Speaker 1: This is Mesters in Business with very Renaults on Bluebird Radio.
Speaker 1: This week on the podcast, once again, I have an
Speaker 1: extra special guest, John Schlifsky. He is the chairman and
Speaker 1: CEO of Northwestern Mutual, the insurance giant that's in the
Speaker 1: top one hundred on the Fortune five hundred list. Uh.
Speaker 1: They have over thirty one billion dollars in annual revenues,
Speaker 1: two trillion plus in life insurance products, and about two
Speaker 1: hundred billion dollars in investable client assets. Uh. This really
Speaker 1: is a fascinating conversation, not just about the insurance industry,
Speaker 1: but about how the entire financial services industry has changed
Speaker 1: over time, how it's become more integrated, more holistic. How
Speaker 1: the concept of, you know, the insurance salesman out hawking
Speaker 1: policies is so outdated. Uh. John is really super knowledgeable
Speaker 1: about a variety of things within the industry. Northwestern has
Speaker 1: been very aggressive in not only their own internal green initiatives,
Speaker 1: but they're diversity initiatives. You tend to think of a
Speaker 1: company like them as a large, staid insurance company that
Speaker 1: might be a little behind the times. They are nothing
Speaker 1: of the sort. They seem to be fairly cutting edge
Speaker 1: relative to the typical financial services firm. I was fascinated
Speaker 1: by the conversation. I find Schlisky to be really a
Speaker 1: fascinating executive, and I think you will also, so, with
Speaker 1: no further ado, my interview with Northwestern Mutual's chairman and CEO,
Speaker 1: John Schlifsky. This is Mesters in Business with very Renaults
Speaker 1: on Bluebird Radio. My extra special guest this week is
Speaker 1: John Schlivsky. He is the chairman and CEO of insurance
Speaker 1: giant Northwestern Mutual. The firm ranks number one oh two
Speaker 1: on the Fortune five hundred. They have over thirty one
Speaker 1: billion dollars in annual revenue. Northwestern has three hundred and
Speaker 1: nine billion dollars in assets and two trillion dollars in
Speaker 1: active life insurance coverage. John Schlifsky, Welcome to Bloomberg. Well, thanks, Verry.
Speaker 1: I'm glad to be here, appreciate it. So let's start
Speaker 1: out talking about some of your beginnings. I read one
Speaker 1: of your first jobs was scraping paint off of trucks.
Speaker 1: To tell us about that, well, my, uh, yeah, My
Speaker 1: father owned a very small trucking company in Milwaukee, and
Speaker 1: so when I was thirteen I had to start working
Speaker 1: there and I basically did all the jobs none of
Speaker 1: the professional truck drivers wanted to do, including things like
Speaker 1: cleaning bathrooms and cleaning trucks and scraping paint off of
Speaker 1: things and stuff like that. So it was I think
Speaker 1: it was my dad's way of uh making me want
Speaker 1: to go to college because I was you know, it
Speaker 1: was a lot of gritty and grimy work and uh
Speaker 1: um in a family business environment. So it was a
Speaker 1: great experience. Uh And and it certainly taught me the
Speaker 1: value of an education, I'll tell you that. So, speaking
Speaker 1: of education, you go to college, you get an m
Speaker 1: b A. And it looks like pretty much right out
Speaker 1: of school, you started at Northwestern Mutual and eight seven
Speaker 1: was Was that your first job right out of school? No,
Speaker 1: my first job was with MetLife doing similar things. Uh.
Speaker 1: So I graduated from business school and went to MetLife
Speaker 1: for four years, both in Chicago and in New York
Speaker 1: and uh and then I got recruited to go to
Speaker 1: Northwestern Mutual, which is in my hometown of Milwaukee. So
Speaker 1: it seemed like a kind of a dream come true
Speaker 1: for me, and so I started. Yes. So then I
Speaker 1: did go to Northwestern much and that was thirty four
Speaker 1: years ago. I can't believe it. UM, back in seven,
Speaker 1: that's right, Did you always want a career in financial services? Was?
