This month, our CEO, Jay C. Judas, sits down with Hong Kong-based, American producer Justin Man. They discuss the evolving market of selling life insurance to HNW individuals outside of the United States, running a global distribution and where some of the best food around the world can be found. Hint: its mainly all in Singapore!
Jay: We are going to cover a lot in this interview because I have known you and your family both professionally and personally for nearly 17 years. In fact, I remember meeting you for the first time when you were graduating Babson and I was running Sun Life Financial's international distribution from Bermuda. You came to lunch at the University Club here in Boston with your next oldest brother, Jonathan, because Jonathan was finishing up a research project at his alma mater, Harvard, and was about to join Apeiron International. You, on the other hand, were about to take another career path. Before we get into that, share more about Apeiron International and your role with the company.
Justin: Apeiron International has a unique position in the HNW life insurance advisory world. As one of the few independent international distributors and brokers of HNW life insurance, we have been operating for two decades and we are one of the earlier pioneers in the industry.
Apeiron was founded by my parents, Andy and Irene Man. We are still a family-owned and operated company and have built our business succession plan with me taking over as CEO of our firm 3 years ago. It has been a long journey to get to where I am as my parents initially put me to work running all of our company’s illustrations. In retrospect, having that connection with the product and the numbers has not only helped me understand the product better, but also understand what our team goes through in servicing our clients and partners.
Today, Apeiron’s goal is to build the largest distribution network of advisors in the world dealing in HNW life insurance by providing world class technology, education and access to products from all major jurisdictions. We believe that by empowering brokers and advisors with knowledge and access, clients always win.
Jay: I want to hear about your upbringing, education and your first career choice because it certainly was not life insurance, but I suspect it helped you become successful in running an international life insurance distribution company.
Justin: What do you mean, of course life insurance was my first choice…we all know it is every boy’s dream to grow up and become a life insurance salesman because of our rock star status in the financial services sector! But you are right, life insurance was not my first career.
A bit of background about me. I was born in Redmond, Washington State, most of you would know this area because of Microsoft. My parents both immigrated to the U.S. around the time of university, so they have been in the U.S. since the 60s. They are the true embodiment of the American dream. As most immigrant stories go, they came with nothing and their success was built from a foundation of hard work, will power and a little luck.
While my Dad and Mom initially took traditional corporate paths, they were always entrepreneurs at heart. They were always starting and building companies. But as we came of age, they knew that education would play the key role in our development. They sacrificed everything - including some businesses- so that my brothers and I could receive the best education we could access in the US.
All of us had the privilege of attending Lakeside School, a private elementary and high school in Seattle Washington. Halfway through schooling, my Dad had decided to work more internationally, so my brother Jonathan and I enrolled at Phillips Exeter Academy in NH for secondary school. My oldest brother, Steven, graduated with an Economics degree at University of Chicago and Jonathan graduated with a Biomedical engineering degree from Harvard.
For me, I had grown up watching my mom and dad build things and I knew that entrepreneurship was my only path. With that in mind, Babson College was the only place I could go to learn the practical knowledge of entrepreneurship.
Higher education was always mandatory in my family. Collectively, we have 5 MBAs, 3 CPAs, 3 JDs and an RN. It was not easy growing up surrounded by letter collectors.
While starting and running a business was my dream, I knew I needed to learn and grow on someone else’s dime and I decided to join an industry that I loved, the luxury watch industry. In a short period of time, I was fortunate to work for the Movado Group, Louis Vuitton Moet Hennessey (LVMH) and Swatch Group. I worked in wholesale distribution and brand management at Movado, Zenith Watches and Breguet.
While it was not my intention, I realized that this experience provided me valuable training in dealing with HNW clients. One of my most distinct memories was when I brought in a special one-of-a-kind watch for a client and he flew to Las Vegas on his private jet just to see the piece and then flew out after the meeting. This fun had to stop at some point as I always believed that my real calling was to join my family in the insurance business.
