The Convergence of Workplace and Wealth with Matthew Gray

Jack Sharry: Hello, everyone. Thank you for joining us on this week’s WealthTech on Deck podcast. I’ve been following what I call the convergence of workplace and wealth for some time. What I mean by this is our industry has been coming together around the 401k defined contribution business and the wealth management business. Arguably, most Americans are getting more and more of their financial advice and guidance from their 401k plan. If you’re paying attention here, you’ve been watching the services offered by 401k and defined contribution plans expand and become more user friendly, all while offering better guidance, whether it’s budgeting or income generation or many services in between. Today we’re going to speak with Matt Gray. Matt is responsible for Allianz Life’s employer markets and defined contribution business. He oversees strategy, distribution, marketing, product development, thought leadership, implementation, he’s got a lot going on here, partner and vendor management, business development and plan, partner and advice participant engagement and experience. He does a lot. I’m gonna have him fill us in a little bit with all that means in a moment. He’s been doing some very interesting things and innovative work in providing guaranteed income solutions in defined contribution plans, and we will talk about all that in just a moment. Matt, welcome to WealthTech on Deck. It’s great to have you.

Matthew Gray: Thank you, Jack. It’s great to be here.

Jack Sharry: Terrific. So, Matt, let’s kick things off. Why don’t you fill us in on your role at Allianz Life? Who are you, what do you do, and who do you serve?

Matthew Gray: Lucky you, you get to talk to an actuary. I’m an actuary by background. My first 12 years was developing life and annuity products on the retail side. Then I moved into the marketing department, where I led an area called product innovation that was responsible for bringing those solutions to market. For a little over the past five years, like you said, I’ve been leading Allianz Life’s entry into the defined contribution space. So I’m responsible for the areas that you mentioned earlier, and I totally love it because it aligns so closely with our mission at Allianz, which is really simple, we secure your future. Our vision is that customers should be able to live out their lives with confidence, and retirement security is obviously a big part of being able to do that. This vision is really at the heart of everything we do, including our entry into the defined contribution space. And I’m super fortunate to work with a really passionate team that’s really willing to put in the extra effort to make this happen, because it is so important.

Jack Sharry: Well, it’s fundamental, frankly, isn’t it? When you think about retirement, what’s the first thought about retirement, besides holding hands, walking down the beach, and all the rest of that sort of stuff we see in the brochures. But really what it comes down is income. So Matt, I saw recently where you’ve been working with Empower. For those who know the DC 401k market, you’ll know that Empower is the second largest in the industry. And you, together, you’ve developed a guaranteed income solutions as part of a DC plan. And I saw that all Allianz Life’s in plan annuity will be the first fixed index annuity on Empower’s platform. So fill us in broadly on the trends in the 401k DC market, around income and where you all fit in.

Matthew Gray: Yeah, there’s been an increasing interest in efforts for a long time from employers and advisors to help their employees, their plan participants get better prepared for retirement. And there’s a lot of other trends driving this, but Empower administers about 80,000 retirement plans that are offered by these employers, so they recognize an opportunity to add solutions to their platform that could provide a guaranteed stream of income for the participants in these plans. Allianz Lifetime Income+ is a fixed index annuity chassis, like you mentioned, and it can be an efficient way to provide that guaranteed lifetime income inside of these plans. And now it’s available for advisors and for employers to add to their plans through Empower’s managed account service. And what’s so cool about that is that it can help participants improve their retirement security by having some of their retirement portfolio in their employer plan be automatically allocated for them by that managed account service to a guaranteed income solution based on the advice service, that advice service offered by Empower. So it’s not a one size fits all allocation. It’s based on the amount that that fiduciary advice deems as appropriate for their specific needs and circumstances. But just one other notable aspect of this collaboration is that our solution will not only cater to 401k plans, but also to 403b and 457 plans, all types that Empower administers. So this really expands the reach of these benefits to serve a wider range of individuals that, you know, are seeking reliable retirement income options.

