Shooting for the stars — with AuguStar Retirement’s Clifford Jack

In July 2023, Constellation Insurance announced it had purchased Ohio National, which had run into some turbulence in 2018, and was changing its name to AuguStar.

“The CEO of Constellation, our holding company, called and had a story that was too good to say no to,” said Clifford Jack, president and CEO of AuguStar Retirement. “I tried to say no a bunch of times. In fact, I even recommended other people for the job. But he was pretty persistent, and I had the opportunity to meet with the board. And the board had great passion for what is now AuguStar. By the time that I joined, the company had already purchased the old Ohio National.

“Our job was to hire a new team. If you look at the team, everybody is new; the ownership structure is new, the brand is new, there’s no one left from the senior management team. We tried to start fresh, and it has been very successful. The brand has started to get significant traction in the market. We’ve had wonderful success in terms of brand adoption, but also in product and platform adoption with our new strategies and our new products. We’re pleased with the success that we’ve had so far.”

Jack said, “I stumbled into the industry because my dream of becoming an NBA point guard was cut short by lack of ability and lack of ambition. I interned for a bunch of different brokerage firms when I was in college. All the ones that I wanted to go to turned me down. I ended up with Dean Witter. And at that time, I launched my career in the illustrious Sears, Roebuck stores.”

At the start of his career, Jack described himself as “a financial advisor whose directions to the washing machines were probably better than my financial advice.”

In this interview with InsuranceNewsNet Publisher Paul Feldman, Jack describes how all that changed, though, with a rise to the top and many successes over the course of his career.

Paul Feldman: Tell me a bit about your history in the business. How did you get into the industry?

Cliff Jack: I graduated from school a little early, and so I was at the ripe age of 21 when I got my Series 7 and started to give financial advice. I ended up working for one of my largest clients who, at the time, was running a bank financial services organization. In those days, the back offices for brokerage firms and insurance operations were outsourced to third-party marketing companies and broker-dealers. And so that was how I moved away from the advisor’s business and into a management type of a situation.

That led me to work for a company that is no longer in existence, SunAmerica. I was hired by the president of SunAmerica, who called me and said, “Hey, I want to talk to you.” I didn’t know many presidents at the time, and so it was a great opportunity for me to learn. He went on to become CEO of Jackson National, now Jackson, and asked me to come with him. And I was at Jackson for 20 years. I was there when we launched the variable annuity business. I still remember our first few tickets and how exciting that was to have people say yes.

That turned into a great run, where we became the largest variable annuity provider in the country. And while I was at Jackson, I had the good fortune of having a great group of people above me in the organization who allowed me to do wonderful things. I wrote a business plan to create an independent broker-dealer; I thought that there was a need in the marketplace. 

I was the first CEO of National Planning Holdings. We ended up having a very good run there as well. I think we had 4,500 advisors when I left, and we did about $1.4 billion, $1.5 billion or so in revenue. Sadly — and unfortunately in some ways — that organization no longer exists because it was purchased by LPL Financial, but it was a great run with a great group of people. 

At Jackson, I was able to build a wealth management business in a way that hadn’t been done. We were one of the first to bring unified managed accounts to the advisory world using fractional shares in a fractional share facility. I did a number of things while I was at Jackson. I was executive vice president in charge of all retail at Jackson. I had the insurance business, which I love very much, but I also had wealth management and the asset management business as well.

Feldman: Which go hand in hand.

Jack: They do. I enjoyed my time there. I left the corporate world to go do my own thing with private equity and private equity real estate and had a very nice run there. And then I had a personal situation that caused me to have to step away from the industry for a while. After that was resolved, I was able to consider getting back into the game. And that was right around the time when Constellation called. 

Feldman: Tell me about your new direction with AuguStar as well as the product lines you are developing and have already introduced into the market.

Jack: I’ve been fortunate enough to bring a number of my former colleagues to the organization. We had worked together for a long time, and there was a lot of trust built up. We had to revamp our product lines and reinitiate product lines. We created a fixed indexed annuity product specifically tailored towards the independent marketing organization. We created multiyear guaranteed annuities, a suite of MYGA products that were rolling out not just through IMOs but also in institutions, banks and broker-dealers. 

We had to go about the process of obtaining selling group agreements, making sure that we onboarded lots and lots of advisors to make sure that we got their experience right. We had to change the brand and introduce the brand and change our messaging to be consistent with AuguStar and what we stand for.

We had to restart our ops and our IT stack, which is not insignificant in any way. So, we have been definitely busy, and that has gone well. We now have what I would call two of the three legs of the stool available from a product standpoint. We have traditional fixed annuities in the form of MYGAs, and we have FIA products across all channels, institutions and IMOs. We’re not in the registered product space currently, but that’s forthcoming. We have been busy. It has definitely been a quick-paced environment, but one that is consistent with the way I believe a business needs to be built.

