We recently read the conflict of interest document released by Northwestern Mutual (NWM), and we were surprised, to say the least, and we thought you may be interested in reading it as well.
To read the 8-page piece documenting the massive conflict of interest problems NWM advisors have, click on the following link: http://www.uploadedimages.net/content/PDFs/Northwestern.Conflict.Disclosure.pdf
What’s the big deal about NWM’s disclosure document?
It’s really a groundbreaking document of the kind I’ve never seen before. What NWM has done in the document is literally disclose not only conflicts of interest, but NWM has listed in the document sales tactics that put them at odds with the client’s best interest.
NWM admits to the following in its 8-page piece (this is only a few from the list):
- Advisors primarily recommend NWM to meet production requirements.
- NWM incentives advisors to sell the highest commission products (such as pushing whole life instead of term insurance).
- There is a conflict with production requirements to 1) meet cash bonuses, 2) qualify for health insurance and retirement benefits, 3) qualify for free trips, 4) qualify for expense allowances. These additional incentives create a material conflict of interest in that they further incentivize their advisors to recommend and sell NWM products instead of products of other carriers.
- That they are prohibited from selling Fixed Indexed Annuities (FIAs) (a product that has no risk of loss and locks in investment gains every year).
Again, these admissions are absolutely stunning!
Who should make admissions about conflicts of interest to clients?
- All “career” system advisors (Advisors with Mass Mutual, Thrivent, Prudential, Met Life, NY Life, National Life, Guardian, State Farm, etc.). These advisors have many of the same conflicts NWM has.
- Anyone who works through Broker Dealers (B/Ds)? This one is the much more interesting question. Most B/Ds put some level of restrictions on advisors (many of which are not disclosed to clients).
Working with independent advisors
This glimpse into the world of NWM just reinforces the concept that consumers should seek out and work ONLY with “independent” advisors.
Independent advisors have the choice to recommend whatever is best for their clients to help them grow wealth for retirement. Independent advisors do NOT have to worry about production requirements or limitations put upon them like NWM advisors and many other firms in the industry. They do NOT have to worry about giving out an 8-page document listing their conflicts and biases.
If you are NOT working with an independent advisor (or don’t know if you are) and would like a review of your situation to make sure you have in place wealth-building tools that are in your best interest instead of the advisor’s best interest, contact us and we can set up a call or schedule a call with one of our advisors. We would be happy to review your situation and give you an opinion from an “independent” point of view.