[Editor's Note: Today's guest post is actually a combination of two submitted guest posts that were both very good so I wanted to run both of them. However, they were so similar and we had so many other great guest posts to run this quarter, that I decided to combine them. That makes today's post about twice as long as usual, but I think if you read through them, you will find the experience worthwhile in understanding the mindset of many professionals in the financial services industry.]
By Donovan J. Sanchez, ChFC®, CSLP®, CLU®, Guest Writer
Confessions of an Ex-Northwestern Mutual “Financial Advisor”
I graduated from Brigham Young University with a degree in English Teaching and minors in Spanish and Business Management. After graduation, my family and I accepted an opportunity with Teach for America and moved to Dallas, Texas, where I worked as a high school teacher serving at-risk youth.
I was naive about how expensive life is and soon found there were goals and life experiences that would be out of reach with my career choice. I was the sole breadwinner for our growing family and as I wrestled with financial concerns, I came across Dave Ramsey. I was intrigued by his no-nonsense approach to financial planning, the simplicity of his steps, and the almost religious intensity he uses to get listeners pumped up to take responsibility for their lives. I had one credit left on a canceled Audible account and I decided to purchase The Total Money Makeover.
Prior to reading Ramsey’s book, I knew basically nothing about finance, but soon my wife and I were working our way through Ramsey’s “Baby Steps.” Dave recommends that you work with a financial advisor, so we used his “Endorsed Local Provider” search to find someone we could trust. Our advisor helped us get life insurance and we opened Roth IRAs. Meeting with him was like storytime with grandpa—he was just a really nice guy.
In the meantime, I had become disenchanted with teaching and after a few opportunities that didn’t work out, my wife suggested that I reach out to our financial advisor to see if I might like his job. When I called him, he told me that I would love his line of work, and gave me a few companies to interview with.
How I Became a Northwestern Mutual Financial Advisor
After interviewing with a few firms, I decided to join Northwestern Mutual. Why? Because I liked the people there. It didn’t have anything to do with the planning philosophy or how they conducted business because . . . I didn’t know any better. I wasn’t financially sophisticated enough to know much about what I was getting into.
Misgivings About Whole Life Insurance
Something I did know, however, was that Northwestern Mutual was a BIG believer in whole life insurance (a.k.a. “permanent” life insurance). Under the tutelage of Dave Ramsey, I had some serious misgivings about whole life, but I also recognized my lack of financial knowledge in general, and so decided to suspend disbelief and see if I could learn something from Northwestern Mutual. Perhaps the bad things I had heard about whole life insurance weren’t true after all.
The Northwestern Mutual Interview Process
As part of the interview process, I was required to call people that I knew, tell them about the opportunity I was exploring, and see if they would be willing to provide me with referrals. In doing so, I called one of our doctor friends that we knew through church. He kindly accepted my request to meet with him.
During our conversation, he brought up the fact that he had met with a Northwestern Mutual advisor and hadn’t had the best experience. He felt the process was too salesy. He also revealed that he followed a blog called “The White Coat Investor,” and was doing a lot on his own. I didn’t end up asking him to refer me to anyone.
My Training with Northwestern Mutual
For my introductory training (which lasted about 3-weeks) I was told to gather a list of 200 individuals to call for scheduling appointments. We called the people on our list and scheduled as many meetings as we could with the ultimate goal of hitting “Pacesetter 40” (selling 40 insurance policies in the first six months in business).
Because many of my friends were resident physicians, I called on them to meet with me and my manager. Many of these friends purchased the company’s term life and disability insurance products. I was taught that Northwestern Mutual’s products were the best in the business.
My career as a “financial advisor” was off to a good start.
The White Coat Investor Blog
I didn’t forget my doctor friend who told me that he was following the White Coat Investor blog. In fact, because I had decided that serving medical professionals would be a good niche, I began following the blog myself. I purchased Dr. Dahle’s book and read it and referred to it often.
Initially, I felt irritated at Dr. Dahle’s antagonism of financial advisors like me. I felt belittled and degraded by the things that he wrote, in particular about Northwestern Mutual advisors (apparently stemming from an experience he had with a friend who sold him a whole life insurance policy). I felt defensive and wanted to justify what I was doing, but I also worried that perhaps I would become the “friend” that sold Dr. Dahle something that he didn’t actually want or need.
