitely see merit to exploring some of these themes in isolation.”

An ESG investment is a stock that is rooted in values relating to environmental, social or governance issues, such as climate change, human rights, and data protection and privacy. For a stock to qualify as an ESG, it must undergo a rigorous evaluation process and adhere to certain principles set out by investment houses.

If the stock passes the initial evaluation, it is then scored based on the MSCI ESG index. ESGs can fall under three different categories in the U.S.: AAA-AA: Leaders, A-BBB: Average, and BB-B-CC: Laggard. This index rates organizations based on their exposure to ESG risks and how they manage those risks, and then assigns them one of the three categories above.

BlackRock had “a very successful launch” of its first ESG index within a fixed-index annuity last year, Garrity said. But it’s not so much the themes as the basic thought and construction put into an index, she added.

“When we think about product construction, what it should come down to at the end of the day, is how can we create the best index that’s going to create the best client outcome, regardless of a theme or a tilt?” she said. “At the end of the day, at least from our perspective, it really does come down to how can we create the most thoughtful index.”

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Ashley SaundersIndexes must evolve with inflation, rising rates, says NAFA panel
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Episode 103: Confidently Sorting Through a Sea of Indices With Laurence Black

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Fixed Indexed Annuities in the U.S. market now offer crediting strategies that include over 100 proprietary indices. How should agents and advisors conduct due diligence in this environment? What factors really matter? Today, Laurence Black, founder of The Index Standard, shares his perspective with us on this very important topic. Hope you enjoy our conversation. Also, do you want to get regular updates on news from Laurence and other guests of our show? Subscribe to our newsletter, below.

Thank you to our show sponsor, The Index Standard!

Fixed Index Annuities and RILAs are getting more complex and technical just when fiduciary rules are getting stricter. How do you choose the right index and allocate to them?

The Index Standard is your answer. They are an independent provider ratings and forecasts on all indices and ETFs used in the US insurance space. Their process is systematic and unbiased, identifying robust and well-designed indices.

We all know finance is complex and The Index Standard has a clear ratings system and uses approachable language to demystify this complexity. Visit for more information.



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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.



Welcome to That Annuity Show, the podcast that will make you an expert in explaining annuities to your clients. Give us 30 minutes each week, and we’ll shave hours from your client presentations. Now, here’s your host, Paul Tyler.

Paul Tyler:

Hi, this is Paul Tyler, and welcome to another episode of That Annuity Show. And today, we’ve got a full complement of our hosts and co-hosts. Mark, how are you?

Mark Fitzgerald:

Doing great, Paul. Good morning. How are you?

Paul Tyler:

Will [Morecraft 00:00:40], how are you? We missed you-

Will Morecraft:


Paul Tyler:

… the last couple of episodes.

Will Morecraft:

Great. Great to be back.

Paul Tyler:

Yeah. And Ramsey, good to see you as usual. Do you want to introduce our very special guest we’re honored to have on our show?

Ramsey Smith:

Absolutely. So Paul, today, Paul, Mark and Will, today, we’re honored to have with us Professor Moshe Arye Milevsky. We’re going to call him Moshe today, per his instructions. And hopefully, many people in our audience will already have heard his name or know who he is, but for anybody that’s happened to somehow miss out, Moshe Milevsky, Moshe, is really, in many ways, one of the godfathers of longevity academia. And if you’ve been listening to our show, they’ve been any number of people that have been on our show over the course of the last six months or so who in some point in time will make reference to or pay homage to having learned much of what they do from Moshe. So we’re very honored to have him here today, and we’re going to hopefully touch on a number of topics, but the biggest thing going on right now is that Moshe has just published a new book called Retirement Income Recipes in R.

Ramsey Smith:

Now, Moshe is a professor at the University of Toronto, Schulich School of Business, and has received any number of awards, probably more than I can mention in this short intro, but one of the key things that I saw that was interesting, he was named by Investment Advisor Magazine as one of the 35 most influential people in the US financial advisory business over the last 35 years. And he’s also received a Lifetime Achievement Award from the Retirement Industry Association. 65 peer-reviewed articles, this is his 15th book, and I think it just came out very recently. So we’re delighted to have you here Moshe.

Ramsey Smith:

And with that, I guess, get us started. Tell us a little bit about why you decided to write this book and what your main goals were in putting it together.

Moshe Milevsky:

So, first of all, Ramsey, thank you very much for the lovely introduction. I’m honored to be on the show. You’ve had some great guests, and I’m glad to follow in their footsteps.

Moshe Milevsky:

In terms of the motivation for the book, I teach a course at the Schulich School of Business. The teaching has actually been taking place right here in my office, obviously, for the last six months. We’ve been doing everything by Zoom, but I teach a graduate course and an undergraduate course on retirement income planning. So we have basic personal finance courses, where we teach people about mortgages and life insurance and income taxes, and how to figure out whether to buy or rent. But I designed a course that was exclusively focused on retirement income planning, which is a very different beast than accumulation planning. Some of the risk metrics products that we use, the strategies, just the language that we use in accumulation planning is very different than retirement income planning.

Moshe Milevsky:

So I started teaching a course to our students on retirement income planning, and we discuss things like sequencing risk, and we discuss things like annuities, and we discuss things like optimal withdrawal strategies and so on and so forth. There just wasn’t a good textbook to use. This is relatively new. The whole idea of decumulation is a new area. And there were great articles by authors out there. You mentioned Wade Pfau earlier. He’s done some great work. There’s been others that have written. Michael Kitces would be another name that I’d say. These have all put together a lot of articles, but there was no textbook. So that was number one, I needed a textbook.

Moshe Milevsky:

And number two, there’s a growing movement at the university, certainly in our business school, to teach students how to code, how to write code. There’s a growing awareness, if you talk to big software companies, that they need more people who know how to write code, whether it’s in Python or C or Fortran, or the language that I decided to use, which is R, which is a freely available language for coding snippets of things and perhaps even larger programs. So I decided to merge the two.

