Annuities are a form contract often used for retirement in which funds are invested in order to guarantee a stream of income later. Many aspects of the financial and insurance industries have heavily evolved over the years. However, annuities are still mostly sold in the traditional fashion. Currently, they tend to include high costs — such as agent commissions — that have a negative impact on investors.
Giglal General is offering a path to guide annuities into the future. The company is working to build what it considers the first annuity contract exchange market in the world and in doing so eliminate a lot of the usual issues that arise in annuities. We reached out to its founder and CEO Alexander Ampontuah to learn the significance of annuities in an aging population and how investors can help.
Note: This interview was conducted over phone and email. It has been lightly edited for clarity and length.
Can you give us a brief elevator pitch for your company?
We are building the first electronic exchange marketplace for exchange-traded annuities — a NASDAQ for annuities. Where retirees and investors can come to an electronic trading exchange and purchase/buy annuities directly from a trading exchange without brokers or commission fees.
What inspired you to take the leap and build this company?
I was speaking with a lot of pension funds during my previous company, and many of the pensions kept bringing up the current pace of moving their pension liability risks to insurance companies in the form of issuing annuities to their previous workers/employees to insurance companies and moving the liability risk to insurers.
The process was arduous, costly, manual, and time consuming. This also affected current retirees who wanted access to annuities for retirement guaranteed income. I’m quite innovative and came from a derivatives/mortgage bond derivatives background on Wall Street. I knew I could solve this.
What past experiences prepared you to start, build, and lead your company?
I was part of agency mortgage-backed securities trading and derivatives trading desks at Nomura Securities, UBS, RBC Capital Markets, and Deutsche Bank. I’ve been working on Wall Street for more than 20 years.
What is your vision for the future of the industry you are operating in?
Insurance companies pay brokers/advisers fees to sell/distribute annuities to retirees/employees. Insurers then lock retirees into surrender charges if they leave before the surrender period. We are building an electronic trading exchange marketplace where insurance companies unite as market-makers at the trading exchange under standardized annuity contracts and make markets for retirees/investors seeking retirement income using annuities. This will eliminate the need for brokers/advisers who are charging fees to distribute/sell annuities for insurers.
Who is on your team and how did you come together?
Bo Qian, Cenray Gangadharan. We all worked together at RBC Capital Markets for five years from 2008-2014.
Do you have any competition, if so, how do you differentiate?
US insurance companies — Prudential, AXA, Allianz, New York Life, Jackson National, Lincoln Financial, etc. The current insurers distribute annuities by hiring brokers and advisers to sell annuities for them. We are building an electronic trading exchange and standardizing the annuity contract for the insurers, giving retirees the ability to purchase annuity contracts from a trading exchange commission-free.
What does your business model look like?
It’s a marketplace model. We charge an execution fee to retirees buying/selling electronic annuity contracts. We also take a cut of insurers revenue for all contracts executed at the exchange.
What brought you to equity crowdfunding and how do you intend to use the money you raise this round to scale the business?
A good friend and co-founder of a Series C company introduced me to Wefunder. We intend to hire two to three more developers/engineers and bring on a CTO to get the product to beta.
What do you want potential investors to know about you and/or your company?
I’m a problem solver. I love technical challenges, and I’m a hard worker. I love to tinker around and solve/constantly innovate. The annuity market and the current distribution model is broken. Every financial contract with future payout (futures on oil, gold, copper etc.) is exchange traded. Annuities can be, too. The market is quite sizable at $225 billion annual annuity sales per year. The US population is aging. We are living longer due to advances in medicine. Annuities provide guaranteed retirement income for retirees, but the current distribution model is too expensive and broken for retirees. We are building the technology infrastructure to solve this problem.
As you think about the business 5-10 years down the road, what do you see exit opportunities looking like? have you set any future goals for the company?
I can easily see Gilgal General being purchased by one of the larger public exchanges. Or potentially one of the larger US asset managers purchasing Gilgal General to complement its asset management offerings for clients.
I would like to have converted about 20% of the current US annuity sales market volume to our electronic trading exchange by 2024/2025. There is currently a $225 billion annual annuity sales market in the US.
We at KingsCrowd are excited to see where Alexander and his team take the company. Gilgal General is currently raising on Wefunder.