During the 38th episode of the Fintech Impact podcast, Jason Pereira, award-winning financial planner, university lecturer, writer, and host, interviews Gary Baker, COO of Cannex. Cannex is a one-stop shop for annuity pricing. Jason and Gary delve into the complexities surrounding the annuity industry. From Big Data to global trends, Gary gives an all-encompassing view of annuities and what the industry is up against.

Show Notes:

1:11—Introduction of Guest, Gary Baker—COO of Cannex, a one-stop shop for annuity pricing
1:40—Cannex got started from a couple friends gathered in a small apartment. 2:33—Gary´s experiential background of nearly 30 years within finance including a stint with GE Capital.
3:45—There are two different segments within Cannex, annuities and savings products.
4:50—The premise of Cannex is to provide a central exchange for brokers to sell third-party products.
5:30—Cannex´s largest business investments focus on technology and Research and Development.
8:20—Distributors want assurance of the market and Cannex provides value back to them.
10:28—The areas the business focuses on includes information security and investment and development.
12:20—The complexity of the market can be difficult to overcome while still adding value.
13:26— Cannex overcomes the complexity of the market without over-simplifying and still extracting the best value
13:30—Cannex´s quantitative perspectives guides them through the complexity of the industry.
15:30—The biggest challenges when developing the company occur when trying to develop the right platforms to be more efficient.
15:50—Systems and processes are major areas of focus when developing the company.
17:07—The financial planning tools´ functionality help give the industry a quantitative perspective.
17:30—Essentially an annuities portfolio is a Super Bond.
17:54—We use real-time data to optimize our processes.
18:58—When working with our data tools we have to be cognizant of the assumptions, blac box and the effects on returns and correlations.
21:20—The role of financial advisors in the annuity industry is more process focused than product focused.
22:30—Recently, we have seen a movement from a product sale to a process sale in the market.
24:00—We do not use ordinary indices to do benchmarking at Cannex.
24:08—Gary demystifies the benchmarking they do and the indices they use.
25:21—Principal, interest, and longevity
28:20—The difficulties of getting their data tools into the market stem from the reality of the modern advisor: 90% psychology, 10% numbers
30:00—We want to focus on what is quantitatively the best economic scenario for the client.
33:28—There needs to be global trend for professionalizing the annuity industry.
33:50—Cannex is dedicated to being a change-agent in the annuity industry.
34:00—An independent evaluator can help give the industry a more quantitative outlook.
35:12—Price doesn’t correlate with quality--a higher price does not mean better quality.
35:40—Cannex is helping to quantify value propositions in the market.
36:00—Cannex´s data platform is available to students.

3 Key Points:

1. Gary and Jason discuss nature of the annuity market and how Cannex began.

2. The toll complexity takes on the industry and how Cannex relies on Quantitative methods to counter this challenge.

3. The industry needs to move towards professionalism.

Tweetable Quotes:

- “There is this tug of war between the market wanting simplicity and traders wanting to deliver value. So, what we do is add analytics on top of our core platform to pull the marketing story off of it.” – Gary.

- “The easy part [of the business] is the methodology and the processes that we put together to deconstruct and then put everything into an apples to apples environment. The tougher part is building the systems and processes that allow us to be more efficient when programming these products into the platform, and most importantly to allow our clients to configure what we provide” – Gary.

- “If you talk to financial advisors themselves, they would tell you my practice is 90% psychology and 10% numbers” – Gary.

Resources Mentioned:

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