Moshe Milevsky:

So to answer your question, I decided to write a textbook that would focus on retirement income planning, but I decided to do it in a way that we would be able to teach our students how to code in R so that they can go out into industry and work in the many shops, whether it’s on registered investment advisor or whether it’s Goldman Sachs or Merrill Lynch or some other place, anybody working in a retirement income field has to be able to compute things. Not just to sell things, but how to compute numbers and risk metrics. And the purpose of the book is to teach them how to do that in a transparent way, easily replicable way, so that when somebody says there’s a 97% chance you’ll have enough money, they actually know how to do it and how to compute it and how to replicate. So that is the long-winded answer to your question, why did I write this book?

Paul Tyler:

Listen, I’m a absolute fan of R, Moshe, and maybe, I’m sure some of the people are going to say, “R? Are, A-R-E? What exactly is this?” My daughter took a statistics course in college and I said, “What are they teaching you? SPSS or SASH?” She said, “No, no, no. R. You don’t know what this is.” Okay. Grab a book, learn how to do this. I guess [crosstalk 00:05:49]-

Moshe Milevsky:

Well, it’s an interesting point. I’m going to just jump in, your daughter. So I have a daughter who’s studying engineering, and she’s learning Python. And when I started writing this thing about a year ago, she said to me, “Dad, R? No, man, Python.” And so we’ve been debating this at the dinner table, and the rest of my family’s sick of this.

Moshe Milevsky:

Hey, to make a long story short, I was trying to compute an algorithm to see whether the 4% rule works or not. What’s the probability the 4% rule works? I wrote it in R. She looked at it and she said, “Oh man, that’s so clunky. I could do it in Python faster.” Equal. It was not faster in Python. She wrote the simulation in Python. I wrote it in R, and mine was about three times faster.

Paul Tyler:

Well, I think-

Moshe Milevsky:

For the few geeks out there that are listening, for the few geeks, R actually worked better.

Paul Tyler:

Well, I think first of all, now I haven’t read your book. I read the description, saw some listings out there. Couple reasons. Now, first off, it’s very interesting language. It’s free, right? And it’s based on some [inaudible 00:06:56] powerful … You’re able to go out and download these amazingly free open-source algorithms. Does this potentially open the door to sophisticated planning to a bunch of people who can’t afford some of these more expensive software platforms?

Moshe Milevsky:

I think Paul, that you’re onto something, but there’s something that’s going to have to take place first. And that is we’re going to have to raise the level of the financial planning community so that they can learn how to code these things and learn how to use these things. Because right now, what worries me is the black box mentality in retirement income planning, where you have someone that doesn’t know a do loop from a for loop and says, “Oh. Monte Carlo says that this is the right product for you.” What does that even mean? How do you replicate it? Where did the numbers come from? So we need to raise the overall level.


Moshe Milevsky:

I think my personal philosophies do not rely on a piece of software where there’s 150 assumptions in the background that you don’t know. Write the code yourself. Now, most advisors will say, “I don’t have time to write code. I don’t even know what that means. I got to sell.” Hire someone in the office that does, because you can’t report statistics and metrics and summaries without understanding where that came from, or having someone on your team that does.

Moshe Milevsky:

So that’s what we’re trying to create on my universe, to create the next generation of retirement income planners that will assist to the charismatic people that are out there selling, but you need somebody in the office that understands this. Otherwise, I think the regulators, whether it’s the FINRAs and the SECs are going to go, “What is this sales piece? 5% on cash? You can’t turn 5% on cash.” That was built into the software. You didn’t know it.

Will Morecraft:

So Moshe, one quick question on that, because it’s, again, I’m a big fan as well and fascinated with the work you’re doing, especially at that college level. So the folks that you’re training through your courses, you said undergraduate and graduate, they’re going out into the workforce and it sounds like you’re saying that they might be ripe to be hired potentially by some of the more experienced financial professionals who don’t have this expertise or the time necessary to learn how to code. Would that be a pathway for one of your students?

Moshe Milevsky:

That’s my five to 10 year goal. So I think every, whether it’s an RIA or it’s a broker dealer, everybody understands you need to be within a couple of feet of a tax expert. You’re not a tax expert, but you need someone who you can bring in for a complicated day. You need someone that’s within walking distance that really understands social security. You kind of know, but you need someone that knows the devil in the details.

Moshe Milevsky:

I’m thinking that at some point, we’re all going to realize that you need someone who can quickly code up a numerical answer so that you can justify what it is that you’re saying and feel confident that that’s really the answer, that this annuity will help them avoid outliving their money. Or that this asset allocation is the right one, or the current strategies, where do you withdraw from first? The Roth or the IRA? You need someone in the office that understands the math or the coding, because otherwise, you’re just, I hate to say this, you’re just BSing.

Paul Tyler:

Yeah. Listen, we’re using this extensively. We’ve gotten a bunch of people internally to start to love the ability to do sophisticated analysis ourselves. So Mark, some of the data science work you’ve seen coming out of our product shop, right? That’s all in R. It’s an interesting challenge, Will. You think from a compliance standpoint, we’re all modeled to say, “Hey, we approved this piece of software.” It doesn’t really matter that you know how it works as long as you’re using the software and you put the numbers in.

Will Morecraft:

Well, that’s why I think it’s so important to be able to describe not just, as Moshe said, the black box, because everyone in here knows, but I’ll tell Moshe. I was a salesperson before I became a compliance professional, and we were using these rudimentary Monte Carlo simulations. I’m going back 20 years, that we’re …

Will Morecraft:

Honestly, in fairness, we could attempt to try to explain how it was ultimately arrived at that this certain asset allocation model should be the preference, or that you’ll have money through the age 97, to borrow your example. But there was a lack of, I think, true understanding. And we’ve talked a lot about transparency. We’ve talked a lot about, on this show, about the importance of not just selling a product, but really going deep and understanding what the objectives are. So everything that Moshe is talking about points to that fundamental education, knowledge and ability to explain how you might arrive at a particular product sale, not just start with the product sale.

