Emotionally Overwhelmed

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Hi everyone, I'm Sterling Shea with Barron's, and I want to thank you for joining in for another episode of The Way Forward. Since the beginning of the pandemic, we've been saying that this is an outstanding time for advisors across the industry in every channel and across the country to take a step back and really think about their business and their strategy looking forward and find opportunities to refine their processes, refine that business strategy and value proposition to make sure they're well set up for the future. And that they're adding as meaningful value as possible to, for their clients. It's our belief looking forward that the pandemic and the complexity of the capital markets, uh, as we move forward are going to be such that it's going to put a lot of money into motion, which will make for an amazing opportunity for a smaller group of forward-thinking advisors. Well, we have two guests in the program today that I think can lend unique perspective and very valuable insight on how to do that. Aditi Gokhale and Tim Gerand are the Chief Commercial Officer and Chief Distribution Officer, respectively, of Northwestern Mutual. And I would suggest to you that, uh, what you think you might know about Northwestern Mutual's wealth business, uh, is probably incomplete, uh, as I know that they've been putting a lot of effort, time, and energy into thinking about what the evolution of their strategy might be. So we're simply delighted to have them here with us today. Aditi, Tim, thanks so much for taking time to be on the show.

Great, great to be with you.

Great to be with you, Sterling.

Let's start off talking about challenges. When you think about the last 7 months since the pandemic started, what would you say have been some of the challenges that your organization, that your advisors have faced, and what initiatives or lessons have come from those challenges and your response? Aditi, would you start? Do you want to start?

Sure, sure, absolutely. So we know that this has been an extremely difficult time for everyone, and our advisors have stepped up significantly to respond. And I'm proud to say that we transitioned back in March in a virtual environment, both from the home office and our advisor perspective. It was flawless, Sterling. So when the pandemic began, thousands of our advisors jumped in. They rallied their teams and their peers, virtually, and they proactively started to reach out to their clients individually by phone. And we know that our clients need us during this time, and we're here for them. This was the challenge. The challenge was not being able to connect in person. Because you know, Sterling, this is a relationship-based business, right? So that to us was one of the biggest challenges that we had. But we took steps very early on in making sure that we were supporting our advisors first and foremost, who then needed to support their clients. So let me give you a few things that we did very early on, and I think we were one of the first in the industry. We moved with things like rent support, incentives aimed at making sure our newest advisors could stay productive, and more. We were one of the first companies to quickly support our field in this way, and it turned out it was the right approach. They needed our help, and in turn, they were able to do what matters most in this environment, which is to support their clients. We also decided in this virtual environment that it was important to increase our communication because we knew that with social distancing and the pandemic, we all knew that the markets were going crazy. And so we significantly increased our communication with our advisors. And in fact, we also increased our communication with our clients. And also we were very transparent with them in the way we communicated. So we had a lot of virtual webinars, town halls, and many of that. So, you know, Tim, do you want to add some more specific initiatives that we took?

