Richard Kado, President of Genesis Financial Development Corporation, joins Cathy on The Financial Hour with DeWitt & Dunn Financial Services. Richard and Genesis were instrumental in the development of the first annuities. Richard leads the team who is responsible for 15 patents issued to date on annuity products, which is more than the rest of the fixed index annuity marketplace combined. Listen in as Cathy and Richard discuss annuities, the market, and much more in this exciting interview.
Cathy DeWitt Dunn: Welcome back toThe Financial Hour with DeWitt & Dunn Financial Services. I’m Cathy DeWitt Dunn. I’m very excited. I have a once-in-a-lifetime guest on my show, and I am so excited, and you’re going to be, too. I have Richard Kado, who’s the President of Genesis Financial Development Corporation, a financial research and development company focused on developing retirement income solutions for the United States market. Richard and Genesis played a key role in the first fixed index annuities.
Today, Richard leads Genesis’ close partnership with Annexus to produce innovative fixed income products, most recently with the BalancedChoice Annuity with Athene and the Nationwide New Heights Fixed Indexed Annuities. Richard leads a creative international development team responsible for 15 patents issued to date, more than the rest of the fixed indexed annuity marketplace combined. Oh my gosh, and he’s on my show. Richard, it’s so great to have you here. Thank you for coming out.
Richard Kado: Well, thank you very much for inviting me. Now, your listeners might not know, but the Annexus Group limits our products only to the best agents and best financial planners. Now, I’m glad, frankly, that you’re able to join that very limited group of agents and can offer our products, and I’m glad to have been here in Dallas visiting with you. I’ve got to tell you a little bit about Genesis. We’re a very, very different company from anything out there in the marketplace. We’re basically a research and development company. We sit down, and we try to figure out what’s working, what isn’t working in the marketplace, and how can we create something better.
That’s our total focus, is how can we always create something better. The spark for indexed annuity designs really came from a question that was asked by a financial planner, a very straightforward question. He said to me, “I provide a lot of interest products to my clients, interest earnings. They don’t have a lot of upside potential, but they’re very safe. And one the other hand, I’ve got products that participate in the market, equity-based products, and there a lot of upside potential but, as we all know, a lot of downside potential as well.”
Richard Kado: And so he asked, “Can I get something in between?” And we came up with a solution, and it was the birth of the indexed annuity marketplace.
Cathy: You know, the problems with equities right now is that they’re way too volatile for people. Would you agree with that given this space that we’re in?
Richard: Can I tell you a joke?
Cathy: I would love to have you tell me a joke.
Richard: Whenever I think about equities, I think about that, on average, equities beat every other investment, and there are all kinds of studies. My favorite one is from Jeremy Siegel. He looked at all kinds of investment instruments over a hundred years and came to the conclusion that, on average, stocks way outperform anything else in the marketplace. But here’s the joke, if you have one foot in fire and the other foot in ice, on average, you’re very comfortable. And that’s the issue with equities, is that they’re very volatile. They give us a great opportunity for returns, but there is a downside risk, and that’s why we added the key element, which is the downside protection.
Cathy: So there is something in between?
Richard: Well, indexed annuities work well because of the balance that we have, the balance between the growth potential and protection but without sacrificing that flexibility to deliver to all the changing circumstances in life. Life is not a static event, right? I mean, things…
Cathy: No, it’s not.
Richard: …change all the time. Then the question arises: what does it mean to improve a product? Financial products, a lot of people think they’re very static things, they never change.
Cathy: Wow, they’re wrong.
Richard: They do change.
Richard: It’s like a car engine. Well, car engines haven’t changed at all. They still help cars move forward, but the internals have changed tremendously, same with our products. So to help understand how that happens, how can you improve a product, you’ve got to understand what products are. They’re really a contract, an agreement between the insurance company and the consumer whereby you make a financial commitment and the insurance company in return makes a financial commitment back to you.
And what we do is we take advantage of efficiencies in the marketplace. You know, the most efficient financial transactions are those institutional transactions, the ones that, as a consumer, you can’t really buy into. We’re talking about transactions where the minimum payment is 10 or 100 million dollars.
Cathy: That’s a lot of money.
Richard: Those are pretty big numbers, but insurance companies what they do is they can pool money together and take advantage of those transactions. What we then do is we figure out the best and most efficient way of using those financial transactions, those wholesale, if I might call them that, transactions, and then once we’ve made the product as efficient as possible, then adding all of that flexibility that’s needed for the various life events, lifetime income guarantees, death benefits, liquidity benefits.
We have to make sure money is available when somebody wants to use it and needs it. And, of course, at the end, we can’t forget about the main thing, which is making that account value grow, which I like to call “Putting money in the customers’ pocket.”
Cathy: That’s absolutely wonderful, and we’re going to go to a quick break. Feel free to look me up today at annuitywatchusa.com. That’s annuitywatchusa.com. Again, the number today to reach us is (972) 473-4700. We’ll be right back.