Moshe Milevsky:

And Bill, just to build on what you’re saying, just to build on it, another audience for my students, or to put it this way, another place that I’d like to place them is in the compliance departments, who are right now, mostly filled with lawyers, I’m generalizing, and their knowledge of some of the underlying technical algorithms is just nonexistent. I know this because I write white papers and I try to get presentations approved, and I’m trying explain to people basic Marco, it’s 101. “No, no, no, no. That’s risk, that’s return.” It’s just not taught in law schools.

Moshe Milevsky:

So what we need to do is we need to place somebody who really technically gets it, and they’re the ones that they go, “Hey. Can you approve that? We’re trying to approve this, but we don’t really understand this equation.” “Ah, okay. Here, let me explain it to you.” And that’s a huge, because everybody’s got compliance. Everybody’s got a chief compliance officer. “Who do you lean on?” I ask the chief compliance officer, “When you don’t quite get what this thing is about?” “Oh, we don’t do that. We talk to the actuaries.” No, but they’re in a different department. You need someone internal. So I think there’s many, many places to put them.

Will Morecraft:

It’s a great, great point really because when it comes to anything, and I’m probably different from many compliance professionals given my background, but you’re right. You’re trained with a certain toolbox. And what you’re describing and what we’ve seen across the industry and new innovative methodologies and techniques is the ability to understand it and so that you’re able to utilize that understanding when you’re doing compliance evaluations of sales and other things.

Moshe Milevsky:

Look, just this whole idea of illustrations, illustrating a product back to 1929, I really don’t think that’s valid. So what we did is we went back to 1929. It was a different world. The Federal Reserve as we know it didn’t exist. You shouldn’t be allowed to use 1932 for anything. I’m sorry, but that seems to be the standard. We went back to 1929. No. You need a forward-looking model. What does that mean, forward-looking model? What does that mean? A model that looks nice? What does that even mean? [crosstalk 00:13:55]-

Will Morecraft:

We’re all dealing with hypothetical back-casted performance for new industries. This is an all new world for us to be able to, when you don’t have actual performance on a new index, how do you navigate that in this [crosstalk 00:14:06] environment?

Paul Tyler:

Back cast for 1932 that didn’t ever exist. Okay. That’s an interesting question.

Moshe Milevsky:

Yeah. Yeah.

Mark Fitzgerald:

Moshe, [crosstalk 00:14:12]-

Moshe Milevsky:

On a RILA. On a RILA, by the way, right? And as if you had liquid options on all markets at all time. “Oh yeah. We had S&P 500 options in 1932.” Really? Chicago Board Options Exchange, or Chicago Board of Trade? Where did you get the liquid index options? And we used Black-Scholes. They weren’t born in 1930. It goes on and on.

Mark Fitzgerald:

Moshe, you had mentioned the 4% withdrawal rule and that being one of the catalysts of driving you to write the code. And that obviously seemed to be, that rule seemed to be for years what people use as their baseline factor in terms of determining things. What are some of the, I guess, fundamental flaws that you see in that today as things have changed over the years?

Moshe Milevsky:

Yeah. So Mark, I don’t mean to put you on the spot, but there are six different ways to interpret the 4% rule. So I’ll answer your question when you tell me which one of the six you’re talking about.

Mark Fitzgerald:

An open inflation adjusted.

Moshe Milevsky:

Inflation adjusted what? Walk me through. I have $100, and I go to you, Mark, and I say, “Mark, I want to do a 4%.” Walk me through what my life looks like for the next few years.

Mark Fitzgerald:

Well, so I think that’s the challenge right there. So I think fundamentally, they’re saying, if you do an 80/20% split equities to fixed income, and you withdraw based on a 4% withdrawal rate, inflation adjusted, there’s a X% probability that you’ll be successful.

Moshe Milevsky:

Right. So let’s just do a numerical example, just for the sake of the audience because this is an issue for me. This means different things to different ears. So I have $100, and in the first year, I’m going to pull out $4. What happens in the second year? What happens in the second? The first year I pull out four, what do I do in the second year, according to the 4% rule?

Mark Fitzgerald:

So according to the inflation adjusted dynamic, my understanding would be that you would go up 4% based on 4% plus inflation on that withdrawal rate.

Moshe Milevsky:

Okay. So give me a dollar value because my mother understands dollars and cents. Percentages aren’t good. So mom, how much did she withdraw?

Mark Fitzgerald:

So $4-

Moshe Milevsky:

So about $4 last year, is it?

Mark Fitzgerald:

So $4.03.

Moshe Milevsky:

All right. So that’s what you mean by the 4%. Because a lot of people interpret it as 4% of the current value of the portfolios if it’s an RMD, right? A lot of people interpret it that way. Okay. And what do I do the next year, just so that we make clear? So this year she pulled out 4.03. What’s she going to do the next year?

Mark Fitzgerald:

So it’d be little over 4.06 because you take the [crosstalk 00:16:37]-

Moshe Milevsky:

All right. Very good. What happens if the market goes down 30% between this year and the next year? We’ve had a horrible correction. Am I still telling her to pull out the 4.06?

Mark Fitzgerald:

I think that there’s a standardized component of that that says yes, and I think that’s where the fundamental flaw is in that dynamic, that it would stay that and it would inflation adjust off of that dollar factor.

Moshe Milevsky:

Right. So the market can go down 50%. I’m still telling mom you pull out 4.06?

Mark Fitzgerald:

Based on-

Moshe Milevsky:


Mark Fitzgerald:


Moshe Milevsky:

And if the S&P soars 30%, I’m telling her to pull out 4.06. Basically, no matter what happens in the market, I’m telling her to pull out 4.06. I’m telling her two years in advance already what you should do two years from now?

Mark Fitzgerald:


Moshe Milevsky:

Right. And anybody thinks that’s a normal way to manage your life? To tell someone, “For the next 30 years, this is what you wear no matter what the weather is. You’re going to wear that sweater in April.” I don’t understand why I have to argue with people about how simplistic this rule is, but yet I’ve been to it for 20 years.

Mark Fitzgerald:

Agreed, and I think that’s part of the biggest challenge with it, is that it’s so static in terms of what its interpretation is.