Jack Sharry: So Matt, as you well know, retirement is ultimately about generating more income, and lots of different ways one might do that. Fill us in on some of the broader trends in the marketplace around income and where you all fit in those broader trends, maybe some product differentiation, because, for the uninitiated, they may not be familiar with your your product form or chassis or type. So talk about the trends. Talk about where you fit, how you compare to other income solutions.

Matthew Gray: Yeah, you said it, like it’s about generating more income and generating that income for longer. But unfortunately, the trends from moving from defined benefit plans to defined contribution plans, you combine that with challenges with Social Security, they all point to maybe people getting less or maybe not getting it for as long. So this problem is sort of like triply compounded because, you know, people are living longer, and inflation is just constantly sort of eroding the value that that income can actually purchase. So for many Americans, their employer sponsored plan we’re talking about here serves as their primary means of retirement savings. We did a survey of 60% of people worried of running out of money from their employer sponsored plan. So our objective is to make guaranteed lifetime income more accessible, and inclusive for a larger number of Americans who really depend on what they can generate out of their employer sponsored plan. So that’s where we and other lifetime income providers come in, and platforms like Empower come in. We’re trying to counter this trend of less income and this worry that people have of running out of money, but until now, there just haven’t really been viable options to do that inside of a DC plan. So we hadn’t been in the DC space before. We had a little bit of an advantage, because we could see what had been tried and what kind of hadn’t worked. We had basically a blank slate, essentially, and we listened very closely to what experts and stakeholders were saying that the space needed, and we talked to advisors and record keepers, institutional consultants. We surveyed hundreds of participants and plan sponsors to make sure that what we were coming to market with really addressed their needs and addressed the gaps that existed with previous and even some current solutions. So some key advantages of our solution, it’s really centered around providing protected growth, so opportunity for continued growth while people are saving and working, and even growth during the income phase. Also the flexibility to, you know, this isn’t an… you know, one on one. This is inside of a plan, a whole spectrum of participants and circumstances and needs. So you need a solution that’s flexible enough to meet the variety of participant needs within a plan. And then third, we have an advantage on portability, so that participants can take their benefits with them when they leave. You know, people don’t necessarily stay at the same employer, like I have for, you know, a long time. They move, and they need to be able to take whatever they’ve built up with them. So that was a critical aspect. And these elements have really resonated with fiduciary advisors and plan sponsors, because they get right at the heart of what they were telling us these things needed. But on top of that, you know, you mentioned, we’ve been talking about this, that it’s about generating more income. So we wanted to make sure that the solution that we came with could do that. It could help participants generate that additional income. So we tested a variety of ways to deliver that guaranteed income, and we found an approach through what we’ve offered that could be very compelling when you look at the math, and, you know, as an actuary, that’s near and dear to my heart, very exciting to see that math, see what it could mathematically do for people. And, you know, I think we talked about this, and we can share a link to some of the results of that work, so that people can see that, I think that they’ll be included as part of this. But that’s just what’s so exciting to me, is being able to see how it can actually improve that participant outcome in addition to meeting… those design elements that were really important for this space.

Jack Sharry: My understanding is that I figure you’re the leader, or at least among the leaders, in fixed index annuities, in non plan world, the non qualified monies, etc. So first of all, my… do I have that right? Aren’t you guys like the number one or two in that space?

Matthew Gray: Yeah, you know, we’ve been at this for a few decades, and I could pull up the stats specifically for you, but for the majority of those years, we’ve been the number one provider.

Jack Sharry: Gotcha. And so what is it that I’m assuming you took what people love about what you offer in the non DC world, in the everyday world of taxable assets and what have you. What are the compelling aspects here? And then, how did you transfer that or repurpose that in a plan?

