Strategic Partnerships in FinTech and InsurTech with Chad Virgin

Jack Sharry: Hello, everyone. Thank you for joining us on this week’s WealthTech on Deck podcast. As our listeners know, we examine the strategies, disruptions, and innovations of asset and wealth management firms, workplace retirement companies, insurance and annuity companies, and fintechs. A central theme we discuss is the confluence of digital and human advice as well as the convergence of workplace retirement and wealth management. One of the things we haven’t looked at as closely as we should is the critical role played by venture capital and private equity investment, which fuels all this growth and expansion. Today, we’re going to talk with Chad Virgin. Chad is the managing director of Allianz Life Ventures. Chad leads Allianz Life’s corporate venture capital and is responsible for the strategic direction of the program and spends much of his time seeking opportunities for strategic partnerships with innovative startups and Allianz Life. I’ll let Chad fill us in on the depth and breadth of the work he does. And we’ll be talking about that in just a moment. But, in the meantime, Chad, my friend, welcome to WealthTech on Deck.

Chad Virgin: Jack, happy to be here. Thank you for having me.

Jack Sharry: So, Chad, let’s start with you providing more detail on your role. Fill us in, on a high level, if you would.

Chad Virgin: Yeah. Thanks, Jack. My role at Allianz is I lead our corporate venture arm, as you said. And what we’re trying to do from an Allianz Life Ventures perspective is really try to find unique opportunities for our company to partner with innovative fintechs, insurtechs to create a better value proposition to our clients and the advisors that we work with. We also get closer to these companies by investing in them. And being on the cap table as financial partners really deepens that relationship, not only from the investor hat, but also from a strategic standpoint, really understanding and knowing where the company is headed from their roadmap and be able to help support them going forward. So my team and I, we’re out meeting with founders every day, hearing about what’s the latest and greatest out there in the street. And bringing back those external learnings internally here within Allianz and trying to see you know, what makes sense for us and where it fits into our strategic roadmap. And since we’ve been doing this since 2017, we’ve invested in 18 portfolio companies, LifeYield, being one of them, which we’re really excited about, which we’ll talk about a little bit more what we’re doing with LifeYield and Jack and team. And we also make investments here locally in the Twin Cities area where our North American headquarters are located here at Allianz, really trying to prop up our local ecosystem to become more entrepreneurial. And the best way to do that is to provide capital and access and Allianz has been a leader here locally within our community here in Minnesota. And then we also do support earlier stage companies than what we do from a direct perspective. Our direct investments are usually in companies that are at that series A, series B type milestone. But we do want to continue to invest and provide capital to those entrepreneurs that have an idea but need capital. So we do have a couple of accelerator programs that we support and sponsor that we’re very excited about and have yielded great successes. And that, at a high level, Jack, is what what we’re trying to do here at Allianz Life Ventures.

Jack Sharry: Sounds great. So, Chad, you have a, clearly have a front row seat on where we’re headed around the confluence of digital and human advice. And because I know Allianz is squarely focused on retirement as a critical aspect, why don’t you talk about what you’re seeing, how’s it going, what are you especially excited about? Don’t be hesitant to name drop. So tell us.

Chad Virgin: Yeah, I think I think the trend that we’ve observed here at Allianz and through my talking with people like you, Jack, and other founders, the need for more personalization and customization is quite critical. And the demands from the end consumer are out there. And it’s really been accelerated through technology and advancements through AI and automation that have really been able to help deliver these kinds of outcomes that clients are are demanding from their wealth managers. Some of our portfolio companies are clearly doing that or trying to do that for their clients, LifeYield being one of them. Really trying to get to the crux of what clients are demanding and more seeing the need for personalization. And what that means, I think that personalization means something different to everybody. But we’re really passionate here at Allianz Life around creating defined outcomes for clients. Clients have experienced some volatile markets over the last 10-15 years with the financial crisis, and then coming out of COVID and in the market that we’re in today. People are really needing for defined outcomes when they’re investing for their retirement futures. And where we see the opportunity here at Allianz is partnering with tech providers like LifeYield to deliver those outcomes to our clients. And we’ve had some great success, both from a financial return with our portfolio companies, but strategically, those returns have been exponential and delivering that kind of differentiated value proposition is something that we’re, that we’ve done, and is still key to our strategic future going forward.