The first thing I learned was that it was much easier selling a $100,000 watch to a client than a life insurance policy. But, surprisingly even though they are completely different industries, the end clients are the exact same profile. In the watch industry I was effectively the brand wholesaling to our authorized retailers, and in the insurance industry we are distributors working with financial professionals and brokers.
Both industries' businesses and business models were antiquated and slow-moving while end consumers were becoming more technical and savvier. Having the opportunity to oversee a major overhaul in the distribution network and strategy for the watch industry, I have gained a new respect for the challenges and time it takes to move a legacy industry an inch in the right direction.
Coming to Asia has been an amazing experience for me. When growing up in the U.S., I had never thought I would ever leave New York or Los Angeles, but after working in Asia for almost a decade, I cannot imagine life any other way. This journey has brought me to Singapore and Hong Kong, has given me the opportunity to add to the collection of MBAs in my family as I attended Peking University in Beijing and Kellogg Northwestern. Most importantly, I found my wife and gave my bosses their first grandchild.
Jay: You have seen a lot of changes in the international market, including some of the reasons high net worth individuals buy life insurance. What are the differences today from a decade ago?
Justin: Basic needs have not changed, in fact, that is why HNW life insurance continues to be relevant. Our lives are finite, but our choices that deal with this inevitable concept of death can wreck, maintain, or elevate the lives of our loved ones. The loss alone is hard enough, but the consequences of the loss have generational implications. In my mind, the changes over the last decade can be broken down into the following categories:
Product/Competition;
Funding structure;
Political restrictions and Risk/Currency hedge; and,
Worldwide transparency.
Product/Competition:
Prior to 2010, Flexible Premium Universal Life was the only true HNW product available in the international markets. You remember this well because you were one of the first life insurance company executives in this market. You introduced the first No-Lapse (NLG) product in 2005 for Sun Life’s Bermuda Branch and it, and others, disappeared shortly after the financial crisis. Then, Indexed UL, for international HNW, was introduced by one company in 2009. In 2010, we had around 4 or 5 main carriers with a few products available.
Today, every life insurance company in Singapore and Hong Kong has a HNW division and products which are not limited to just UL, they also include Participating Whole Life and European and UK-style Savings Plans that include UL 101%, participating whole life savings, annuities and endowments. The line between HNW and retail advisory is not as clear as it used to be which means increased competition from advisors and carriers.
In addition, as UL was always considered to be the HNW product available only to HNW brokers and private banks, retail brokers that did not have access to these products put more emphasis on participating whole life protection and savings policies, creating a segment that did not exist at scale a decade ago.
Funding Structure:
Up until 2018, I would estimate that 90% of HNW clients originated from private banks, which is a model you had a hand in starting twenty years ago through mainly HSBC and Citibank in Asia. Of that 90%, roughly 80% of the business written are single premium financed polices.
Over the last few years, while the cost of borrowing has decreased, the appetite from a bank’s lending side has also decreased because of Basel III. Do not get me wrong, banks love lending, but because Basel III is about minimum capital ratios, the banks have limited capacity to lend per carrier and reserve the best rates for clients with the largest AUM. As a response, many carriers have been offering attractive multi-pay premium options for clients and, as a result, these carriers have seen new business applications at a closer to 50-50 ratio between single premium and multi-pay.
Political Restrictions & Risk/Currency Hedge:
As we are in the cross border, multi-jurisdictional planning and advisory business, political risk continues to be one of the key factors in shaping the industry. Since the early 2000s, Indonesia played a major role in HNW Life advisory representing vast majority of the South East Asia business. With their Tax Amnesty in 2017, new business from wealthy Indonesians disappeared. Around the same time, China’s regulatory changes on capital outflow changed the business environment overnight.
Enterprising Hong Kong brokers, agencies and carriers implemented creative payment options for clients and focused on changing the product offering to speed up the underwriting process. This has now become such a focus that almost all the HNW Life carriers have created products for this specific need.