Moshe Milevsky:

Yeah. Yeah.

Ramsey Smith:

So I raised my hand because I felt like I had to like I was in class. You just hit us with a Socratic method. [crosstalk 00:17:51]-

Moshe Milevsky:

I was going to say, “This sounds awful socratic.” I’m familiar with this.

Ramsey Smith:

Yeah. I haven’t seen that since I was in business school. Thank you.

Moshe Milevsky:

Hey, what do I do for a living? This is-

Ramsey Smith:

So, yeah. So for me, when I think 4% rule, I think it’s 4% off of what the balance is. So it’d be 4% on 100 in first year. Next year, it’s … So it was 96 plus whatever the return is, right, in the ensuing year, and then you withdraw 4% on that. And so what that means is that you’re spending budget goes up and down with the markets over time, which obviously, is problematic. So that’s my interpretation.

Moshe Milevsky:

Well, that’s not what Mark said. That’s not what Mark said.

Ramsey Smith:

But no. We-

Moshe Milevsky:

Mark had a different interpretation.

Paul Tyler:

That’s different.

Ramsey Smith:

Exactly. You said there’s six different interpretations. We’ve already discovered two in a very short period of time.

Moshe Milevsky:

That’s why I’ve got three chapters on this in the book because everybody sees 4% and reacts differently. And it’s just about just what 4% that you’re talking about before we improve it? Which is why I’m a big fan of intelligent drawdown rates. That’s what I call it, IDD. Intelligent drawdown rates. What do I mean by intelligent? Where at the beginning of the year, we look at what the market value is, and we do some sort of combination of what Ramsey said and what Mark said. I’ve got to stick to what I did in the past because we can’t have it too disruptive. On the other hand, I have to react to things. Endowments apply those rules.

Moshe Milevsky:

When you talk to Yale or Harvard or Stanford and you ask them, “How do you decide how much to pull out of the endowments? We’re in COVID, your tuitions are down.” “Well, what we do is a weighted average of what we did last year and where the market is now.” That’s a viable strategy.

Ramsey Smith:

So it’s very interesting to hear you talk about why it’s important to have more people do this. So I had a list of questions coming into this discussion. One of them was, well, in your introduction, you had said that you want to train more aspiring retirement quants. And so my question was, “Huh, how many do we need?” Now you’ve answered the question that we need a whole lot more because there’s a place for them in sales, in compliance and lots of other different areas.


Ramsey Smith:

And then so the next interesting piece here is that you place a very high value on engagement, another word that you used in your introduction. You really want people actually touching these problems and doing the calculations themselves, and it reminded me of something that I saw in one of your tweets. You made a comment about the Dow, about the Dow being useless, and I completely agree. And in my mind, I’ve always felt like we have a tendency in finance, as quantitative as finance is theoretically, we have a tendency in finance to rely on rules of thumb, and they seem to live well beyond their useful life. 4% rule is one, the Dow is another and then Libor is another one. There’s lots of them.

Ramsey Smith:

So it seems to me like a very fundamental part of what you’re trying to do is you’re trying to ask people to reconnect with the numbers regularly so we’re always making sure that we’ve essentially marked to market our benchmarking standard. Is that a fair description?

Moshe Milevsky:

Ramsey, you’re absolutely right. There’s nothing more boring to a 19-year-old senior, there’s nothing more boring than having an entire lecture on at what age should their grandparents take social security.

Ramsey Smith:

Right. Okay.

Moshe Milevsky:

And today we’re doing RMDs everyone. RMDs. Take out your calculators. RMDs.

Ramsey Smith:

Yeah. Yeah.

Will Morecraft:

Moshe, well-

Moshe Milevsky:

It’s totally disengaged from their life. So how do you make a 19-year-old or 20-year-old or 21-year-old interested in retirement income planning? You give them a coding problem. You say, “Look, here’s the issue. Sequence of returns is the coefficient on a regression of whether you had enough money and the decades return.” “Oh, okay.” “Please run a simulation and give me the regression coefficients.”

Moshe Milevsky:

Okay, that makes sense, that they know. It may make no sense to a lot of other people, but we’ve taught them statistics. We’ve taught them economics. You engage them by giving them computational problems that mean something to them. They can’t feel money yet. They don’t have any, but they can run these analyses. And then they feel comfortable to then support the people that are doing the actual sims. That’s my view of it. We need to make it interesting or they will drop the course and go and take a course on gender studies because that’s really fun.

Will Morecraft:

Moshe, do you find that those 19, 20, 21-year-olds are very, very interested in this coding and running these regression tests and everything that you’re describing?

Moshe Milevsky:

I’m stunned by the enrollment. I thought, “Okay, I’m introducing a course on pensions and retirement income planning in R. That’s got to be empty seat. Three people, and two of them are Russian mathematicians.” That’s what I thought I would get. And it turns out that I’ve got, full class, 45 [inaudible 00:22:29]. Why? Because they’re realizing, “Hey, I’m going to learn how to code, and that’s a skill employers want. Hey, I’m going to learn something that actually uses all the statistics I’ve been taught, and I’m going to be very valuable to my grandparents at the kitchen table because I’ve heard them talk about these things. Didn’t really know what it means, but I can create some code to answer it.” So I’m finding some [crosstalk 00:22:47]-

Will Morecraft:

Is it a variety of majors? Like statistics majors, engineering majors, finance, business? Are you pulling from all these different areas?

Moshe Milevsky:

I’m teaching within a business school. We don’t have dance majors coming in and saying, “I need to know some R to compliment the dance lessons.” These are business students who are taking marketing and accounting and economics and policy and management science. And they’re in their third and their fourth year, and they’re like, “I need an elective course that somehow brings this all together. Yeah. I heard about that Professor Moshe guy. Yeah, let’s give it a try.”

Paul Tyler:

So if I’m as a CFP, I’m mid-career, this sounds intriguing. How would I start to walk my way into this? Do I buy your book and take the course? Can I go lesson by lesson by myself at night?