My Whole Life Insurance Sales Training
As time passed I became discouraged that so much of my training was focused on sales, insurance, and on using the right language to get people to buy our products. It seemed that we were constantly talking about insurance, but not as much about creating good plans for people.
Leadership in my area invited young advisors to join a regular call to learn how to be successful in the business and achieve a coveted company award. I attended many of these calls and learned the special language our local leader used when he was a young advisor to sell large amounts of whole life insurance. The training focused on saying the right things to trigger interest from the consumer, while waiting until the very end to reveal that the product was actually whole life insurance. In other trainings, I was taught to avoid saying “whole life insurance” and say “permanent life insurance” because it didn’t have the same stigma that “whole life insurance” did.
Because my career identity was tied up with the company, I wanted to believe that what I was doing was a good thing. So I paid for training from one of Northwestern Mutual’s best producers, hoping he could convince me of the value of permanent life insurance.
Unsurprisingly, what I actually purchased was more sales language training.
Making a Living: Whole Life Sales Quotas
Being a Northwestern Mutual financial advisor is no walk in the park. Most of the people who join the company end up leaving in a relatively short period of time. It frustrated me that managers recruited so heavily, but when I looked around there were very few seasoned advisors.
Because Northwestern Mutual financial advisors can sell non-Northwestern Mutual insurance products, we often used this as a way to persuade clients as to why we were recommending Northwestern Mutual in the first place. If we can offer everything, we reasoned, but choose to recommend Northwestern Mutual, that means that we are offering the best product out there. But I never heard advisors mention that we had high sales quotas for Northwestern Mutual products. In fact, if we didn’t sell enough Northwestern Mutual products we could be fined. One friend has been fined for years for not hitting the required thresholds.
As I was coming up on a year and a half with the company, I was no longer convinced that whole life insurance was a product worth selling to most people. In a few cases where a guaranteed death benefit is desirable, it’s a great solution. However, I found that advisors often wanted to tout secondary features instead of its true nature as an insurance product.
It was very hard to make a living selling term insurance. Additionally, a lot of my personal money was going to whole life insurance policies on each of my family members. When I joined the firm, we had been encouraged to buy the policies so that I could have the confidence to sell the product. There’s a weird tendency among advisors to buy everything they sell so that they can justify it to their clients. I happily canceled these policies just before leaving the firm.
It became uncomfortable to sit across from clients, knowing that the right thing for them to do was to stay the course and not make any purchases at that time. But if they didn’t buy something, I didn’t get paid. And that was hard to swallow.
It’s no secret that financial advisors who are paid on commissions have strong incentives to sell expensive products and come up with creative reasons why they make sense in your life. There’s some serious mental maneuvering that happens to justify the sale. I once heard an advisor say that it was better to sell a more expensive product to a client than a cheaper one because the most important thing for them (the client) was that you (the advisor) were still in business next year to continue to work with them.
That doesn’t sound like putting the client’s best interests first.
Is Northwestern Mutual a Good Company? The Business Is Made Up of Good People.
This article isn’t intended to vilify Northwestern Mutual financial advisors or any other advisor working with a similar company. There are certainly bad actors, as there are in any field, but most of those I interacted with were good people. I still cherish many of the relationships that I established while working at Northwestern Mutual. However, I do hope that this article helps you see how environments shape behavior.
People will do what it takes to feed their families and provide a great life for themselves and those that they love. Also, many advisors actually do believe that the expensive whole life policies that they sell are the best thing for their clients. I obviously don’t share this belief.
Coming to My Senses
I was taught that Northwestern Mutual’s products and planning philosophy were the best. My personal conclusions—many of them formed or inspired by White Coat Investor articles—suggest that there are better ways to plan and do business. I also learned that the way to determine which product is “best” for a physician is to analyze their unique situation and then make a selection from all available companies.
I knew that my time at Northwestern Mutual was coming to a close, and I eventually joined a fee-only firm that charges clients based on a percentage of assets under management. While an improvement to the commission compensation model, I soon found that charging based on assets under management creates a new set of problems.
This realization led me to form a financial planning firm based on a flat fee only compensation model.
A Story Worth Repeating
For avid readers of this blog, maybe this feels like old news. The White Coat Investor has been preaching from the mountaintop about the realities of whole life, commissions, and crafty advisors for years already. Perhaps this isn’t a story worth repeating anymore.