It sounds absolutely crazy, but today, private banks in Asia, including all the biggest names you know, refer clients to brokers selling life insurance savings plans at Starbucks over coffee. There are benefits of course, currency hedge and stable returns should be part of everyone’s balanced portfolio, but the ease of placing business with simplified underwriting have made it a choice product category.
Worldwide transparency (OECD CRS and FACTA):
Of course, we cannot talk about changes without mentioning transparency and the massive changes in AML/TF and KYC over the last 5 years. Tax-efficient planning internationally was not that complicated 20 years ago. As most jurisdictions do not tax offshore assets or income, many clients set up simple offshore holding structures for tax efficient planning. These structures include BVI trusts or Cayman companies.
FACTA and the automatic exchange of information between virtually all jurisdictions in the world changed the landscape dramatically. I do not need to go too deep into this, but you can imagine how much Foreign National business has been written from brokers residing on both coasts of the US since these changes have been implemented.
Jay: I think a lot of life insurance professionals in the United States would be surprised about some of the underwriting nuances you encounter with your clients. For example, how multiple residences and travel can affect coverage or the reluctance of private banks to share financial information. Can you talk about some of the hoops you have to jump through when dealing with international clients?
Justin: The first question I usually get when working with HNW individuals in Asia is “How much do I need to disclose?” Underreporting assets is quite common here and even when a private banker refers me a client they have known for 10 years, the client reveals to me in confidence that they actually have 5 other private banks they work with and sometimes 10 times as much assets than originally disclosed. As many of the countries in the Asia are emerging markets, we have to spend a lot of time on KYC and AML/TF compliance. Determining source of wealth is difficult but compulsory.
In addition, as you mentioned, travel throughout the region in Central Asia and the middle east can have underwriting implications. You cannot discount the experience of a great underwriter and the difference it makes when dealing with international clients. Choosing an experienced insurance carrier and underwriter makes our lives easier and can have major cost saving implications for clients.
Knowing how to package and place cases cannot be underestimated in our market sector. As you know from experience, as underwriters have very little information on the clients, limited to the disclosures on the forms, broker recommendation letters make a world of difference and have been one of the greatest tools we use to get better offers for our distribution partners and their clients.
Jay: The way jumbo life insurance policies have been distributed to wealthy clients through international financial centers has not changed much in the last quarter of a century. I know you have pounded your head against the wall over the years trying to figure out how to do things differently. Have you figured it out?
Justin: You are correct, the way we have done business over the past 25 years has not changed much. Traditionally 90% of the business has been driven through private bank referrals. At a time when the number of wealthy clients in the world are growing, they have chosen alternative means to place their wealth. We have seen an explosion in the number of family offices and external asset managers in greater Asia in the last 3+ years. It is estimated that 70% of wealth is unplaced at private banks, which means we are only currently serving a small percentage of our client base and there is massive market potential.
The tricky part in shifting into the non-private bank related distribution model is the complex distribution networks that are connected to the wealthy individuals. The challenge in our market is cross border compliance and solicitation. When you primarily distribute products that are not admitted in most jurisdictions, there has to be in place specific compliance standards that need to be followed by the entire value chain. Entering a market with many layers of intermediaries that control the access to HNWIs can be a ticking compliance time bomb.
In every industry in the world, disintermediation has always been the common goal. In financial services and life insurance, while there can be a certain amount of digitizing and robo-advisory to reduce the cost of service and compliance, advisors and centers of influence still play a monumental role in the HNW sector.
People often ask me is brokerage dead? It is a scary thought, as many insurance companies in Asia adopt a direct-to-consumer model via digital options, there has also been a large push towards a greater and growing agency business. This seems to be taking a much different business model than other parts of the world that have focused more on independent advisory. We are on a mission to change that and to save this generation of experts.