Speaker 1: Was that the plan? What I really wanted to do
Speaker 1: was be in the investment world. I had. I had
Speaker 1: had a couple of summer jobs in banks, and I
Speaker 1: saw their asset management uh stuff. And when I was
Speaker 1: in business school at Kellogg at Northwestern, Warren Buffett was
Speaker 1: speaking in Chicago, and you know, it was for young
Speaker 1: and investment people, and he said, if you really wanted
Speaker 1: a great investment care you should work for a life
Speaker 1: insurance company because they have great processes. They're typically buy
Speaker 1: and hold investors, very analytical in nature, uh, exposure to
Speaker 1: the the entire balance sheet, from bonds through equities, all
Speaker 1: that kind of stuff. And so I you know, I
Speaker 1: think that made a huge impact on me. And so
Speaker 1: as I was interviewing at business schools UM, I became
Speaker 1: increasingly interested in the investment side of financial services. So
Speaker 1: U looked at some investment banks, looked at money management
Speaker 1: firms on Wall Street and things like that. And I think,
Speaker 1: given my experience, and I was relatively young when I
Speaker 1: got that business school, I think the life insurance jobs
Speaker 1: were just perfect for me because it was a place
Speaker 1: where I could, uh, you know, build my skills and
Speaker 1: start out really at the bottom as a junior analyst.
Speaker 1: And uh um, and I really loved managing money. I
Speaker 1: just I love the game. I love the you know,
Speaker 1: the game in the sense of trying to figure stuff
Speaker 1: out that other people hadn't. And so I was I
Speaker 1: think I was always attracted to that sort of analytical framework,
Speaker 1: and that's why I went to MetLife and then ultimately
Speaker 1: Northwestern Mutual. So I read an interesting quote from you,
Speaker 1: and I want to get your feedback on this quote.
Speaker 1: What had the biggest impact was the recession of nineteen
Speaker 1: seventy three and seventy four. I watched my dad be
Speaker 1: worried about at that point about even meeting payroll. I
Speaker 1: saw the volatility of being a small business owner, and
Speaker 1: that drew me to want to work for a big
Speaker 1: company for security reasons. Explain the thinking that well, uh yes, So,
Speaker 1: as I mentioned, my dad had the small trucking company
Speaker 1: maybe at its peak had had thirty employees. Uh and
Speaker 1: I and I was fourteen and fifteen during the recession
Speaker 1: of seventy three and seventy four, and I didn't really
Speaker 1: understand it the way I do now. But I do
Speaker 1: remember him coming home and you know, hearing him talk
Speaker 1: to my mom about making payroll for his employees and
Speaker 1: having to draw in his own savings accounts a couple
Speaker 1: of times to feed the check account at work. And
Speaker 1: I remember one week where he said he made twenty
Speaker 1: two cents. Uh, you know, that was what's left over
Speaker 1: after he paid all the employees. And and I it
Speaker 1: just scared me, I think. And I just saw that
Speaker 1: that pressure and that volatility, and uh uh. And then I,
Speaker 1: as I mentioned, I had a summer. I worked in
Speaker 1: a mail room at a bank one summer. So imagine
Speaker 1: you go from this grimy, gritty trucking company where you
Speaker 1: never know where the next paychecks coming from, to a
Speaker 1: bank where every he's clean and showered and well dressed.
Speaker 1: And I think that had a tremendous impact on me.
Speaker 1: And then you had the security of it, which is
Speaker 1: the bank seemed to be much less impervious to the
Speaker 1: economic volatility, at least to someone working in the mail
Speaker 1: room at the time. I'm sure they had their challenges. Uh.
Speaker 1: And so I just uh, I just never wanted to
Speaker 1: work for a small company and I never wanted to
Speaker 1: to run my own business. I always wanted to work
Speaker 1: in a big company. And I think that that notion
Speaker 1: of security was a key element in it makes a
Speaker 1: lot of sense. So from MetLife you end up at
Speaker 1: Northwestern Mutual, where you start working your way up the ladder.