Feldman: The shift of Ohio National to the IMO market is significantly different. How do you see that playing out?

Jack: Depending upon how you measure, there are 300,000 or 400,000 advisors and agents in the country that can do business with organizations like ours. We want to make sure that we provide our resources and our capabilities and our products in the ways that meet the need of the agent and the advisor, whether they are in independent broker-dealers, whether they’re in IMOs, whether they’re in banks, whether they do business directly — all of that needs to be agent choice. They need to decide what’s best for them.

We don’t mandate any of that. We try to create great suites of products and support our agents and our advisors to make sure that they are getting what they need from us to help them grow their business. The natural extension of that, of course, is the IMO marketplace, which Ohio National was never in. For us, setting up AuguStar as a new brand with new ownership, it was important for us to be in all channels with all products, thereby giving the advisors what they need. They can determine how their business is best written, and we want to be able to support that.

Feldman: Where do you see your future as a company between life and annuities? Ohio National had a big product mix. Where do you see that going in the future? Do you see more on the annuity side? Do you see more on the life side? Is there a certain blend that you’re shooting for?

Jack: I can’t stress enough that what we bought was a platform and the organization that was in the past is very different than our organization today. What you have in Constellation, our parent company, is an organization that first and foremost is global, and it will grow through acquisitions as well as organically both in and out of the U.S. And that’s demonstrated by a number of acquisitions that we’ve already done and/or that we’ve announced. 

We intend to focus on traditional life insurance sold by either agents who are attached to IMOs or through a traditional brokerage general agency structure. I think you’ll see us focusing more on indexed universal life-related products than we are on other products of the past or products that other organizations might choose. We think there’s a significant overlap in the IMO space between IMOs that write annuity products and life insurance products.

Annuities are a bit more in favor now in the interest rate environment that we are in. You can just look at that from a flow standpoint. But we think that having all products available in the markets that we are actually servicing is key. We’re not going to be able to predict the future of markets. We think that clearly annuities are in favor now, or at least certain aspects of the annuity business are in favor now. Other aspects of the life insurance business may be somewhat out of favor, but we think those things are likely to be cyclical. So again, all products in all distribution channels are our real focus, and we think there’ll be a lot of synergy between  the annuity and the life insurance platforms.

Feldman: I was talking the other day with one of the larger manufacturers of products in the industry, and it was interesting to see somebody who is mostly in the annuity space now is getting into the life space. Do you think the life space is a big opportunity? How do you think that might be affected by the threat of the Department of Labor fiduciary rule?

Jack: I do think that the life insurance industry provides great complementary opportunities to insurance companies because it does a number of things. First of all, getting a deeper wallet share with your agents is never a bad thing. Clearly there’s a lot of crossover between agents who sell annuity products and life insurance products. If we can generate more wallet share and more mindshare from those agents, that is a very significant opportunity for us. So we like that. 

We also like the fact that the balance sheet obligations and requirements for annuities are very different than they are for life insurance. Obviously with life insurance you have mortality risk, and with annuities, you either have market risk or spread-based risk. And we like having the opportunity to have diversification of risks on our balance sheet.

That doesn’t mean that originating annuities or life insurance are the only ways to go. When we look at it, certain products may be out of favor, certain platforms may be out of favor, and they may be a better opportunity to purchase at any given time in the market cycle than it would be to originate or vice versa. Sometimes things are so hot that it’s better to originate than to buy. And the inverse of that can be the case as well. As it pertains to the DOL rule, I don’t believe that the DOL rule is going to have a significant impact on life insurance flows. I think demographics will have a significant impact on life insurance flows, and I think that product innovation will have significant impact on life insurance flows, but I don’t believe that the DOL rule will trigger much of that. And with respect to the DOL rule, we agree with the recent lawsuits filed by some of our trade associations.

I believe that limiting consumer choice is always a bad thing. I think consumers are smart, they have access to lots of information. Having more options is good. Limiting the advice that they can receive from agents, from advisors and intermediaries is never a good thing. I think it leads to a significant portion of the market being underserved. If the lawsuits are unsuccessful, we believe that we’re well-prepared should the DOL rule not be overturned. We feel like we’re in good shape either way. We believe in the validity of the lawsuits, and we look forward to seeing the conclusion of that.

I think no matter where this ends up, having clear rules is incredibly important because it’s always damaging to have it be arbitrarily done either by the carrier or by the intermediary and the IMOs and the broker-dealers or by the agents. So, hopefully, the lawsuits will be successful; we believe they should, and if not, then I think we need a significant level of clarity with respect to what is required in order to comply not just at the agent level, but in the intermediary level and at the carrier level as well.

Feldman: How does your structure compare to other private equity companies in the industry?