Jack Sharry: Gotcha. So, Chad, I know you work with some just big names in our industry, really, some fast growers and folks that are really breaking out in a big way. Why don’t you fill us in a little bit about some of the folks you work with, how you work with them, what you’re seeing from them, where you see things going?

Chad Virgin: Yeah. I think one great example that, Jack, is one of our portfolio companies is a company called Halo. And Halo originally started off as a structured no platform to really just disrupt how that process was traditionally done and bring automation to the table, to bring that that asset class to the masses, which was mainly exclusively for higher net worth individuals. And through us getting to know Halo and what their objectives are as a firm long term really fit into what we’re trying to accomplish here at Allianz, again going back to the defined outcomes. And Halo has been a great partner for us bringing our annuity products onto their platform, as well as our buffered ETF products to really bring different investment opportunities and solutions to clients outside of their core product. And that’s been really successful for us to diversify and broaden our distribution footprint, but also get key learnings around what the demands are out there in the market so we can continue to innovate within our product sets.

Jack Sharry: Gotcha. And did I hear a little birdie tell me that Vestwell is one of your portfolio companies? They seem to be… every time I turn around, Aaron Schumm and team are crushing it. So, fill us in on that one.

Chad Virgin: Yeah, we love what Aaron and team are doing. We were an early investor in Vestwell. It’s part of our defined contribution space, it is the blue ocean for us as an insurance carrier with some legislation coming out of Washington, DC, a couple years back with the SECURE Act being passed, allowing 401ks to adopt annuity type solutions into their plans more easily. And Vestwell is creating a lot of disruption and access to every day savers as they prepare for their retirements. And that’s something that we’re, a goal that we’re really passionate about here at Allianz. And there’s a lot of strategic opportunity for us from a product manufacturer standpoint to partner with Vestwell in the future, but also from from a thought leadership perspective, to get more Americans saving and thinking about retirement because as you know, Jack, it’s a crisis that we have here as Americans. And what Aaron and, Aaron and team are doing at Vestwell is really important. And we’re really excited about what they’re doing.

Jack Sharry: So, how does that come about? I mean, LifeYield is a good example. You found us somehow or another. I can’t recall how at this point, but it was a while ago. And have made an important contribution, not only in terms of capital, but also just having a name like Allianz as having faith in in our future. So we appreciate that. And Vestwell is a huge name, Halo has been killing it. So how do you find these folks? How do you, how do you, I know you’re talking to people every day, so I’m sure it’s word of mouth. But tell us a little bit about how you, how you identify opportunity. And it’s clear, you have a strategic focus on retirement, and also because of your business, insurance and annuities. So talk a little bit about how that comes to pass. How do you identify and locate these companies and ultimately invest in them?

Chad Virgin: So, Jack, to your point, the Allianz namebrand is definitely a door opener and allows us to get into a lot of great deals. But at the end of the day, it’s good old fashioned networking, just like a lot of things within our industry. It’s knowing who the right players are at different wealth management firms, different tech providers. And then we keep a really close network of investors. So we’re very active, talking with traditional VCs that are focused within insurtech and fintech and share deal flow with them, as well as my counterparts within the corporate venture world, we co-invest with a lot of our peer carriers out on the street as well as asset managers. And we find a lot of synergies and I really like that and prefer that because having other strategics around the table just opens up, from a financial investment returns perspective, opens up that customer base and opportunity a lot quicker to a startup in their early innings, but also has different thought leadership and perspective and mentoring opportunities for those founders early on in their formative years as an organization, which we find extremely valuable. And at the end of the day, we’re looking for companies that have strong founders and executive leadership teams. For early stage companies, the founder and the executive management team is critical because things change, things don’t always go to plan. But if you have a strong team in place that understands the business and where the puck is going, usually those types of deals work out long term. Yeah. I’m excited about learning more about what the opportunity with generative AI is going to mean to our business. Myself and my team, we spent a lot of time this year really developing our thesis around what that is going to mean to… how it’s going to impact our business going forward. And there’s a lot more questions than we have answers at this moment, just to be completely candid with you. And I think that’s probably the case for most people.