Yeah, I would be happy to. And Sterling, a great question, and I'll just echo what Aditi said. You know, obviously, there's been all kinds of economic turmoil, ultra-low rates, lots of volatility in the markets, but I would underscore what Aditi said. This is a relationship business. So I think the challenge of being remote from each other is real. Our advisors weren't able to be with their clients and in some cases with their teams. We weren't able to be with our advisors, which is something we really miss. That's a really important part of our business. And so we had to pivot to go virtually remote overnight. And I think fortunately for us as a company, we're a company for all seasons and we came into this environment incredibly financially strong. And I give credit to John Schlipsky and our leadership team who said from the beginning, we were built for this and we're going to be in a position to play offense. So while we would have never wished for this kind of environment, you know, we know this is an environment where we really thrive. And I want to go back to something that DT said that, you know, right after I would say prioritizing health and safety, right, we needed to make sure we were operating the business in such a way that we were taking care of people given just the risks of the pandemic. So that meant going virtually remote. I mean, virtually overnight. I still remember the weekend in March when we decided we weren't coming back to the home office. But the other thing I remember about that is John Slivsky came to us and said, after health and safety, the number one most important thing is we have to make sure our advisors can continue to do business. And so Aditi alluded to the field stimulus programs that we put in place. And I think the dollars, for example, the rent support we provided, of course, that was important financially to them, but I think even more important to them, it sent a message that we were open for business and we were there to serve. And ultimately, as a mutual company, we exist to serve our policyowners and clients. And so I think that gave them confidence that we were going to be open for business. It sent a message that we were going to do whatever it took to keep them active and up in front of their clients. Thank goodness, of course, that all those BCP plans worked and we were able to actually operate remotely and digitally. So great for all of the digital investments we've made. And I think the points Aditi made around communication and flexibility are just table stakes in this environment. From a communication standpoint, demands transparency and flexibility, things like premium payment, for our clients or underwriting. We just had to do business differently. And fortunately, we were able to pivot quickly to do that. And what we've seen is really good business results. We've had incredible growth across the board on life insurance, new cash, net cash flow on the wealth management side, and even new clients, which was a bit of a surprise to us. You would think a lot of what was going on here was, you know, going back to existing clients. And we've seen quite the contrary, especially in recent months, a huge increase in advisors bringing in new business, which has been really encouraging.

That's terrific, and it's, and it's no surprise. I know that you have quite a team there that was able to manage that, that pivot to the virtual engagement. A question I have for you both, though, is I'm sure that the process illuminated some areas where you need to pivot the strategy a bit, and I'd like to hear where you did that. Were some examples of strategies that you changed or pivoted on to strengthen the business as a whole? And can you put into context as well, I know that in your business, the strategy strategy has been evolving over the course of the last few years. So in answering that question, give us a little sense of where it was, where you changed, and where is it going?

So first and foremost, I think, Sterling, the most important part is that we actually, as Tim mentioned before, Northwestern Mutual is, you know, we were sort of not expecting the pandemic to happen, but one of the things we do as a company is stress test every year. And so we are strong, ready, and prepared. So what's interesting is we actually did not pivot our company strategy, our go-to-market strategy, or pull us— we didn't do anything to pull us off course. What we did do is, because we wanted to make sure that we were true to our go-to-market, and as I've spoken to you before, Sterling, our go-to-market strategy is all about starting with a trusted advisor. It's with a personalized plan. It's the integration of our insurance and investments. Which we believe is truly unique and not many people are able to offer that sort of closed-loop ecosystem of insurance and investments, our 24/7 servicing, and our dynamic digital ecosystem. So what we did, though, is we wanted to make sure that we were investing and accelerating our investments because of our financial strength in specific initiatives rather than changing course. So for example, we are introducing a proprietary financial planning platform for our advisors, So we continue to increase our investments to making sure that it's truly differentiated in the industry. What's happened is the adoption of that platform has doubled since COVID started. So that's one. The other thing that we did is when most companies were selling back in March, our investment team that manages the general account actually went in and bought, right? So we were really trying to make sure that we were taking advantage of the strategy that we believe in, our recruiting, both from a home office perspective and advisor perspective, has seen record years, a record year. So I think those are some of the examples. I don't know, Tim, do you want to add a little bit more?