Speaker 1: Tell us a little bit about your career path. Well,
Speaker 1: as I said, I started out in what we call
Speaker 1: our private capital area, so that was doing private placements
Speaker 1: of so privately placed debt, privately placed equity, leveraged buyout.
Speaker 1: The eighties where the leveraged buy out you know, Glory days,
Speaker 1: and Northwestern Mutual was was a huge participant in it.
Speaker 1: So it was it was a fun experience because we
Speaker 1: were we were looking at so many different companies, so
Speaker 1: many different industries, so many different kinds of capital structures,
Speaker 1: and I was learning so much um So we had
Speaker 1: that growth in the company and then I was I
Speaker 1: was growing as a as a professional. And one of
Speaker 1: the things I've always appreciated about Northwestern Mutual, and I
Speaker 1: think it's still true to this day, it was a
Speaker 1: true meritocracy, and and by that I mean that I
Speaker 1: always thought the people who got promoted, including me obviously Uh,
Speaker 1: we're being rewarded for what we did, what we knew,
Speaker 1: how we were growing. And I never felt it was
Speaker 1: there was a club. I never thought connections were the
Speaker 1: way to the top. I always thought it was doing
Speaker 1: the right thing and being rewarded for it. So I think,
Speaker 1: you know, over my over, you know, it's your growing
Speaker 1: up in your twenties and thirties and forties. Every now
Speaker 1: and then head hunters would call. But I always wanted
Speaker 1: to stay at Northwestern Mutual really for two reasons. One,
Speaker 1: I love the culture, I love the what the company
Speaker 1: stood for. And then the second, as I mentioned, I
Speaker 1: always felt it was a true meritocracy where you were
Speaker 1: rewarded for what you did. And I think, ultimately, if
Speaker 1: you had told me I'd be still here, I don't
Speaker 1: think I would have believed you. But when you start
Speaker 1: stringing together year after year of this feeling about good
Speaker 1: about the company, it's culture and its mission, and good
Speaker 1: about your career and your bosses and the way you're treated, um,
Speaker 1: I just think that growth was amazing. And so here
Speaker 1: I am twenty at whatever it is, thirty four years later,
Speaker 1: one feeling really privileged to have been able to make
Speaker 1: most of my career at this great company. Sound sounds
Speaker 1: really interesting. And you've been CEO for is it what
Speaker 1: seven eight years already? It's even you can believe it. Yeah,
Speaker 1: that's a shocking that's a shocking number. So, speaking of
Speaker 1: how quickly time goes by, Northwestern Mutual has a hundred
Speaker 1: and fifty year old history. How does that affect how
Speaker 1: you manage the firm? What does that legacy mean to you? Well,
Speaker 1: I I would start up with the notion that it's
Speaker 1: uh both an honor and a responsibility. So it's sort
Speaker 1: of like take your favorite sports team, the Packers, the Yankees,
Speaker 1: you know, whatever team has this unbelievable legacy when when
Speaker 1: you're running the place, you can't lose sight of not
Speaker 1: just what a great job it is, but the huge
Speaker 1: responsibility that goes along with it, and this notion that
Speaker 1: we've been around for generations, we've taken care of people
Speaker 1: for generations, and that we have to do that for
Speaker 1: years and years to come. I say, I always like
Speaker 1: to tell the story. So we're a mutual company. That
Speaker 1: means we're owned by our policy owners, were not a
Speaker 1: stock company, and we don't really have an end date.
Speaker 1: There's no there's no notion that at some point this
Speaker 1: company will get sold to somebody else or that uh there,
Speaker 1: you know, we need to find a different ownership structure
Speaker 1: or anything like that. We we are in business uh
Speaker 1: for past generations, are current customers, and generations yet to come,
Speaker 1: even people who aren't even born yet. Uh. There's a
Speaker 1: sense of responsibility to take can care of that. And UM,
Speaker 1: I think that's one of the things I love about
Speaker 1: this job that as the CEO, you can think in
Speaker 1: three different time directions. We obviously have to deliver and
Speaker 1: I call them near now in far so we have
Speaker 1: to deliver near. We have to we have to do
Speaker 1: what's required today to deliver uh or excuse me, that's
Speaker 1: the now, to deliver value to our policy owners today.