Sadly, I know that many young doctors continue to engage in financial planning relationships with the wrong type of advisor. I expect that there is still a long, hard fight left to be fought. But it’s not just to protect young doctors. It’s also about helping direct the next generation of financial advisors to environments where they can become the financial professionals that they strive to be, and avoid those environments that will exhaust, manipulate, and waste their talents.
These are my opinions, and this is my story.
By Anonymous Finance Profressional, Guest Writer
What Does Northwestern Mutual Do? Inside the Mind of an Insurance Company Selling Whole Life and Annuities
I work for a finance company whose main products are different types of annuities and whole life insurance products. Our company has actuaries, marketers, and salespeople. We do not have finance professionals.
Our business creates these financial products that we then market and sell to financial professionals, who in turn try to sell to their clients. Even in the annuity and whole life space, our products are very complex in how they work. I'm someone who works on the inside, and yet knows enough about personal finance that I’d never buy one of our products—even with a set percentage employee discount!
Whole Life ‘Scam'? Gulf Dividing DIYers and the Insurance Industry.
I thought your readers might appreciate the vast world of differences between how DIY investors think the finance and insurance industry works and what people in this industry at least tell themselves they are doing. The average DIY believes whole life insurance and annuities are scam products that almost only exist to fill the pockets of financial professionals. The average industry insider believes whole life insurance and annuities help guarantee income in retirement.
Helping the Average Joe?
I think it’s important to remind your readers that just about any company out there in a capitalistic society has one overall objective over anything else: make money/be profitable. Companies work very hard to create a culture around their brand and products. In order to create a positive culture, you need to create a theme that what you do really does help the average Joe.
If a human thinks they’re being helpful to others, they are more likely to value what they do. So when I see financial professionals come on the blog and defend annuities or whole life insurance, they really do believe it! They are often experienced, certified and trained to sell these products, and of course, they think they’re a good person — so they really do think they are helping.
Financial professionals think DIYers have no idea what they are doing. They believe the knowledge and education DIYers get by themselves online is inferior to what financial professionals have to go through — even if in reality it’s just a few formal hours of learning how to sell a product. Because it’s “formal” that makes it more legitimate, in their view.
“Doing Good” by Selling Whole Life Insurance to Financially Illiterate People
My company has a slogan that centers around the idea of helping people prepare for retirement with a guarantee of income. We make a promise of a guarantee of lifetime income, and it is a promise that is kept if you do everything that the contract says you need to do. Think about that. That’s a powerful statement to make—a guarantee—to people who are otherwise financially illiterate (which are most people).
We convince our own employees that we’re helping people who otherwise would have no clue what they are doing. The sales training, which I’ve witnessed, really ingrains this message. It also claims our products are complex. Our products are complex and so the intensive training just makes an individual all the more invested in getting others to understand the complexities. They really feel they are doing good by helping even a financial professional understand our products and how the products can “help” their clients.
Measuring Success by Premiums
As I’m in marketing, I am asked how marketing contributed to the business. And do you know what someone means when they ask that? They really mean “how much additional policy premium did you bring into the business that we wouldn’t have had if there hadn’t been a marketing campaign?” It’s a common term in business called ROI-return on investment. Never have I ever been asked “How many people did you make promises of lifetime income to?” or “How many people’s lives did we improve today?” Premium, premium, premium. It is the only outcome that measures success.
Research and Development
As any good business does, we do a lot of research and development. We have a key understanding of the market. More and more people are aware of their RMD tax bomb, and so we make products that play into this fear to get them to move their money into other areas that might protect them from taxes, while yes, glossing over the fee structure.
A recent survey we did found that 35% of people are worried that “RMDs will throw them into a higher tax bracket.” With the knowledge we have, and the wording of the question, we will now go create products and messages around those products that will communicate how our products will help them from getting hit with a huge tax bill because RMDs forced them into a higher marginal bracket.
Wining and Dining the “Customer”
While our immediate customer is financial planners, we know that our products are meant mostly for rich people ($1m+ in assets not including a house) who are between 50-70 years old. We have relationships with financial planners, and some, in turn, share other customer data with us. We wine and dine and talk to the financial planners who provide us the most business at least weekly.
