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Life Health > Annuities

Milevsky reflects on his future after sale of business

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Moshe Milevsky, York University finance professor and foremost international authority on annuities, is selling his QWeMA Group consulting firm to retirement income data provider Cannex, in a deal that preserves QWeMA group’s unique intellectual property: Dr. Milevsky himself, who will join the Cannex board and oversee its quantitative research.

“Cannex has been working closely with Moshe Milevsky for more than 17 years and was QWeMA’s first client,” said Lowell Aronoff, CEO of Cannex, in a news release announcing the deal Monday morning. “The two companies are a perfect fit because we share similar philosophies about the need for education and awareness about how all types of annuities fit into retirement plans.”

Under the agreement, QWeMA, which stands for Quantitative Wealth Management Analytics, will retain its name as an independent Cannex unit and continue to help institutional clients like Pacific Life, John Hancock and Principal Financial Group help their advisors and clients optimize the quantitative aspects of portfolio decisions.

But Cannex’s larger infrastructure will broaden QWeMA’s ability to help financial advisors provide guidance on optimal spending rates and answer such questions as “What is my client’s annuity policy worth?” and “Should I turn on my client’s annuity’s living benefit?”

QWeMA’s staff will move 10 blocks away to Cannex’s downtown Toronto headquarters, and Milevsky will cede day-to-day operational control to Faisal Habib.

ThinkAdvisor (a sister publication of LifeHealthPro) asked Dr. Milevsky, a veteran contributor to Research Magazine and ThinkAdvisor, what the sale of QWeMA means for the retirement income industry and for him personally:

What is the competitive importance of this sale? What does the retirement income consulting landscape now look like?  

Cannex has a unique advantage in providing data (prices, quotes, comparisons) on all aspects of income annuities. Basically, if you are a financial advisor anywhere in North America and want to see and/or compare what various insurance companies are offering for a life annuity, then Cannex is pretty much the only game in town. Sure, you might call up the individual insurance companies who sell annuities, but the process is much more efficient and quicker if you pay a few dollars and run a Cannex quote.

They are doing similar things for variable and deferred annuities. In my mind, they are the Bloomberg Terminal of annuities.

QWeMA, on the other hand, is about the analytics of decisions around retirement income in general and annuities in particular. We have extremely powerful and efficient tools, but need a better way of distributing and implementing those tools. This is where Cannex comes in.

So, for example, if you are a financial advisor who uses Cannex and would like to get answers to questions like: When should I buy the life annuity? How does it impact the sustainability of my retirement plan? What is the optimal age? What happens if interest rates go up by 100 or 200 basis points? What will the annuity pay? Should I turn on my living benefit on my VA+GLB? QWeMA can offer answers to all of those. So QWeMA will be using the Cannex platform to offer our unique analytics.  

Also, in the Canadian market I have been doing a bit of work on mortgage financing (actually, I’m known for that more than my work on annuities) and there again Cannex is a powerhouse in the “data and prices” business.

We are going to work on cleaning up and packaging their historical data…I explain this to my academic colleagues as the Centre for Research in Security Prices (CRSP) of the insurance world.

Which industry players are served by Cannex vs. QWeMA?

Cannex has hundreds of financial institutions as clients, who then serve hundreds of thousands of individual financial advisors, insurance agents, brokers, planners, etc. If you are anywhere in the financial services and need a reliable and up-to-date comparison of “who is paying what” in the annuity market, you dial into Cannex and run a survey. QWeMA serves a much, much smaller sliver of that universe. We are going after the same market — financial intermediaries who help individuals make better decisions around retirement income planning.

Why is Cannex the right outfit to take custody of your “baby”?

Putting on my business school professor and case-study hat, we knew that to grow we had to partner up with a much larger player in the industry. We had the choice of going with (1) a product manufacturer such as an insurance company; or (2) a financial planning software firm; or (3) a data vendor.

The problem with (1) is that although they had deep pockets, we would risk alienating some of our clients who use our allocation software tools and compete directly with other product manufacturers. It would have been mighty hard to call up insurance company A and tell them that we just sold ourselves to insurance company B. There goes that client!

Then, as far as partnering up with (2) a financial planning firm, our main problem was “lifecycle philosophy.” Many of the widely used tools and packages take a very deterministic approach to the future. They are expected-cash-flow-focused and do a poor (or horrible) job of implementing uncertainty into their planning. At QWeMA we live and breathe stochastic processes and random variables. So I would listen or watch some of the presentations explaining their financial planning tools, and couldn’t help but wonder (or scream) “Where is the risk? Life has more than one moment!”

So although these tools might be quite popular and widely used, I feared a future in which I would continuously be arguing with their research and development team about how to “model” a variable annuity or a DIA [deferred income annuity]. Not fun!

This left us with (3) data vendors who don’t really sell any financial products, nor do they have a pre-existing philosophy of financial planning. They have to be great plumbers. Now, that poses its own challenge because they don’t have a culture of research and development and aren’t really viewed as thought leaders. The trick then was to find the right people who appreciate the importance of pure research and brainstorming. Anyway, through a process of elimination this led us to Cannex. The rest is history.

In hindsight, Lowell [Aronoff, CEO of Cannex] and Alex [Melvin, President of Cannex] were wondering why it took us so long to realize it was a perfect fit. Sort of like some 40-year-old bachelor — who has been dating for decades — finally realizing that the girl next door was the best match.

Where does Moshe Milevsky go from here? Any new projects in the offing?

In the next few months I’ll be quite busy transferring the business to the new owners, getting our employees properly integrated and making sure QweMA’s existing clients in the U.S. and Canada continue to receive the same high level of service they have expected until now.

I have developed a huge appreciation for human resource management. We also have some really cool new analytic tools that Cannex will be launching from within the QWeMA unit, which will be run by Faisal Habib going forward.

Eventually though, I will move back from business management and let the “professional suits” take over the day-to-day life of support, servicing, contract negotiations, etc. Yes, I will be joining the Cannex board, but I will have more of a research and oversight responsibility.

I also would like to see the Cannex model exported to other countries that are experiencing the same retirement income challenges as in North America. I’ll try to help with high-level introductions there. Perhaps I’ll function as a traveling billboard for Cannex.

Over the last decade I have been traveling quite a bit — my wife and kids claim that it is an insane amount — part of which has to do with my work promoting “annuity analytics” and the QWeMA brand. So I do plan to reduce travel and speaking appearances in favor of my (original) true love, research and teaching at the university.

I’m just getting the momentum going on my 12th book called Who Murdered the Tontine? I look forward to immersing myself in. At the age of 46, I can afford to pause for a bit, refresh and then figure out what is next. 

One thing is for certain, I ain’t retiring — not a big fan of golf!

Check out these articles by Moshe Milevsky on ThinkAdvisor:


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