Northwestern Mutual vs. Other Providers

This posting pertains to the advantages of staying with Northwestern Mutual vs. moving to another financial services organization.

The fact is that we have never conducted a comprehensive search of all the available options to know exactly how good or bad NML is vs. the competition. My father did this 30 years ago to his credit, and that is how he ended up with NML. But a lot has changed in 30 years, and perhaps it should be done again.

We do have some idea of how NML ranks, as well as some opinions. Obviously, as far as whole life insurance is concerned, NML is second to none, particularly with the flexibility of its ECL product. NML's Advanced Planning department is an excellent resource. Its culture of well educated professionals is very valuable. Our branch office in particular is a great work environment, with knowledgeable staff.

However, there are many drawbacks as well, that I have tended to put up with. I realize that perhaps it is not necessary to put up with them; I believe there is probably an other organization out there that can provide a better platform overall, and maybe fall short slightly on the insurance side, but that this shortcoming will be made up for by improvements in other areas.

The drawbacks are as follows, in relative order of importance to me:

1) While NML's insurance is of the utmost quality, its investment program seems to be two steps behind. Its new signature choice product removes all flexibility that I as an advisor have to make recommendations. The fact that we are not allowed to add specialty funds is borderline insulting to our own education. The fact that we are not allowed to increase international exposure is disturbing. Overall, NML sees investments as purely a commodity, and WE are the value added. It is basically a package of mutual funds; I believe it is overpriced, and while it is certainly worth it for the investor because he gets MY input on it, NML takes TOO MUCH of the cost for itself- that money should go to us, and I should be able to lower it if I think I am overcharging the investor.

Its lack of exposure to alternative investments is disturbing. While the buzz about hedge funds these days is probably overblown and quite annoying in general, I do believe that, as everyone starts to do the "asset allocation" model, it will indeed become commoditized and outdated. Furthermore, the "buttonwood" effect (the increasing correlation of the financial markets which is taking away the benefit of diversification) leads me to believe that new and better ways of investing need to be found. NML seems to "stick to the old way" of doing things. I would like to be with an organization that at least tries to innovate, albeit cautiously and with an eye on what is already tried and true.

2) NML's lack of support and low compensation with regard to its investment products is upsetting. Their refusal to keep me at a 65% payout after the transition from my father's accounts is illogical, disruptive to my business, and shortsighted on NML's part. There is no reason for them to have done this. Certainly, I am upset about the lost revenue; but I would be able to tolerate that if I thought there was a good reason for it. For some reason, NML does not see the folly in this as a business policy; it does not bolster my faith in their judgment to make other business decisions.

Furthermore, in general, I find NML's lack of expense allowance and even partial salary to be very crass and outdated. NML seems to pay huge producers quite well; it also seems to be a good place for people that do very little investment business and a lot of insurance. It does NOT seem good for someone who does moderate investment business. The fact that Oppenheimer would see fit to give Ozi 65% to start, while they are keeping me at 35%, makes no sense to me. NMIS pays too little, and they are not doing enough to earn their 65%. In fact, NMIS seems to do LESS than the average brokerage firm when it comes to good procedures, innovative products, etc.

3) I do not like NML's unwillingness to deal with international accounts. From what I have seen, Merrill Lynch, Morgan Stanley, and Oppenheimer all have no problem with international applications. Moreover, from the insurance side, I have found that other companies have greater flexibility with international clients. I find NML's stance on this to be annoying and insulting. Furthermore, I think that in the coming years, as the world becomes more globalized, and as other countries catch up to the US, it may be increasingly desirable to be able to have overseas clients, or even to relocate. This would be completely impossible with NML. Why should I stand for this?

Investor services are lacking compared to other organizations, but I'm not sure how big a problem this is. Probably not such a big deal. Our technology should be better. Not all clients need or want it, but a better online system would be nice. I'm not sure if this exists elsewhere. I know it does with the discount brokerages, but perhaps not with full-service firms. Must investigate this.

4) Another service that would be nice to have is banking services, so that everything can be integrated. However, I'm not sure how necessary this is, as not many people would feel compelled to move ALL their banking to us. People seem fine keeping their advisory services separate from their banking.

5) I would like to be able to be paid as an advisor, not through sales. Furthermore, there is an overreliance on insurance sales, particularly on NML insurance. I have never pushed NML insurance on my clients, but I have suffered as a result.

The NML model would work better if a) they lowered the prices on their term, di, and ltc insurance by a little bit, so that we could feel comfortable selling it in all cases. In my opinion, it is currently too high, and therefore, I have to go outside half the time. This disrupts the streamlined services I'd be able to provide if I was NML only. It would also work better if I had a better Broker Dealer.