For us, it’s all about building and keeping relationships up with financial planners. Marketing does the same to keep them engaged with the business, with the assumption that keeping them engaged passively influences their behavior to push our products as opposed to competitors’ products. That’s really no different than many other industries (including drug companies). [Editor's Note: Although to be fair, the “wining and dining” of doctors by drug companies is now severely limited both by law and by the sunshine rule/database.]
Marketing reaches out with trinkets/items marking their birthday or anniversary of the day they first sold a product of ours. We have a separate list of financial planners who have done at least a certain amount of business with us in the past year, and these planners get extra attention from us (think like if you are Vanguard Voyager select client or Delta Premium status member). We also keep track of planners who have done business with us in the past but not in the past year or half year, and set up marketing campaigns centered around a message of trying to win them back.
Marketing Spin Zone
Whenever we think annuities are getting a bad rap in the media (and we’re well aware of the reputation that is out there), I find it very interesting that the language I hear at our company is that what we need to do to fix this is to do a better job at “informing” or “educating” people on what annuities really are. That alone should tell you that our starting point for how to think about these products is nowhere near in the same universe that DIYers think about these products.
My company thinks we need to reshift how our products are talked about; they are NOT an alternative to the stock market. Instead, they are an alternative to fixed income. So the readers of this blog might ask how in the world they are possibly a good alternative to fixed income like a high-yield savings account at Ally? Well, my personal answer is I don’t know, I’d never buy them either!
Keep in mind that most of the general population in the United States is not well versed in financial planning — much less an even more complex topic such as annuities and whole life insurance! The next time you go into a store like Target or Costco, do you think their product placement is random? It’s not. Do you think it’s a coincidence that most people (though maybe not most who read this blog) buy more things at the store than they intended? The marketing in our society fundamentally plays with the brain to make us think we need something.
Protecting People from Themselves
![Northwestern Mutual "Advisor” Review [Fees, Whole Life & More] | White Coat Investor (10)](https://i0.wp.com/www.whitecoatinvestor.com/wp-content/uploads/2018/01/WCI-Course-Square-2-e1516211395313.png "Northwestern Mutual \"Advisor” Review [Fees, Whole Life & More] | White Coat Investor (10)")
Seeing Whole Life from the Industry's Point of View
Finally, you know how doctors can get irritated when a patient looks up your diagnosis (or self-diagnoses prior to a visit) on WebMD and based on that information, is absolutely convinced you’re wrong? Think about it this way….people in the financial space don’t like DIYers saying annuities and whole life are bad products or are products that basically steal money from people, and they feel DIYers are in no way qualified to make such a determination because they never went through the “sales” training they went through. I’m not at all saying they are right….I’m just telling you their point of view.
One reason it’s so hard to get the message out there about how terrible these products are is that you’re up against a massive amount of financial muscle and people in this community who have a completely different set of beliefs than you when it comes to these products. To be sure, keep speaking out against these products, but hopefully, this post has given some insight on how uphill a battle it is.
So why do I work here? Well, I need a job. I’ve only been in this industry for a few years, and my career before this latest gig was for other non-finance corporations and even in the non-profit sector. In fact, only a fourth of my career so far has been in finance and insurance. I do not have any conflicts of interest because I’m not promoting our products in any way. In fact, I’m telling you I don’t have any.
But I find it interesting to get others’ perspectives, and this post will no doubt infuriate some but I hope readers can read this eyes wide open and just realize the financial services industry does not think itself to be a scam. Most people working in it do not think they are scammers either. And we all know—those in finance and many at the WCI blog and forum—that financial literacy is lacking in this country. There are many different ways to address that illiteracy, and in a capitalistic society, the finance and insurance industry has found a profitable way to tackle a need that people want to address in order to fulfill a more stable, more secure and guaranteed, retirement.
What do you think? Do any of the “revelations” in this post surprise you? Why do you think so many doctors end up buying insurance products they don't need? Comment below!
[Editor's Note: The first half was written by Donovan J. Sanchez, ChFC®, CSLP®, CLU®, an ex-Northwestern Mutual financial advisor. Donovan now runs his own fee-only financial planning company at SkyviewPlanning.com. The second half is written anonymously. These articles were submitted and approved according to our Guest Post Policy. We have no financial relationship with either author, their current firms, or their past firms.]
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