Yeah, sure. I, you know, I think fundamentally, Sterling, I echo Aditi's thought there. We didn't change our strategy, and I think that's an incredible luxury for us as a company because our go-to-market strategy of providing financial security through a trusted advisor didn't change. That said, you know, as I mentioned before, we really were looking at this as an opportunity to pivot, to use your word, or to play offense. And that is because we know a crisis accelerates change, and that means it's gonna accelerate change. You know, we've seen it politically, we've seen it economically, socially, and it also changes expectations and behaviors. So the acceleration of digital tools, and when we think about wrapping like the digital experience around what our advisors can provide, so you think of human and digital together, We view this as an opportunity to accelerate our investment in a better client experience and in a better advisor experience. And we, you know, we think fundamentally the future is going to be won by companies that can create great experiences. And so we've continued to invest and play offense pretty aggressively in improving both of those. And just a few things that I point out, you know, you and I have talked before, Sterling, about the important opportunity around retirement income distribution. And we think we have a really unique offering there because of the opportunity to bring together insurance and investments. So insurance, guaranteed income through annuities, and investments for spend-down, we know that that delivers better outcomes for clients. It can provide higher retirement income, better legacy values, and higher probability of success. And so this is an opportunity for us to continue to double down on that investment 'Cause as you said, I think a lot of the folks out there probably don't think about Northwestern Mutual that way, but this is a place where we know we have something that's gonna resonate with clients. We know we can provide them better outcomes. So we're trying to use this as an opportunity to move there more aggressively. The, the other thing that I would say along the same lines, I talk about adoption of digital tools. Sometimes advisors can be reluctant to try new things. In this environment, everybody has to try new things. So our advisors and our clients are becoming much more conditioned to use the kinds of digital tools that we think are gonna be really important to providing a differentiated experience going forward.

One other thing, just back to what Tim mentioned, the strategy is solid. What we did, which I believe most other companies haven't, is we decided to accelerate some of our investments. You asked a question about specific initiatives. In addition to the retirement income distribution, we have launched a national training program. Sterling, you and I have talked offline about the fact that we are also launching a private client group for our most sophisticated practices that have continued to service high-net-worth clients. So, you know, in between January and now, we've got these major things that we decided to sort of double down from an investment perspective.

I love hearing about the approach to strategy and digging in deeper in this notion of kind of doubling down during a period when others might be playing defense to play offense. But even if you have a great plan and you have a great strategy, you still have to execute. One of the areas that I've been hearing about from a lot of other, you know, peers of yours at other firms and even advisors at the team level is the great execution is going to depend on a great culture. And cultures, you know, driving a great culture is a little more complicated in the virtual environment, let's say. Can you give us a few thoughts on, you know, how you both have tried to uphold the culture that you've had, maybe ways that you've adapted your leadership style in regards to perpetuating culture in the work-from-home environment?

I really appreciate you calling out culture because, you know, you can talk about strategy and all of these things, but if you don't have great people and you're not engaging your teams, and I think that's what culture is all about, you're not going to be able to deliver. And interestingly, when we've had, you know, our board of trustees in or when I've been visiting with the rating agencies, they'll look at our results compared to what's happening at other places and they'll say, like, how did you do it? And, you know, of course, strategy is important, our business fundamentals and how strong the company is, that's all really important. But I think culture is really at the heart of our outperformance this year. And, you know, I'd mention that in a couple of ways that I think are really unique for us. One is we are a mutual company, so we are owned by our policyowners. So we don't have a conflict between shareholders and clients. And we have an exclusive advisor distribution system And we are totally aligned with that distribution system around providing maximum value to our clients and policyowners. So we talk about the roots and wings or this sort of family feel we have at Northwestern Mutual. You know, I've been here for almost 20 years and I can tell you that's real. And it pays huge dividends now because we had to pivot. Like, we had to figure so many different things out— how to communicate, how to engage with clients, how to work remotely. And we had the advantage of partnering really closely with our very best advisors through field committees or study groups or what we would call co-creation or ad hoc teams. So we were able to figure this stuff out together in a way that maximizes value for our policyowners. And I think, you know, compared to companies that have lots of other go-to-market strategies or distribution channels, you know, I think the relationship we have with our advisors really is unique and that has been a huge strength. The other thing that I would add that I think is a unique characteristic of our advisors, and I know you've met some of them, um, is they have this incredible combination of being high performers, right? They're competitive. They want to win. It's important to them where the strongest company, best product value, all of that stuff. But they also are, um, incredibly generous in working with each other to help other people succeed. And we have seen, especially through the pandemic in this remote environment, the way our advisors have reached out and helped each other, whether that's through informal study groups, whether that's through sharing best practices with us through digital training and otherwise, to make sure that the things they're doing in the market right now are shared and other people benefit from those. And I think that abundance mindset of our advisors really stands out. I'm really grateful for it because it not only helps them succeed, but it just helps us be stronger as an organization. And it, and I think one of the questions we'll have is like, how do we keep that going in this remote environment where we just don't get to be together as much? But I'd say so far so good, but we've really had to work at it. That's, that's great.