Moshe Milevsky:

So you said mid-career. Can you give me a chronological age? [crosstalk 00:23:45]?

Paul Tyler:

I’m 45 years old. I got a CFP. I probably never saw myself doing this thing. This may be my second career. I’m okay with math. I certainly love conversations, but I like doing plans for people. What-

Moshe Milevsky:

So I would send you to a calculus refresher, just quickly, or an algebra refresher, because the book is replete with that. But if you say, “No, no, no. That stuff’s easy for me,” I would go through chapter by chapter.

Moshe Milevsky:

Now, [inaudible 00:24:12], I’m not trying to sell a book here or sell a course. What I’m trying to say is I’m trying to convince people that this is a career that you’re going to need. This is a service you’re going to have to rely on. You probably have a healthcare specialist within reach. I hope you have, on speed dial, a gerontologist or a social worker because you have clients that need that. Do you have a mathematician on speed dial? A quant on speed dial? Now if the answer is, “Why would I need that?” That’s what I’m trying to convince people to do.

Moshe Milevsky:

So it’s not necessarily to turn you into one, to know you need to go to them to get some answers because if you’re trying to convince the compliance person that this annuity solves a particular problem, you better have the right metrics.

Ramsey Smith:

So one of the things that I did, I went through your chapters, and I thought that there were a lot of interesting issues that you cover. You actually touched on one of them right there when you referenced Paul’s age. You said chronological age. You were very specific because I know you draw a distinction between chronological and biological age. That’s one of the top three or four things I saw that were interesting to me of the problems you solve. Can we talk about one of them, whether it’s [inaudible 00:25:24] or returns or lifetime ruin probability. There’s a very interesting topic. Can you talk a little bit about how you dealt with that in the chapter?

Moshe Milevsky:

Sure. So I’ll talk about both. I’m especially passionate about this chronological age, biological age thing. It’s something that I’m learning more and more about. And that is the fact that your true age, your true age is not the number of times you circled the sun. “Oh, well, I was born in 1952 and right now …” No. That’s just the number of times you circled the sun. What’s your body’s true age? And there are now tests, biochemical tests, that take a look at something called your telomeres, which is the end of the chromosomes, DNA methylation. There are other methods, and they tell you your body’s true age. And in the insurance industry, people nod and said, “Yeah, that’s called underwriting.” Basically we take a look at someone and say, “Look, your chronological age is 65, but your biological age is 52. You’re not as old as your age,” and vice versa. I’m sure you’ve all met people. They’re 65 years old chronologically. Look at them. They’re not in good shape. What does that mean? They’re 75 or 80 biologically.

Moshe Milevsky:

And my idea is to get people to start building financial plans that are geared towards biological age, not chronological age. So like, “Hey. I’m not retiring at the age of 65 chronologically. I’m going to retire at 65 biologically. Right now, biologically I’m 52. What should I be doing?” So asset allocation has to be geared to biological age. I think pension policy, retirement policy has to be geared to biological age. Right now, the entire retirement code, if you take a look at the IRS retirement ages, at age 85, the QLAC better start chronologically. At age 72, RMDs, chronologically, 67, full retirement age. Everything’s chronological, yet we all know, come on, man. That’s not my age.

Moshe Milevsky:

So the question becomes how do you compute biological age and how do you do it in an algorithmic sense? And that’s what that chapter is about, to give students the tools to take mortality tables, demographics, and convert them from chronological age to biologically age. And there’s a little bit of an R code there, so that’s sort of where that one came from.

Mark Fitzgerald:

Yeah. I-

Ramsey Smith:

Is [crosstalk 00:27:30] ready for it?

Paul Tyler:

Let’s [crosstalk 00:27:33]-

Moshe Milevsky:

I’m sorry. Say that again?

Ramsey Smith:

It makes all the sense in the world. Is the world ready for it?

Will Morecraft:


Moshe Milevsky:

I get a lot of pushback from compliance. Like, “I don’t care what your biological age is.” She’s 62 so she is now a senior. So you better … She’s 49 biologically. So it’s going to take some time.

Will Morecraft:

I think you’re right. I think there’s sometimes a one-dimensional approach in compliance and legal, and it oversimplifies things instead of recognizing many of the things you just discussed.

Moshe Milevsky:

Look. I envision a time in which your clients will come in and say, “That’s not my age.” “Yeah, but it says that on your birth certificate.” “That’s not my age. I got tested. I am 51. Don’t use that number.” Maybe not tomorrow, but 10 years from now, 15 years from now, I’m telling you your watch will tell you how old you are today, your Apple watch. It’ll prick you in the invisible dot and say, “Hey, good morning. You’re 49. You’re good. You’re 49 today.”

Will Morecraft:

I think what you’re-

Moshe Milevsky:

And you think people will … Go ahead.

Will Morecraft:

Yeah. I think what you’re describing is just advanced underwriting to a certain extent, where you’re taking a look at a bunch of factors that will contribute to mortality, depending on … These may be tests of your chromosome length and other things, but really, what they’re trying to get at is the likelihood of you attaining a certain age isn’t necessarily dependent upon your chronological age at this point.

Moshe Milevsky:

And at some point, somebody asks you how old you are, you will no longer say your chronological age. You won’t. You say, “No, no, no. That’s not my … Oh, that thing, the number of times I’ve circled the sun. Yeah. That’s 62.”

Paul Tyler:

Right. We just, as an industry, have built this great factory to predict when you will die prematurely. We just have not gotten to that point yet, Moshe, where we can predict how long you will live, right? Which I-

Moshe Milevsky:

That’s exactly it because I think it’s more salient. When you’re trying to get somebody, let’s talk about annuities. Amazing. We’ve been doing that for a half hour. I haven’t heard the word annuity. When you’re trying to convince somebody to buy an annuity, here’s the way not to do it. “You may become a centenarian. You might live to 130. You need an annuity.” What? Then you show them pictures of 130-year-olds and like oh my God, no, right?