Jack Sharry: So, Chad, you were early on with Vestwell, early on with LifeYield, early on with Halo, all companies that are really doing a great job, if I may say so myself, but certainly my friends and counterparts at, like Aaron and Jason Barsema at Halo and many others, Joanna Kanakis, and many others at Halo. Lots of good things happening to us and to them, and you were early on with them. What are you looking at now? What are some of the trends that you’re seeing? What are some of the things you’re excited about, some of the things you’d like to… you think will play out, hopefully, in the same kind of realm, as you’ve seen with some of the players just named?: But the change is going to happen. And it’s going to be fast, and it’s going to be exciting. And at the end of the day, I believe that it’s going to deliver better outcomes for clients. And as investors, as tech providers, as wealth managers, being open minded to the change and the disruption is going to be critical. And there’s going to be a lot of tests and learns, and there’s going to be mistakes, and there’s going to be some fines maybe come out of the different regulatory bodies for maybe not having the right security measures in place with some of these generative AI solutions. Who knows? But when we look back on this, Jack, when we’re retired on a dock somewhere, talking about that time we were on your podcast talking about generative AI, I think…

Jack Sharry: Yeah.

Chad Virgin: I think the world is going to be completely different. But the good news for people in our business that are wealth managers is that we squarely believe, and I believe, and our firm believes that the human is definitely going to continue to be at the center of the equation. The tech surrounding the advisor is going to change and only going to make them better. And hopefully that leads to personalized outcomes that clients want to meet their financial outcomes. And that’s what I’m excited about. I’m seeing a lot of really cool companies pop up here recently, we’re on diligence on two right now that we hope to get across the finish line before the end of the year, really focused on delivering outcomes for clients in a personalized manner. And that’s something that we’re, we’re passionate about right now.

Jack Sharry: Yeah, we had our friend in common, Jud Mackrill, on the podcast recently, and we talked about that topic specifically, because I keep reading about it, I can’t quite figure out what it all means. I know it’s going to be meaningful. I’m just not sure how it plays out. Jud is of a similar mind. But for our listeners, if you haven’t listened to that podcast, Jud puts it in perspective, but he too, agrees that human beings will be at the center of it. It’s not to eliminate human beings, but rather enhance what they do. So tune in if you care to learn more about generative AI and the like. So, Chad, how did you get started in this? I’m always curious on people’s backstory, how did you wind up as a VC guy, I bet your folks probably had to ask you what that meant way back when.

Chad Virgin: Yeah. My start into venture capital is definitely unique, Jack. I don’t think it’s a career path that I had set out on my, on my dream board as a kid when I was looking at what my goals and aspirations were. But now that I’ve found it, I love it. And it’s probably because I didn’t know what it was when I was growing up. I started my career at Allianz on the distribution side. So I worked as a wholesaler calling on independent broker dealers, and then managed a group of the internal sales, the sales desk here at Allianz and then moved to leading a new business line within Allianz with the RIA market. And then when we established our venture fund in 2017, I moved over here and have no plans of leaving anytime soon, it’s been a breath of fresh air to still stay close to what I’m passionate about, which is financial planning and helping people think through their retirements and be able to retire securely in the way they want to. But also, you know, being at the cutting edge of technology and being able to get to know a company like LifeYield, and Vestwell, and some of the other great portfolio companies that we have, and being able to disrupt how business has been done and the way it’s going to be done here in the future. And it’s been a lot of a lot of fun, a lot of learning, a lot of mistakes along the way. And we will continue to try our best and bring the solutions to the table that our clients want.

Jack Sharry: That’s cool. So, let’s talk about the future. What’s, what’s your, what are your, some of your predictions on where our industry heads? Clearly we are in agreement that AI will be an important part. We’re not sure exactly how, but we think that humans will be, we will be indispensable still. But what are some of the other trends? What does the future hold for our industry, for retirement, for, for Allianz?