Aditi, anything to add on, on culture?

Yeah, I mean, you know, Tim pretty much did an amazing job about the culture. And, you know, for somebody who started a little bit later than Tim at Northwestern Mutual, I can tell you personally, it is the culture of the company, whether it's the home office or the advisors, that truly attracted me to the company. You know, one of the other cultural moments that we have is this— we have an annual meeting every year. And we have not missed— we've only missed one annual meeting, and that's during World War II, Sterling. And so we were determined because it is an extremely important cultural moment, and we were determined as a company with our field to make that happen. And so we actually introduced our first-ever annual meeting with over 15,000 advisors and teams and staff attending it. And we got really, really rave reviews. So we were very happy that we were able to work with our field members to make that happen too.

And Sterling, I'll just say, as good as it was, we're really looking forward to the day when we can get all of our advisors and field leaders back to Milwaukee. We have a lot of fun when we're together, but it was an amazing pivot to pull that off. And so, Aditi's right on there.

Well, so yeah, my takeaways on what you're saying here is you got to communicate frequently and clearly and continue the things in whatever format that it needs to be that really matter to the people. I want to shift gears a little bit. If the hypothesis is that the decade to come, from a capital markets perspective, let's say that it's higher volatility, greater uncertainty, and lower returns across all asset classes than compared to the last decade. Pretty safe assumption, although you never know. But if that happens, it's our belief that it's going to expose mediocrity in the business and again, put a lot of money in at play. How important is it for advisors to differentiate themselves and what are some of the ways that they should think about doing that? And I want you to answer that based on your experience and wisdom for all advisors, not just from the lens that you have working with the advisors at Northwestern.

So here's the thing. I completely agree with you that where the industry is going over the next decade it's moving to a place where I believe long-term the value is going to be around advice and guidance because everything else is going to be kind of table stakes or commoditized from a services perspective. So really the true value, and this is where I know, you know, you want me to talk about all advisors, but I think this was the big aha for me too, is where our advisors really drive that value. And that value is driven through guidance, but it starts with a financial plan. So, so I think the guidance and the perspectives is what of, of an advisor is what people are gonna pay for is, is what I believe. Tim, do you wanna add anything?

I, I think that's exactly right. Where advisors really sort of earn their money is in differentiating themselves by providing great advice and great value. And in a lot of ways, Sterling, I think it's not just what advisors are doing now, but it's what have they been doing with their clients coming into the crisis. So we believe that financial security's best provided by a trusted advisor in a holistic integrated plan. And so I think for advisors at this point in time, time, obviously frequency of communication, empathy and connection, depth of relationship. Those are things that I think all great advisors at Northwestern Mutual or other places excel. But I think to be there and be proactive in this time when emotions might get the best of your clients, whether that's fear or anxiety or whatever, and what our advisors have found to be really effective is taking them back to the plan, providing that broader perspective of time horizon. Why are they doing what they did? What were their goals? Why did they make the decisions they made before? And one of the things that our advisors have found to be especially helpful is, as we talk about our integrated approach to financial planning, they've been able to remind people about the decisions they've made with what you might consider safe dollars. So for example, risk protection or non-correlated assets. So we have permanent life insurance that has a cash value component to it that goes up in value every single month. So at the peak of the market uncertainty in March and April, our advisors could sit down with their clients and say, hey, look, here's how your overall portfolio is going. This is what's happening with these assets, and this is why we made them part of your plan. Same thing is true for what we call our portfolio deferred income annuity, which is an income annuity that's tied to our general account. And again, other advisors will have other products that they use, but these are non-correlated, safe dollar assets that our advisors could go back and remind their clients about why they did what they did. And what we've seen is that had a couple of consequences for the clients. Number one, it reminded them of the incredible value of these products. And we've seen it in our sales results this year. They've added more. But the other thing that's maybe just as important is the psychological benefit to clients that gives them confidence to do what they should be doing in this market, which generally is like reminder that they're in it for the long term, staying invested, dollar-cost averaging, tax-loss harvesting, all those things that are hard to do if you're panicked. And I think the trusted advice from an advisor can help. And then The last thing that I would say that I think is gonna be a more durable trend, Sterling, we talk about advisor and digital together. Clearly digital adoption and digital savvy, if you will, for advisors is gonna be critical. They're gonna have to be able to operate in a world where clients have an expectation of engaging both in person and remotely or digitally. That's a trend that's here to stay. And I think the good news is our advisors who are engaging that way now are finding they can be successful. They can actually be more productive because they can keep more meetings And so I think it will give them an opportunity to think differently about how they provide service and support.