Speaker 1: But we also have to be effective and relevant both
Speaker 1: in the near term, let's say two to four years
Speaker 1: out and in the far years out. We're selling products
Speaker 1: today in which people will own them for sixty, seventy
Speaker 1: eighty years, and so that that notion of working over decades,
Speaker 1: creating relevance over decades, creating economic value over decades, evolving
Speaker 1: over decades is really one of the sort of legacies
Speaker 1: that goes with running a company that's over a hundred
Speaker 1: and sixty years old. And if you look at this company,
Speaker 1: we started as a life insurance company that we're now
Speaker 1: number one in the in terms of market share in
Speaker 1: the country. And you mentioned we have over two trillion
Speaker 1: of life insurance in force. But we've evolved. We now
Speaker 1: sell a variety of risk products including disability, income, annuities,
Speaker 1: long term care. But we also are a major wealth
Speaker 1: management player. We have over two hundred close to twounter
Speaker 1: million excuse me billion dollars of assets under management for
Speaker 1: our wealth management clients. We're growing, uh swiftly in that business.
Speaker 1: We're integrating insurance and investments at our at the client
Speaker 1: level to create better outcomes. And those are all proof
Speaker 1: points I think around how this company has evolved and
Speaker 1: how is the leader. You feel this tremendous responsibility to
Speaker 1: steward the company for the next generation of employees, policy owners,
Speaker 1: and people who sell our products, which we call our field.
Speaker 1: They all have a long term stake in the in
Speaker 1: the value of this enterprise. So John, let's talk a
Speaker 1: little bit about change. You were discussing how the company
Speaker 1: has adapted over the past few decades. How have the
Speaker 1: economics of life insurance changed over time. Well, the economics
Speaker 1: have u changed in a material way, and it's it's
Speaker 1: really UH tied to what's going on in the marketplace.
Speaker 1: In the marketplace, UM, the fundamentals that create value for
Speaker 1: our policy owners haven't changed. It's how well the investment
Speaker 1: portfolio performs, It's what's your mortality experience, It's how persistent
Speaker 1: of the policies, how long do the policy owners keep
Speaker 1: their policies, and then ultimately can you manage the expenses
Speaker 1: of the business and be a low cost providers. So
Speaker 1: those things haven't changed in their the core to creating
Speaker 1: value for our policy owners who happened to be our
Speaker 1: customers at the same time. But what's really been I
Speaker 1: would say the most dramatic in the last let's say
Speaker 1: fifteen years or so is the role of interest rates UM.
Speaker 1: They obviously have a huge impact on pricing. When interest
Speaker 1: rates go down, the the cost of life insurance goes up,
Speaker 1: not necessarily the premium per se, but for permanent life insurance.