Moshe Milevsky:

No, that’s not the way to convince them to think that they’re going to live a long time. The way you convince them of that is say, “How old are you?” “65.” “Are you sure you’re 65? Do you really know your age? You might be a lot younger than you think. Are you protected against getting younger? What happens if you’re younger next year? What are you going to do then? Huh?” There you got an annuity story.

Paul Tyler:

So [crosstalk 00:30:04]-

Ramsey Smith:

So you can add sales to your litany of skills there.

Mark Fitzgerald:

Right. So Moshe, I was reading that you do a lot of coaching as well, and really try to help advisors and industry professionals explain their products and services better. Are there some big pitfalls and challenges that you find on a regular basis that they can overcome?

Moshe Milevsky:

I fell into that. So I got invited, back in the days when people did these things, to seminars and conferences and events. And like all good speakers, I show up early because you got to be there early and you end up listening to two or three wholesalers before you actually get up to do your little pitch. So I heard a lot of presentations, and I would cringe at the end of them, like, “Oh my God, I can’t believe I have to follow this.” And what is complexity? Complexity? You’re throwing terms at people. You’re throwing complexity, you’re throwing slogans at people. They didn’t really understand. What did I learn from that hour?

Moshe Milevsky:

So to break things down into simplistic, pedagogically intuitive … I think that’s a big no-no, people that over complex [inaudible 00:31:12], and just too strong a sales pitch is obviously a no-no, but you would know that. I’m here to educate. I want to teach you three things you didn’t know an hour ago, and to implicitly get some ideas in there that’ll help sales, let alone lacking rigor. Where’d that number come from? And that makes no sense. And things like that. It’s common sense. You do know probabilities have to add up to one, right? You can’t have a 90% then a 70% then a six, basic things.

Mark Fitzgerald:

I saw a clip recently that you had done a while back that talked about successful retirement planning and four principles, and those being addition, subtraction, division, and multiplication. I thought it was really interesting how you broke it down that simplistically in terms of things that people really should be conscious of.

Paul Tyler:

Yeah. Yeah. That’s good-

Moshe Milevsky:

Link into things that are … Yeah, go ahead.

Paul Tyler:

Oh no. Well, I actually have a question. Just going back to what to your comment about 1932. Why are we using 1932 in our calculations in a world that didn’t even exist at the point in time? Well, if we flipped the switch and said, “Okay, let’s look at 2032 and take a forward look,” God, what a mess we’re in today. Where do we start?

Paul Tyler:

Now, I know as a human, I tend to overestimate the good, I overestimate the bad. So if you start to look through the changes and the assumptions that we should start to think about that are permanent, not temporary, how do we think of dramatically lower interest rates, unemployment, fundamental changes in the economy, fundamental changes in terms of where we want to live, right? It sounded great to live in a nice retirement center as of February 28th. Come March 1st, “Keep me away. It looks like jail.” How much of this world do you think will shift how we, and the numbers we should be using in some of these assumptions?

Moshe Milevsky:

Yeah. So as I say to people when they ask me questions that are of first order importance, which is what you’re asking me. These are really major issues, not the minutia of what correlation coefficient did you use? Look, I’m just a guy at a bar now. I’m just somebody that you’re talking to, and I’m like, “I don’t know, it’s my opinion.” I have no deep insight into what the year 2030 is going to look like, and and nobody does. Nobody does. But what I do believe in is robustness of sensitivity assumptions. So what assumptions did you make when you gave someone a financial plan, and how can we shake it up to take into account what we learned in the last six months or in the last 12 months? So that’s sort of what I look at. Not so much what are you predicting for the year 2030? How do we shake up the internal assumptions in your model so that we can account for that fact that the future’s going to look very different present?

Moshe Milevsky:

“So this gives me 99% chance of success? Okay, that sounds good. But what if interest rates stay zero for the next 10 years? And what if negative nominal rates continue forever?” Ah, now it’s not a 90% success rate. Now it’s only 60. Okay. Then I may want to change my behavior. So when I say I don’t think 1932 is relevant, what I’m trying to say is that the information that you’re extracting from 1932 isn’t going to be as important as the information that we extract from 2020. You’re all speechless.

Ramsey Smith:

Yeah. So, all right. Well, can we go back to-

Paul Tyler:

Yeah. We’re frightened at the 60% probability, Moshe.

Ramsey Smith:


Moshe Milevsky:

You know what? The margin of error on these things are atrocious. I ask you, “How many simulations did you run?” “Oh, 500.” “Thousand?” “No, 500.” Oh my God. How can you learn anything from 500 simulations when you have 25 underlying variables? Stats 101. Yes. I’ve seen situations where 90 becomes 60 when you shake up assumptions a little bit, which is, by the way, why I’m a big fan of annuities. I know this sounds ridiculous.

Moshe Milevsky:

When somebody says, an IRA, “I hate annuities. Ken Fisher and I only do …” “That’s okay. Why do you think this is the right plan, a systematic withdrawal?” “Because we ran a Monte Carlo, 97%.” Then I say, “Please go back and change the correlation coefficient to negative. Please go back and assume negative nominal returns for 10 years. Please go back and invert the yield curve. Please go back. So now, what number did you get?”

Moshe Milevsky:

Well, half the time they don’t respond, but when they do, “Oh, we got 60%.” “Oh, okay. So you’re saying 90 and six. That’s not good. What happens if you just buy an annuity for the guaranteed portion of the portfolio, or she needs this amount of income. What happens if you just buy a QLAC or a DIA? Did the numbers look better regardless of assumptions?” “Yeah, they did, Moshe.” “All right, there you go.” The point was not necessarily to come up with a number, but to convince you that this product will help.

Mark Fitzgerald:

So in one of the white papers you wrote, you indicated that about a third of retirees don’t know how much money they could spend on a monthly basis. And that if they tried to put some basic math behind it, that would go up to 50%. What are some of the biggest pitfalls that they try to calculate into that that cause that percentage to be so high?