Just to the last point that Tim mentioned, right? I mean, there is a differentiation aspect which Tim and I talked about, whether it's advice, perspective, guidance with a holistic financial plan. But I think the industry in general, this is sort of the— I don't like to call it the new normal, it's the new reality. But it creates a tremendous opportunity for advisors to sort of have a national reach, right? You don't have to now meet somebody one-on-one in New York or wherever, you can have a national landscape to prospect. And so, one has to start thinking about it that way, enabling good digital tools to be able to support and service our clients.

Yeah, that was the next question I was gonna ask. And your point about geography becoming irrelevant is a huge game changer for wealth management.

Yeah, absolutely.

If you project forward, say 5 years, let's call the the COVID the strange year of COVID as a distant memory, you know, what changes in the way advisors do business will never, will be here forever, you know, what will never go back to the way it was before. Do you have any thoughts on what might be hallmarks of a wealth management business that will be forever altered by the, by the period we're in now?

I think there are 3 things which I feel is going to be altered. I don't know about the forever, but at least for a long period of time. I think the way we work and the way we interact with clients, our advisors interact with clients, as I mentioned, is going to change. The more advisors and clients adopt digital capabilities, and that's not just in the wealth business, it's across multiple industries, I think people are going to just start to feel comfortable with technology, and there's going to be a new level of expectation in terms of how do we service and connect with our clients based on this sort of new reality, right? So, one has to be able to adopt to these changes because consumers expect it, and then figure out what is their value on top of what is expected. That's number one. And in that, I think there are certain things that are going to get commoditized. And, you know, we're seeing pricing pressure in the industry, and I think that's going to continue to happen. So that's the second thing. But the third thing I would think is back to the— what are the different opportunities? Now you don't have to have the one-on-one meetings. That creates opportunities for advisors across geographies, which earlier was a hurdle. So one has to start thinking about how do I expand my business? How do I start to do what many of our advisors do, which I do believe is very unique to Northwestern Mutual, it's joint work, right? So you can start to set up practices and grow practices because you really don't have any guardrails around geography anymore. So that to me creates a tremendous scope for growth as far as business is concerned.