Speaker 1: A huge component of the value is the cash value
Speaker 1: that builds over time, and when UH interest rates are low,
Speaker 1: that cash value builds at a much slower rate. And
Speaker 1: so that's what I mean when I say it becomes
Speaker 1: more costly. So with rates coming down in the dramatic
Speaker 1: way they have really over the last fifteen years, that's
Speaker 1: had a very important, UH sort of headwind on the
Speaker 1: value of life insurance. And so if you think about
Speaker 1: it this way, UM, you know, policies issued in in
Speaker 1: the mid nineties had interest rates in the eight percent
Speaker 1: range UH, and now we're in a period where interest
Speaker 1: rates are down around three pc. So that that's a
Speaker 1: huge difference in terms of the value that's created in
Speaker 1: these policies over time. The good news is from Northwestern
Speaker 1: Mutual's perspective that we we really have recognized this and
Speaker 1: have stayed ahead of the curve. I remember going to
Speaker 1: Japan in the late UM two thousand's, right around two
Speaker 1: thousand and eight two thousand nine, and I visited with
Speaker 1: a number of Japanese life insurance companies at the time,
Speaker 1: and they, of course have been going through this same
Speaker 1: sort of decline in interest rates for the past couple
Speaker 1: of decades in Japan and UH. I think that the
Speaker 1: two takeaways I had there were one, it never stops,
Speaker 1: and you have to be prepared for a very long
Speaker 1: period of low interest rates and you have to get
Speaker 1: your financial house in order, which we've done. And the
Speaker 1: second is you have to continue to evolve. You have
Speaker 1: to continue to show value to your policy owners because
Speaker 1: what may have been the key value, which is higher
Speaker 1: interest rates, goes away. And so I'm really proud of
Speaker 1: the way Northwestern Mutual has navigated this period. But ultimately, uh,
Speaker 1: it's low rates that have been the biggest headwind on
Speaker 1: the company, and they've had the single biggest impact on
Speaker 1: the economics of our industry. Huh. Really interesting you mentioned
Speaker 1: mortality as another after. There are two issues I have
Speaker 1: to ask about. One is the impact of people living longer.
Speaker 1: In general, we we've tend to see lifespans extent, but
Speaker 1: at the same time, you know, we've had over half
Speaker 1: a million COVID related deaths. How do those two factors
Speaker 1: play into the economics of the insurance business? So, uh,
Speaker 1: you know, the increased longevity of Americans over the last
Speaker 1: century has been a huge positive for the life insurance industry,
Speaker 1: and mortality continues to improve, although not at the same
Speaker 1: pace it did let's say, in the twenties and thirties.
Speaker 1: But in general, Americans tend to be living longer, living
Speaker 1: healthier lives, and that has a huge benefit to the
Speaker 1: value of their policies obviously. And uh, and that's one
Speaker 1: of the and one of the reasons Northwestern Mutual stands
Speaker 1: out is that our mortality experience is actually better than
Speaker 1: the the industry average. We underwrite very well, and so
Speaker 1: all of that mortality improvement really is returned to our customers,
Speaker 1: our policy owners in the form of dividends. We paid
Speaker 1: out over six point two billion dollars in dividends in
Speaker 1: twenty and and that's a huge proofpoint on the the
Speaker 1: economic value that we create. Immortality is a huge component
Speaker 1: of it. COVID, of course, is a tragedy for this country.
Speaker 1: UM and UH, you know, it's obviously many many, many
Speaker 1: hundreds of thousands of deaths due to COVID. What we
Speaker 1: found for our our company is that the average age
Speaker 1: of our COVID claims has been around one years old,
Speaker 1: and the average duration of those policies is over forty years.
Speaker 1: So what's what that's telling us is it, by a
Speaker 1: large at least for Northwestern Mutual's policy owner base, Uh,
Speaker 1: the COVID impact has been relatively negligible. These are obviously
Speaker 1: much older people who have had these policies and forced
Speaker 1: for a long period of time. And if you look
Speaker 1: at sort of the difference, but you know, just in
Speaker 1: terms of death rates with COVID and who's dying versus
Speaker 1: let's say the Spanish flew back in the areas, it
Speaker 1: tends to negatively impact much older people rather than much
Speaker 1: younger people. And so that's that's muted the mortality cost,
Speaker 1: let's say, at the mortality expense of COVID as it
Speaker 1: relates to our policy owner base, and so as as
Speaker 1: we've told our board, uh, you know, we're in business
Speaker 1: to pay claims. We pay death claims because people need
Speaker 1: that their families needed, their loved ones needed, and we're
Speaker 1: proud to pay out our COVID claims. But at the
Speaker 1: end of the day, uh, it's been something that hasn't
Speaker 1: been nearly as bad from a financial perspective as many
Speaker 1: people thought a year ago today. So you had mentioned
Speaker 1: other forms of insurance like disability and long term care.
