Insurer pushes investments

Northwestern Mutual Life Insurance Co. has always provided life insurance products, but it wasn’t until recently that the Milwaukee-based company started pushing investment products and services to hone its competitive edge.

That Northwestern is making a push in the investment arena isn’t a surprise. Recent studies have indicated that insurance companies are positioned to corner the financial services market.

The studies maintain that the risk-based products sold by insurance companies will be-come more popular with aging baby boomers and that those companies can leverage that popularity.

Many industry experts disagree with the studies.

They say that insurance companies still primarily offer proprietary products. That gives brokerage houses with open platforms and independent advisers an edge because they are perceived as offering more objective advice, they contend.

For its part, Northwestern does offer investment products from other companies. But it’s the products from the company’s subsidiaries – Frank Russell Co. in Tacoma, Wash., and Mason Street Advisors LLC in Milwaukee – that are stressed by Northwestern’s financial representatives.

Northwestern, however, contends it isn’t hampered by its proprietary products. Not surprisingly, its executives say that’s because its products are good.

But what also makes Northwestern attractive to investors goes to the quality of advice – the exact thing critics say is compromised by proprietary products provided by the company’s financial representatives, says Chuck Robinson, a senior vice president at Northwestern.

“We emphasize that their value to the client is really being a relationship manager, or asset gatherer, as opposed to being an asset manager,” Mr. Robinson says.

“We believe asset managers end up being little more than mutual fund jockeys when it’s all said and done.”

holistic approach

That’s a startling statement considering so many financial advisers spend so much time managing assets, says Nick Murray, a financial adviser in Mattituck, N.Y., who has written seven books for financial services professionals.

It’s an activity Mr. Murray doesn’t think they should be engaged in.

Too many advisers are “squandering 50%” or more of their time managing managers, Mr. Murray wrote in a March trade magazine column.

Mr. Murray added, “Wouldn’t it be ironic if it’s the life insurance industry – and not the investment professionals at all – who’s figured that out?”

He didn’t say which insurance companies were leading the charge, but companies such as AXA Financial Inc. in New York and Securian Financial Group Inc., the parent of Minnesota Life Insurance Co. in St. Paul, are expanding their investment services and products.

Northwestern’s strategy is particularly ambitious.

Mr. Robinson says the company would eventually like to have $130 million under management in its investment products. It currently has $27.2 billion, he says.

To get there, Northwestern has devised a plan calling for a holistic approach to delivering both insurance and investment services, Mr. Robinson says. It was presented to the company’s trustees in September, he says.

To deliver those services effectively, Northwestern has divided the market into five segments: the retail market, emerging-affluent market, established-affluent market, entry-level high-net-worth market and core high-net-worth market.

Each market is approached differently, Mr. Robinson says.

At the retail level, which Northwestern defines as investors with $100,000 or less in investible assets, it’s more difficult to make money because there aren’t as many assets.

Mr. Robinson, however, says it’s important for Northwestern to service those customers because they may become tomorrow’s emerging-affluent or high-net-worth investors.

As a result, Northwestern’s 5,000 financial representatives help clients by developing a financial plan with the aid of proprietary software that automates the process.

The idea is that it’s possible to deliver an expert level of planning through a system that chooses from preselected packages of mutual funds.

As the needs of Northwestern’s clients become more complicated and their assets grow, the financial reps refer them to one of 155 specialists within Northwestern who can provide the client with more personalized services, Mr. Robinson says.

Northwestern began building its specialist network in the early 1990s and expects to double the number of specialists it has within five years, Mr. Robinson says.

Becoming a specialist at Northwestern is especially attractive to independent registered advisers and brokers because they will automatically be plugged into a network that provides them with referrals and support, he says.

Harold Evensky, chairman of Evensky Brown & Katz in Coral Gables, Fla., disagrees.

Mr. Evensky, whose firm has $250 million under management, says most financial advisers, and even brokers, would be leery of going to work for a company that has its roots in insurance. “They are a high-quality firm, but I can’t imagine what the attraction would be.”

Geoff Bobroff, a mutual fund industry consultant in East Greenwich, R.I., says Northwestern has carved out a workable strategy. That its financial representatives are focused on relationship management and not asset management is a particularly attractive story, he says.

But whether Northwestern will be able to rake in the amount of assets it hopes to gather is debatable, says Matt Schott, a senior analyst with the TowerGroup, a Needham, Mass., consulting firm.

That’s because it will probably take a long time for Northwestern’s financial representatives to learn to manage relationships as opposed to just selling products, Mr. Schott says.

It’s a lesson many brokers are still learning, even though many others realized long before Northwestern’s emergence that they needed to be more relationship-oriented, he says.