Jack: I think we probably are in the middle, in the intersection, if you will, between the traditional carriers with more traditional ownership, whether it be mutual or public, and the private equity-
backed carriers. Because we are owned by two of the larger North American pension funds, we are not under pressure to do anything other than have reasonable risk-adjusted returns. 

I would say that we are in a very good place to be able to compete favorably with the traditional carriers from a balance sheet standpoint and from private equity-led or -owned organizations with respect to the products that we create. We believe we have a unique story. We think that story is identifiable to advisors and to intermediaries, distribution firms, corporate dealers, banks and IMOs. 

Feldman: One of the things that I’ve heard from the agents and advisors is that when a new company comes in, they’re not always friendly to the existing policyholders. What’s your take on that? 

Jack: We want to be very policyholder friendly in everything that we do. I think that ultimately if you’re serving advisors, we view advisors as our clients, and we view policyholders as our clients. And we think we have an obligation to treat everybody appropriately and consistently. We hope to be able to demonstrate that. And some of the organizations that I’ve been with in the past have demonstrated that, and I intend to do the same thing here.

The team that we have been able to recruit has demonstrated excellent, predictable track records, and that’s why I asked them to join. If they didn’t have excellent track records, they wouldn’t be here. We hope that will allow us to be able to continue to earn our reputation in the industry. I was with a group of advisors two weekends ago, and I always love spending time with advisors. And an advisor said, “You bought a restaurant, you bought the footprint of the restaurant, the countertop and all of the equipment and the oven and all of that, but you have a new chef, and you have a new wait staff and all of your contractors are different.” I thought it was a pretty good analogy. 

We have earned the opportunity to have people give us the benefit of the doubt. We know that we need to earn that. We’ve had great success. Some of the recent data has been released; we’re now a top 10 seller of FIAs in Q1. 

Feldman: Where do you see your future — and maybe the industry’s future — going?

Jack: Our future is going to carve out more market share from this huge, massive opportunity we have ahead of us, both in the annuity space and in the life space. I think there’s a lot of opportunity for us to disintermediate from other organizations that aren’t as nimble, that may not have the balance sheet that we do, that may not have the relationships that we do, that may have been given a shot and didn’t do a great job on behalf of the agents and advisors. 

I think we’ll do that with respect to the products that we are developing currently. And I think that you’ll see us dramatically increase the distribution footprint that we have in terms of the partners that we do business with. We want to be thoughtful. Our goal is to roll out a significant distribution partner per quarter, not do it all at once. 

These things are delicate. You need to make sure that you do a good job. I’ve always said that the first ticket experience for every agent, every advisor, every broker-dealer, every distribution partner must be excellent. No one wants you to learn on their dime or on their ticket. 

Feldman: They don’t want their clients getting beaten up over the customer experience.

Jack: That’s exactly right. So we are going to be very deliberate in the way that we roll out products and about our distribution capabilities, and then we want to make sure that our brand is adopted. 

I believe the industry has a chance to be able to do what it has been trying to do forever, and that is compete on a level playing field with the asset management industry and become a bigger part of global wealth management. It’s amazing to me that as an industry, we have competitive advantages that the asset management industry doesn’t. If we choose, we can, of course, own an asset management company or two or three — obviously there are lots of examples of that. But asset management companies can’t take on balance sheet risk in the way that we can.

I think our opportunity presents itself now because the industry has grown so significantly in terms of wallet share. We have an opportunity to make sure that it’s not just one and done, that you didn’t have all this velocity coming out of low interest rates and there’s no stickiness to it. There are a lot of things that we as an industry can do if we learn from some of the mistakes of the past. And it feels as though the industry, and the annuity industry in particular, is well positioned to do that.

Feldman: How can we do that?

Jack: I always laugh when people say you should make your products simple. I don’t believe that simple products are what consumers really need.  I think what consumers need is to have complex products made simple for them to understand. There is nothing of significant value that I can think of in the asset management industry that is simple to pull off. It’s not simple, for example, to pick the right stock if you’re a portfolio manager for a mutual fund company. But I think the insurance industry must have complexity because we have balance sheet obligations that we are making commitments to with respect to our consumers, of course.

The insurance business is complex. But the way that we talk about it and the way that we present it and the way that we illustrate it and the way that we report on it to the consumer, I think leave an awful lot of opportunity for improvement.

Paul Feldman started the website InsuranceNewsNet in 1999, followed by InsuranceNewsNet Magazine in 2008. Paul was a third-generation insurance agent before venturing into the media business. Paul won the 2012 Integrated Marketing Award (IMA) for Lead Gen Initiative for his Truth about Agent Recruiting video and was the runner-up for IMA's Marketer of the Year, a competition that includes consumer and B2B publishing companies. Find out more about Paul at www.paulfeldman.com.