Matthew Gray: Yeah, there are definitely some things that from our experience on the retail side, but there are definitely differences too. These solutions don’t have surrender charges in the DC space. You can get in and out of these solutions without that surrender penalty. A market value adjustment exists to reflect changes in interest rates, but that’s one key element. Sort of the ongoing ability to make contributions, critical in the space, because people are building up a balance over time. That’s a pretty different than how they typically work on retail side. And then the cost, you know, has to be in line with other investments in the DC space. So there’s some big differences, and greatly simplified. You know, this is, there’s not necessarily an advisor right there at the table with somebody while they’re in plan. There may be an advisor on the plan, or maybe when they move out of plan, but, so it’s very simplified compared to the retail side, where there is an advisor right there helping that participant. But some of the things that we could bring over that have been really important to provide that value on the retail side and help people improve those outcomes, is increasing income. I talked about inflation. Well, we have over 50,000 customers on the retail side that have turned on the income and in increasing income, and you can see sort of how that stacked up with inflation. So that is an important element that back to that sort of efficiency of the approach and improving those outcomes that is a part of this design. Not only can that income increase before you start with those contributions and that growth, but once you start, it has the ability to increase at an accelerated rate all through retirement, even after withdrawing your entire account balance. So that’s one key piece. Another one is just the lifetime withdrawal benefit design. You can kind of get income out of these things in two different ways, annuitization, where you make that irrevocable decision and you have that guaranteed stream of income, but there’s no flexibility in that if your circumstances change. Whereas a guaranteed lifetime withdrawal benefit, you get that stream of guaranteed lifetime income, but you still have full access to any remaining account balance, and it still continues to grow. And we’ve seen that on the retail side, people prefer that five to one over annuitization. So those are just a couple things that we could bring over that clearly consumers were demanding on the retail side that play really well here, and I guess just on the flexibility point of when and how to take the income and sort of that access to your account balance. I, I’ve often shared the story of my dad, but he’s been retired for eight or nine years now, and has had eight major unexpected life events that have happened, from my mom passing away, him being remarried, moving across country, putting an addition on the house where he lives now to make room for him with his his wife so and just health challenges and other things. So having the flexibility to adjust the plan, that’s just one person. Now you imagine a retirement plan with 1000 participants, 10,000 participants. There’s just a host of things that can change, and to have that flexibility is just critical in the space. You got it. And again, this is what we heard. And we just wanted to make sure that we we address that. And then, again, to me, the math is kind of the most exciting piece. So…

Jack Sharry: So let me see if I can summarize, because I’m hearing too many advantages to remember them all, but let me throw it out there. So you can keep adding to it. You can withdraw over time. You don’t have to annutize. You can take a withdrawal benefit. So you have some flexibility there. You’ve sort of organized the design of the product itself to grow income over time. Of course, you’re within a tax advantaged structure, namely the 401k DC plan. So you have those tax advantages in terms of the growth of the assets. I know there was a few more that I’m missing, but it sounds like a pretty good deal. Am I getting it right? Yeah. Well, you would think that. I’m just getting to know you a little bit, of course you would say that. One of the things that excites me because I’m, I’m now at a stage where I recently, our company was purchased by SEI. We were in a defined contribution plan. I haven’t been in one of those for a while. I was in a startup situation before, and didn’t have one of those for a while. And now I am, and I’m, I’m noticing, by the way, that the experience, they just make it so easy. It’s so well designed to make it easier for me to do the right thing, and all sorts of defaults that are set up. So I have to say… the other piece I left out in terms of the features or aspects of what you’re describing, it sounds pretty simple and straightforward. You’ve sort of stripped it down in terms of the, you’ve got plenty of bells and whistles, but they’re pretty understandable in terms of what you get. Am I getting that right?

Matthew Gray: You got it. It is more than just any other investment. So I think that’s, you nailed it with the experience. That there’s been a lot of investment from platform providers like Empower and the other platforms we’re on, like the product is one thing. And I’ve, you know, I’m excited about that. We’ve talked about that. Maybe even more important is the experience. And we’ve probably spent more time and investment on the experience, we definitely have, than even the product itself. So people don’t wake up and say, oh, I need an annuity today. I need guaranteed lifetime income today, you know? Or if they did, it’s like, how much do I even need? And you know,: Well, what’s interesting too, again, as a customer, because I’m not often in that role on that side, but here I am setting up my 401k plan. And then, of course, I inevitably can’t figure out what this stuff is saying to me clearly, but I just somehow can’t read, write, or something. So I get on the 800 number, and the other end is someone who’s very patient, very helpful, answers my questions, helps, you know, do what I need to do. And I know Empower is probably one of the better ones along those lines, in terms of that kind of service. But it’s kind of an interesting thing, I think, as our industry can learn from is keeping things simple, giving customers what they want. Not have any, maybe there’s some bells and whistles underneath the hood, but keeping it simple and straightforward and showing people how they can have more money, because who doesn’t want that? So it sounds pretty exciting. What haven’t I asked you? What, is there anything we’ve left out in talking about some of the work you’re doing?

