Northwestern Mutual Admits to Material Conflicts of Interest
When you read the document that Northwestern Mutual (NWM) just put out, your jaw is going to hit the floor. To read the 8-page piece documenting the massive conflict of interest problems NWM advisors have, click on the following link:
What is the 8-page download? Ironically, it’s NWM’s attempt to help its CFP® advisors comply with the new CFP® conflict of interest disclosure rules. It’s a guidance document that NWM advisors can use with clients that discloses their conflicts of interest. It’s stunning.
Bad Advisors: How to Identify Them; How to Avoid Them
I have been warning consumers about the conflicts of interest of firms like NWM for years. My Bad Advisors book has multiple examples of just the kind of conflicts NWM discloses in their 8-page piece. If you have not read my Bad Advisors book, you can download it for FREE by clicking on the following link:
NWM admits to the following in its 8-page piece (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 incent me to recommend and sell NWM products instead of products of other carriers.”
WTF? Who puts that in writing?
-That they are prohibited from selling Fixed Indexed Annuities (FIAs).
Again, these admissions are absolutely stunning!
Will the rest of the industry follow NWM by admitting their conflicts?
Keep in mind I’m an attorney who looks at this industry much differently than most. I see the admissions in the NWM piece as an exhibit for a lawsuit. I also see it as road map to sue others in the industry who have the same conflict issues.
Who should make admissions about conflicts of interest to clients?
1) 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.
2) Anyone who works through a B/D?
This one is the much more interesting question. I have a chapter in my Bad Advisors book on Broker Dealers (B/Ds). I don’t like any entity that puts restrictions on advisors and every B/D puts some if not many restrictions on advisors.
After you read the NWM 8-page piece and read the disclosures they make on conflicts of interest, think about what conflicts of interest those who work through a B/D might want to disclose (at least if you are a CFP® and are trying to comply with their new conflict of interest disclosure requirements).
You can use the NWM 8-page piece anytime you have to compete with a NWM agent or one from any other type of entity that has similar conflicts.
Becoming an RIA or IAR
I’ve been preaching for nearly 10 years that advisors should get rid of their B/Ds and go independent. That can be done by becoming an RIA (Registered Investment Advisor) or an IAR (Investment Advisor Representative) under an RIA.
As an RIA/IAR, you are truly independent and are not saddled with the conflicts of interest captive or career advisors have, and don’t have the restrictions a B/D puts on advisors.
When to Become an IAR or an RIA? What’s the Cost? How Bad is Compliance?
If you are not an IAR or RIA and want to learn whether it’s right for you, I highly recommend you sign up to watch this webinar on recording. Click on the following link to sign up:
Roccy DeFrancesco, JD
Strategic Marketing Partners