Moshe Milevsky:

I’m surprised I would have said something like that, but I don’t know. Maybe it was a while ago. And as you get older, you forget these things, but I am not surprised at the number of people that have no sense of what their needs are going to be five or 10 years from now, this whole exercise in budgeting. I think spreadsheets have turned us into some people who think that we somehow can figure out what we’re going to need 29 years from now. So now, this is your rent for the next thirty years, column H, and this is going to be your Medicare premiums or Medicaid, column J, and then look at that, there’s a gap so we need to …

Moshe Milevsky:

I don’t think you can predict, with any degree of certainty, what expenses are going to be. And I think you have to adapt. So it’s a tough exercise. It’s a tough exercise. I have no idea if I’m answering your question, but it’s tough to estimate what you’re going to need.

Mark Fitzgerald:


Ramsey Smith:

So one of the things that I’ve spent a lot of time following that you’ve talked about has been tontines and other other interesting ways-

Moshe Milevsky:

I’m sorry. I’m sorry, what? I’m sorry, what?

Ramsey Smith:


Moshe Milevsky:

Just to say, what’s that?

Ramsey Smith:

Is this now Socratic method?

Paul Tyler:


Moshe Milevsky:

I don’t know. You’re assuming everybody listening to you knows what that word sounds like.

Ramsey Smith:


Moshe Milevsky:

I heard, honestly-

Ramsey Smith:

That’s fair.

Moshe Milevsky:

… on a Simpsons episode, I heard that once. What is that?

Ramsey Smith:

That’s fair. Well, maybe let me reframe my question. So we’re going into an environment where we know interest rates are currently low and there’s a lot of indication they may remain low for some time to come. And the one thing that you can get from an annuity, from a life annuity, you can get mortality credits, right? And another way to get mortality credits is through a tontine.

Ramsey Smith:

So in some sense, I’m neutral to what the tool is, but it’s very clear to me mortality credits are this remaining, this one residual place where you can get some yield. And fortunately, it’s uncorrelated to everything else in the market. So the question is-

Moshe Milevsky:

To steal a term from Tom Hagner, it’s the last alpha.

Ramsey Smith:

Got it. Okay. So the question is what do we do going forward? I’m of the view that interest rates could go negative, right? So what can we do going forward, whether it’s tontines or whether it’s, whatever it happens to be. What do you think we should be focusing on in this industry in the next couple years to factor in that we’re likely to not have forgiving yields, if you will?

Moshe Milevsky:

Is the answer, pools, swimming pools. That’s the way I look at it. We need to learn how to pool our resources in order to make our money last for the rest of our lives. Now, that’s very dangerous, because it sounds like letting governments take all our money and they’ll deal with the reallocation. That’s not what I’m saying. What I’m saying is that we have to take groups of people and put them together and they have to enter into agreements to share.

Moshe Milevsky:

So you and me and a couple of other people who are the same age, biologically, get together and say, “Look, we’re going to buy a bond portfolio, and we’re going to share coupons for as long as we live. And Ramsey, if you live a longer time than me, you’ll get the coupons. And if I live longer than you, I’ll get the coupons. But if we all go out and buy our own bonds, we’ll never have enough because interest rates are negative. But if we pool our resources and agree to share that way, the mortality credits, which you just noted, will give a subsidy to the negative interest rate and we’re going to have enough for the rest of our lives.”

Moshe Milevsky:

So my perspective is it’s not about the annuity or the tontine or the longevity insurance. Can we pool our resources in an efficient way, in a tax-efficient way, so that we can take our chips and make them last longer?

Ramsey Smith:

So this is one of the elements of the life insurance industry that I feel like the general public doesn’t necessarily understand. They understand maybe that like that there’s investments that are behind products. But at the end of the day, being a trusted place for the formation of a pool is actually one of the fundamentally uniquely valuable elements in life insurance industry because I can’t think of too many other places where you go where you would do that, right? You have to trust the pool.

Moshe Milevsky:

So Ramsey, so why can’t Vanguard or Fidelity do that? Why do I need an insurance company? And I’m sorry, I don’t mean to be combative or adversarially.

Ramsey Smith:


Moshe Milevsky:

Why do we need an insurance company? All we need is a large enough company to pool us together. Why do I need an insurance license?

Ramsey Smith:

Skin in the game.

Moshe Milevsky:

I’m not guaranteeing anything. I’m sorry?

Ramsey Smith:

Skin in the game. Because any other pool that’s just a, if you will, is a vessel-

Moshe Milevsky:

My local golf club. My local golf club. I get together with 80 other golfing buddies. We’re of the same biological age, and say, “All right. Let’s go buy some treasury bonds in a declining pattern so that we have a stable income. And whoever’s alive …” Why do I need skin in the game?

Ramsey Smith:

Well, you need skin in the game and you need, actually, you need a good administrator. So you need either an organ as an entity or a system that will manage those assets and will manage the payouts and monitor, right, who’s alive and who’s not from now till the last person dies. And so, my [crosstalk 00:41:52]-

Will Morecraft:

What insurance companies [crosstalk 00:41:52].

Ramsey Smith:


Moshe Milevsky:

Yeah. Yeah.

Ramsey Smith:

So I haven’t been able to find another entity or type of company that meets all those standards just by definition of walking into the office every day. So that’s-

Moshe Milevsky:


Ramsey Smith:

That’s my view.

Moshe Milevsky:

Keep your eye on BlackRock. Keep your eye on Fidelity. They’re sitting there. They’re listening to your pitch and they’re saying, “I still haven’t heard why I need an insurance license and capital and reserve requirements. I’ll get the actuaries. I’ll get somebody … Why do I need the insurance structure, state regulation? 5200. Why do I need state … We’ll do all of that.”

Ramsey Smith:

Paul [00:05:26] Mark [00:14:36] Will [00:42:25] Ramsey [00:19:20]

Ramsey Smith:


Paul Tyler:

I think that’s a really-

Moshe Milevsky:

Again, I being adversarial.

Ramsey Smith:

Tail risk.

Paul Tyler:

Listen. I think it’s a-

Ramsey Smith:

Who’s going to cover the tail risk though? Who’s going to cover the tail risk?