Chad Virgin: Yeah, that’s a great question. I am a venture guy, but I wish… I don’t have a crystal ball. I wish I did. I think what we’re gonna see with generative AI, Jack, like we talked about earlier on is the need for advisors and everybody within our industry, the entire value chain to continue to demonstrate value to justify the fees. And I think the challenge going forward is through automation. and the different tech disruptors that will, that are here and will continue to emerge is that fees will continue to compress and our industry needs to continue to innovate around that. And I think there’s a lot of opportunity in front of us. But that’s one thing that I see has, it’s already begun. And it’s going to only continue to come in, in the future, in my opinion.

Jack Sharry: Gotcha. So as we look to wrap up, one of the things I like to do at this point in our conversations with our podcast guests is, what are the three key takeaways you’d like to leave with our audience?

Chad Virgin: Yeah, Jack, thanks again for having me. Three takeaways. I’ve already hit on most of these already. I think the first one is something we’ve talked about quite a bit today is, you know, the need for personalization in investments. ESG is out of favor, but people want to make impact investments. And being able to deliver those results to clients is critical. Defined outcome investing is here. And it’s only gonna continue to be more a part of the financial equation going forward, as you see more and more products coming to market. And then I guess the second point is really around market conditions. Being a venture guy, it was only a little over six months ago, the whole Silicon Valley Bank collapse happened. And that was, that was quite the fire drill at the time. That was much to do about nothing when the government came in and backstopped everything. But that was, that was a very scary couple of days. And the market seems to, at least in the privates, early stage side of it, seems to normalize a little bit. But the fallout has happened. Valuations have been compressed. Deals are taking a lot longer to come together. So if there’s founders listening, you’re not alone. If you’re having a tough time fundraising in the timelines that you thought you would be able to get it done with, deals are coming together a lot slower. But there’s signs of light at the end of the tunnel. 2022 was very challenging for a lot of people in a variety of different ways. And private venture investments was not isolated from that. Actually, it was quite impacted. And 2024 looks quite bright, in my opinion. I’m very bullish about next year. But we still have some things to kind of flush through the market, in my opinion. And then the third thing would be just generative AI, we talked about that quite a bit, Jack. It’s going to change… AI, automation, it’s changed the way we live today already, and quite dramatically to the way you and I grew up, Jack. And only going forward, it’s going to accelerate. But again, the human advisor is going to be at the center of it. Technology automation is going to empower them to reach more clients, provide more personalized investment advice and guidance, and hopefully lead to a happier wealth advisor and a happier client at the end of the day because tech has delivered the results that they’re wanting.

Jack Sharry: Terrific. So, Chad, it’s been a real pleasure to spend time together. We get together from time to time over the course of each year, but good to spend in this format. And as we do at this point in our podcast, my favorite question is, that we ask our guests is, what do you do outside of work that you are excited or passionate about, and people might find interesting or surprising?

Chad Virgin: I’m born and raised in Minnesota. And I am so lucky and fortunate that our North American headquarters are based here in my hometown, so I get to live and work in the place that I love. I have my entire family also lives here. I have three daughters, myself, my wife, and what we really enjoy doing, just like all good Minnesotans, we like getting out on the lake, going up to the cabin and hanging out with family. And that’s something that I’m fortunate enough to do. We’re recording this podcast in the fall and Old Man Winter is right around the corner. And we just got done with a great summer here up in Minnesota. And we’re very fortunate to have these beautiful lakes and that’s something that I really enjoy doing, is hanging out with family on the water.

Jack Sharry: What do you have, 10,000 of those suckers?

Chad Virgin: 10,000+ they say.

Jack Sharry: Yeah, yeah. So, Chad, this has been great. Really appreciate you sharing your thoughts and perspective. Really been a pleasure to work with you over the years. For our audience, if you’ve enjoyed our podcast, please rate, review, subscribe, and share what we’re doing here at WealthTech on Deck. We’re available wherever you get your podcasts. Chad, thanks again. It’s been a lot of fun.

Chad Virgin: Thanks, Jack. I appreciate it.