Jay: I understand Apeiron has some good news to announce along these lines.
Justin: Yes, we do! In the coming months, Apeiron will be launching one of the first digital intermediary management systems in the international market, focused on providing all stakeholders better and more efficient access to the life insurance process. We will be working with insurance carriers closely to integrate seamlessly where possible.
It will be the first of its kind in the HNW international segment and will be designed to help facilitate a change in our business model as distributors and as life insurance services providers. We will be transitioning to a fee-based model for better sustainability adopted from business models from different industries. While we work with an age-old product and tried-and-true advisory, we need to adopt modern business models that place client and brokers first in order to grow over the next few decades. I look forward to sharing more with you.
Jay: It occurred to me the other day that I have been to more weddings in your family than my own. I have also sung karaoke with your father in at least three countries which is at least two more countries than I have done that with anyone else. You have such a fun family and it keeps growing after you and Viv had your daughter, Maia, and your brothers had their sons. How do you balance and separate the family relationship from the family business…or do you?
Justin: Anyone who works in a family business will tell you it is not easy. The current COVID19 issue may help give a glimpse to most people what it is like to never have a start and end to a day’s work. Since we grew up with a family business, we have to take a conscious effort to switch between work and non-work conversations. It is not easy, but it just becomes our reality.
There is only so much I can do to make the environment better, but the most important part of the equation is to have a supporting partner. My wife, Viv, has been more than supportive of what we are doing and helps out from time-to-time when needed. As a team, with aligned goals, objectives, and values, we can accomplish anything. We are still trying to find ways to have balance in our lives. It will be a forever work in progress, but I could not do it without Viv’s support.
Jay: I am getting to my restaurant question but, first, I want to give a plug to the clothing company that your wife and her sister started, The Nude Box. www.thenudebox.com I am in awe of their social media marketing and love the imagery. How did Viv decide to start the company and how have they grown?
Justin: Thanks for this shameless plug! My wife will love you forever. Both Viv and her sister came from the luxury industry. What they found was keeping up with the joneses is not easy, think The Devil Wears Prada. The luxury world has a fantastic business model because even the employees pour half of their monthly income back into the products they represent.
Both Viv and her sister had to find ways to “dress cleverly”. By always having one pinnacle piece of clothing from a brand name, the entire outfit could be elevated as long as the cut and finishing were in line. Their entire product line was developed to empower women to be their best selves without breaking the bank.
It has been 3 years since the company was founded. Viv and her sister really impressed me diving head first into a trade without any experience; they went factory to factory sourcing for the best tailors and materials, they built their website, online store, and logistics and processes all from scratch and they created all their own original content. Working from the ground up played a key role in their success, but what made them preserver is their passion and belief that they are making a difference in their client’s lives. I cannot wait to watch where they go from here. If you want to dress cleverly, reach out to them.
Jay: My guess is that you have been to life insurance business dinners in at least two dozen countries. It is going to be much easier for you to not mention steak or a steakhouse than a U.S.-based producer. What is one of your favorite restaurants and what is a must-eat dish to order?
Justin: If you are coming to Singapore and we are talking about a local formal dining experience, I would have to recommend Long Beach in Dempsey Hill, which I know is also one of your favorite spots. They make the most incredible White Jade Crab and Seafood White thick noodle dish. You can get Singapore’s famous Chili Crab here and they will even take off the shell for you if you do not want to get your hands dirty.
If you want to go very local, at ABC Brickworks Market & Food Centre, stall 13, you have one of the best Singapore Hokkien Prawn Noodles (Hokkien Mee). Be prepared to wait up to 2 hours for your order as the uncle cooks each dish one at a time.
Read our companion Tier One blog by clicking here.
Since its inception, Life Insurance Strategies Group has solely focused on the individual high net worth life insurance market. We do not sell products. This allows us to offer unbiased, pragmatic advice. Visit us at www.lifeinsurancestrategiesgroup.com.