Moshe Milevsky:

What tail risk?

Paul Tyler:

There’s none.

Moshe Milevsky:

We’re going to adjust the payouts every year based on survival. We’re not guaranteeing anything.

Paul Tyler:

Well, my grandmother belonged to this burial society. Wow. She was born in 1897, talk about longevity. Yeah. She’d get a little card every month. Write the checks in, right? Last person standing … They’d already folded by the time she passed away. She outlived the funeral society. But no, it’s a good question. Will, I cannot think of a reason why you couldn’t do this as a private entity. Right?

Will Morecraft:

Well, I think, and what I was trying to get at when I said that, I don’t think there’s … Take a look at, who is it? Bill Ackman’s new SPAC, it’s called Pershing Square Tontine Holdings. So people are latching on to this that are not in insurance. Certainly, he’s not, has a hedge fund. But I think that to Moshe’s point there, there are people looking at it saying, “Whoa, whoa, insurance companies can do a lot. They can take your money and invest it in all these different creative ways, and then guarantee you lifetime income and they’re relying on a risk pool.” Just like what we’ve been talking about in all these things.

Will Morecraft:

So there is a component that historically, insurance companies have been doing this. This has been the, I guess the realm of what insurance companies do. Well, along with that comes an awful lot of regulation and a lot of other kind of challenges. In this kind of evolving environment, it would not surprise me if you saw other entities, you mentioned Fidelity and BlackRock, and I have no knowledge of those, but looking at this saying, “This is one of our biggest problems.” We’ve talked about this on so many episodes, the mortality risk, about living your money and how do we solve for this?

Will Morecraft:

We had a guest recently, the former commissioner of Iowa talked about tontine. This is not the first foray into this concept that we’ve talked about. And I think that the industry is paying attention and that there is a longevity risk that everyone recognizes with the lack of pensions that folks have, and the need for a form of income stream, a component of your portfolio to float you.

Will Morecraft:

So to answer your question, Paul, the insurance companies have the luxury that because that’s what they’re doing now, risk pooling, but I don’t think that it’s out of the question to suggest others would try.

Paul Tyler:

No. Well, hey, listen. We’re really close to time here, and Moshe, thank you so much for coming on our show. Final thoughts or questions, Mark?

Mark Fitzgerald:

I guess if I’m an agent in the field listening, what are three main things in terms of bringing into the conversation with a client that you would advise, that is shifting as this world changes?

Moshe Milevsky:

Yeah, that’s a good one. That’s a good one. Look, I think that, and I’m going to try to mention three things off the top of my head that we haven’t talked about. So everything we’ve talked about is obviously what … I think a word that we haven’t heard yet is inflation, or at least I don’t remember it in the last half hour. And the idea that inflation for the elderly and retirees is different than inflation for the rest of the population and what the Fed looks at. When you take a look at what your typical 90-year-old is buying, it’s not technology that has been reduced in price. It’s services that are probably increasing. So gaining an awareness of inflation, and the fact that having an inflation-adjusted income linked to your own inflation is very important. So I think that’s number one. If I’m in the field and I want to sound different, than I want to pitch a product that grows over time, I’m talking about unique inflation. I think that would be number one.

Moshe Milevsky:

Another one that we did not discuss, and this is extraordinarily important, is cognitive decline. Dementia, Alzheimer’s, to protect yourself against yourself. How do I protect myself against myself? That I’m not going to be able to make great investment decisions 10, 20, 30 years down the line? I’m in my 50s. I love asset allocation. Sit at the end of the month with my spreadsheet, stocks, bonds, Europe, emerging markets, more bonds. I’m not going to be able to do that in 80 or 90. So I need to automate things and to tell people that are extremely active now, to try to imagine themselves in the future. Cognitive decline. I think that’s an important one.

Moshe Milevsky:

And the other one, this notion of financial literacy and who do you trust in your family to help you out when that day comes? So these are not necessarily annuity related conversations, but if you’re in the field and you’re talking to individual people, these are things you want to have conversations about, and I think that leads nicely to annuities, but it’s certainly conversations we didn’t have in the last 45 minutes.

Mark Fitzgerald:

Yeah. I agree.

Moshe Milevsky:

A trusted family member.

Mark Fitzgerald:

Great. Thank you.

Will Morecraft:

Yeah. Moshe, this has been fascinating. There’s many, many offshoots of this conversation where we could go. And your perspective as an expert in the field and a professor really brings a lot to bear. And perhaps at some point in the future, you’ll come back because I thoroughly enjoyed today’s conversation.

Paul Tyler:

Yeah. [crosstalk 00:47:34].

Moshe Milevsky:

Sure. I’d be delighted to come back. Delighted to come back. I’ve been here for six months so I can come back anytime.

Will Morecraft:

All right.

Paul Tyler:


Ramsey Smith:


Paul Tyler:

You want to bring us home?

Ramsey Smith:

So thanks so much. Thanks for challenging us. That was interesting, and do hope you can come back sometimes soon to challenge us some more on many fronts.

Ramsey Smith:

So many, many takeaways. One you just said, which I think is, which is really important is this idea of the trusted financial advisor that’s within the family. I actually even created a marketing persona for that person because I think that person is really real, and I’ve run into that person many times.

Ramsey Smith:

And then the next piece is this idea of pooling. I think that we need to really focus on pooling as an asset. I think it’s interesting to see to what extent it can actually be practical and thrive outside of the, where we only seem to see it right now, which is in the context of the insurance business. Obviously, we see it in social security and defined benefit pension plans, but that’s, right, that’s either dead or separate, right? But in private industry, it’ll be interesting to see to what extent it could be replicated, the pooling piece by itself be replicated. So I would love to follow up on that topic on a going-forward basis. And again, thank you for coming today.

Paul Tyler:

Yeah, [crosstalk 00:48:53].

Moshe Milevsky:

Sure. My pleasure.

Paul Tyler:

Hey, thank you. Thanks, everybody. Thanks for listening to our show. Please subscribe, like us, recommend us to your friends and join us again for another episode next week of That Annuity Show.


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