Matthew Gray: You know, I think it’s maybe where this is all headed. It’s here. It’s real. People are already allocated and benefiting from it, but there’s still a lot of education needed just in the space, both with sponsors and advisors. And I think that is happening and will come. And I think as they go through that education and understanding, then I think that increased placement will just happen and continue to happen. And when they see the math, you know when they do it themselves, or they can see what it can do for their participants. This is a fiduciary world, so once they see that, they can’t unsee it.

Jack Sharry: And I’m assuming there’s a user experience that sort of shows the… all the benefits that you’ve described, just in pretty black and white?

Matthew Gray: Certainly within the experience, it’s showing kind of what the income is and how it’s progressing, but when making that fiduciary decision as the advisor and as the sponsor to to put this into the plan, they have a broader due diligence around that to see what that could look like. And I think, I think once they do see the math, they’ll just want to do it, and they’ll kind of almost need to, because of their duty, but they’ll be excited about it like we are. So you know, I think, you know, and other just what’s coming to just other large platforms like Empower, make these available, just that will just increase the choice and availability for the sponsors, for the advisors, and also the participants. And eventually, I think these are going to be in most plans, and that will really help move the needle on retirement security. And that’s really the ultimate goal. That’s what we’re all striving for. And I think we’re well down the path.

Jack Sharry: So Matt, this has been a great conversation. Any key takeaways you want to share with our audience before we start to say farewell?

Matthew Gray: Yeah, just a few things. You know, financial advisors, these plan sponsors just play such an important role in helping the participants and their sponsor clients really navigate the complexity of retirement planning within a plan. And so in order to address that, it’s really all hands on deck. It’s them, it’s the Empowers, it’s the Allianzes, it’s everyone, sort of pitching together to make this happen. The great news is lifetime income solutions aren’t coming sometime in the future. We hear a lot about a lot of announcements. They’re already here. They’re already on platforms like Empower. They’re already in plans helping people, and they’re available for sponsors and advisors who want to help their participants get better prepared for retirement. And then, I guess just the other great news is that those advisors and sponsors aren’t alone in this. There’s a lot of care, like you’ve seen firsthand, has been taken to get that experience right, so that participants know what they’re getting and how to make the most of that and that’s just going to help them as they are able to take full advantage of the tools that are available.

Jack Sharry: That’s great. So Matt, great conversation. Really enjoyed it. And as we do on all of our podcasts, we have one last question, it’s always my favorite. What do you do outside of work that you’re excited or passionate about, that people might find interesting or surprising?

Matthew Gray: I have five kids. You might have heard a few of them in the background, and I volunteer at church, so that takes up a lot of my time outside of work, but I do have a life goal to climb all of the state high points. And I’ve done 22 so far, if you count Reno Point in Washington, DC. I’ve attempted a couple others that I haven’t been successful on yet, including Mount Rainier back in, you know, that’s in Washington, in 2023. So gonna try again this year, this summer. And you know, well underway with the early morning training to try to get ready for that.

Jack Sharry: That’s great. That’s great. Good for you. So for our audience, if you’ve enjoyed our conversation and enjoyed tuning into our podcast over time, please rate, review, subscribe, and share what we are doing here at WealthTech on Deck. We’re available wherever you get your podcasts. You should also check us out on our dedicated website, wealthtechondeck.com. All of our episodes are there, along with blogs and curated content from many folks around the industry. Matt, thanks again. It’s been a real pleasure.

Matthew Gray: Thank you so much for having me, Jack, thank you.