Yeah, Sterling, just to add onto that, and I think, you know, I won't argue with your premise about what the future looks like for capital markets, but I think if your premise is true or close to true, you know, getting back to the kinds of advice that advise, like that winning advisors provide. And I, and by the way, I do believe with your premise that this environment is one, is one of differentiation, meaning you're going to have a smaller number of advisors and firms that are gaining an increasing share of business because they're able to bring together a more relevant, more impactful experience for their clients than others. And so I think you'll see those firms continue to win. I mentioned before, I think client experience here is key, and I do think it's going to be a combination of human and digital. So it's advisors who can bring together the best of both. And when you think about more things coming sort of digitally, things that might otherwise be commoditized, to use that word, the differentiation from the advisor is really how they provide guidance and coaching. So it's almost like behavioral advice. And I think the very best advisors, of course, that you work with, like you see that today. But I think if you're talking about an environment of lower returns, Clients are going to have to save more. So you think about the integrated plan, advisors who can really influence the behaviors and choices that our clients make, that's really where they're going to provide differentiated value. I think clearly there's going to be a higher frequency of contact. So you talk about the service model and the expectation for touches from clients. And I think, again, that will be a combination of digital and in-person touches, if you will. And then the last thing that I would say is that I think there's something going on around talent that's going to be really important. As important as digital is, and we all agree it is, there's such a differentiator in the human experience when you have a knowledgeable advisor who can really make those meaningful connections. And I had an advisor who told me one of the things that he observed from his team is there was a real difference between the people who stepped up and excelled in this environment and people on his team who he thought were pretty good, but like were not quite as good in operating. And so I think there's like a differentiation there for talent. And so I think for advisor teams that it can attract great people, um, That's what it's going to take to grow and be successful. And you know, when I think about our recruiting model and how we brought people into the business, I'm incredibly bullish on the future of the advisor career. I think we will recruit close to 3,000 new advisors this year, and our best advisors and teams are always on the lookout, like scouting for new talent. I think the ability to think about talent in combination with what we talked about before remotely, the way teams look and operate is probably going to be different because you don't have to be in the same building to be on the same team. So, I think that's coming too, but I think there's a big talent component here that is still to be sorted out. And I think the winning firms are going to be the ones who can figure that out.

Well, you make a great point. And I should clarify on my premise. If the decade to come is characterized in the capital markets by lower returns, higher volatility, and greater uncertainty, it's quite possible it might be the exact opposite. But if you as an advisor prepare yourself for lower returns, higher volatility, and greater uncertainty, Your business will do just fine if the opposite happens. But Aditi and Tim, I want to wrap up with kind of a signature element to our conversations on the way forward. I'm wondering if we can sign off by both of you offering a single actionable idea to the advisors that might be listening in, something that they can, they can take away and put into action. Tim, do you want to go first?

I would be happy to. And if it's okay, I'm going to try to do two real quick ones. The first one I would say is bringing in new clients. This is a great, great environment. You talked about upfront money in motion. Your best clients are your best advocates to help you grow your business, and our best advisors are great prospectors. They're always getting in front of new people, and even in this environment, we've seen being willing to seek out and go out and get new business is huge. And I think that's again going to be characteristic of these winning firms. It's not just going to be growth of existing assets with existing clients, it's going to be bringing in new clients on a consistent and regular basis. The last thing I would say, just to add on to my to my prior comment about talent. Downturns are a great opportunity to add talent. I think the very best companies add talent when times are tough because great people are available. So I think for advisors who have an opportunity to think about what's the makeup of their team and what's it gonna take for them to get to the next level, I think this is a great time to be in the market for talent.

Excellent. Aditi, your turn.

Sure, so I'm gonna take a little bit of a different angle to this. The single actionable idea that, again, most of our— many of our best advisors have spoken to me about this. It's critical for advisors to understand that right now both fact and emotion matters. Sterling, we did a survey with our clients, and almost 60% of our clients said they have never been as emotionally overwhelmed and anxious as they are right now. And this is across different segments of our clients. So really understanding what the emotional needs are of our clients, building a plan, and then working through that plan is, I think, probably what has been most successful. And the ones that are most successful are the ones that are actually growing their businesses double-digit, triple-digit with this formula. So, I think that to me is really something that our advisors are doing well. And I think that's something that we've got to think about even over the next 2, 3, 4 years, as we get through this pandemic and, and this low interest rate environment.

Well, Aditi and Tim, you've given us a lot to think about and some great ideas. I want to thank you both so much for joining us on the show today.

Thanks, Sterling. This was fun. Thank you.

Yeah, thanks a lot, Sterling. A real pleasure to be with you.

And I want to thank all of you for listening in as well. We'll be back next week with another newsletter and another episode of The Way Forward.

This podcast was brought to you by Wells Fargo Advisors. Looking for a firm your clients can't outgrow? Wells Fargo Advisors offers financial advisors full balance sheet solutions with wealth planning, investment products, banking, and lending that meet the needs of affluent to ultra-high net worth clients. Build your practice your way and on your schedule with independent and employee model options designed to meet your needs today and tomorrow. Learn more at joinwfadvisors.com.