Speaker 1: I know a number of other carriers have run into
Speaker 1: some problems with that. What seems to be the difficulties
Speaker 1: with those products is it is it they're just harder
Speaker 1: to ice or did they simply underwrite the wrong group
Speaker 1: of people. There's no doubt that some products in the
Speaker 1: insurance world are harder than to price than others. Uh.
Speaker 1: You know, if you think about insurance in general, you've
Speaker 1: got a group of people paying premiums upfront uh and
Speaker 1: then collectively they're sharing in the risk of loss. Um.
Speaker 1: And when it comes to long term care, there's a
Speaker 1: number of assumptions that were really um I think miss price.
Speaker 1: From an industry perspective, I'm glad to say Northwestern Mutual
Speaker 1: didn't fall into that trap. Um. But without getting too esoteric,
Speaker 1: the single biggest mistake that many companies made with pricing
Speaker 1: long term care was what's called laps rate. And so
Speaker 1: this is the percent of the policies which laps in
Speaker 1: which people stopped paying premiums on. And many long term
Speaker 1: care products were basically laps supported pricing. In other words,
Speaker 1: they overestimated how many people would pay premiums for a
Speaker 1: while and then let the product laps before any benefits
Speaker 1: were ever paid on it. And what the industry found
Speaker 1: out is that long term care is in fact a
Speaker 1: product that once people have, they don't want to give
Speaker 1: up because they know how near and dear it is
Speaker 1: to their financial security. And so, yes, the industry had
Speaker 1: some rather significant UM mistakes when it comes to pricing
Speaker 1: that product. I'm proud to say that, UH Northwestern Mutual
Speaker 1: has been sort of much more UM conservative with our
Speaker 1: pricing we have. We don't do lap supported pricing in
Speaker 1: the long term care market, and as a result, we've
Speaker 1: had much better experience with our products. I do think
Speaker 1: long term care is an example of a product that
Speaker 1: is uh, what's the way to say it. It's it's
Speaker 1: people need that product. It's really really important for the uh,
Speaker 1: let's call it the average American to think about, um,
Speaker 1: how they take care of their long term expenses post retirement.
Speaker 1: And I always use the example people have no problem
Speaker 1: ensuring their home even in retirement after the mortgages paid,
Speaker 1: because they can't imagine losing a physical asset to a
Speaker 1: fire or something like that. And yet the odds of
Speaker 1: making a claim on long term care and much higher
Speaker 1: than the odds of your house burning down in retirement.
Speaker 1: And yet people don't assume that that risk is something
Speaker 1: they should insure against. And so long term care insurance
Speaker 1: is a nest. I think it's a necessary product. I'm
Speaker 1: proud to see the way the industry has been evolving
Speaker 1: to find new ways to deliver long term care protection
Speaker 1: to our policy owners, including Northwestern Mutual increasing now long
Speaker 1: term care insurance and the risks of it are being
Speaker 1: embedded in life insurance products so that you you basically
Speaker 1: have a combination of both the mortality risk insurance as
Speaker 1: well as a long term care risk insurance. And I
Speaker 1: think that's really important because at the end of the day,
Speaker 1: one of the biggest concerns people have is running out
Speaker 1: of money in retirement, and long term care is one
Speaker 1: of those events that can completely throw your financial plans
Speaker 1: for a loop and and create you know, unfore unfoecasted expenses,
Speaker 1: especially around things like Alzheimer's, memory issues and so on.
Speaker 1: And so for our industry to uh begin to come
Speaker 1: out with these hybrid products rather than just stand alone
Speaker 1: products that can create sort of these outcomes that people
Speaker 1: need is something that I think the entire industry should
Speaker 1: be be very proud of. The Other factor about these
Speaker 1: combo products that's interesting is it's they're less likely to
Speaker 1: be mispriced the way standalone products are because the combination
Speaker 1: of your premiums over long term with the accumulation of
Speaker 1: cash values and a traditional permanent policy more than offset
Speaker 1: some of the risk that goes with long term care.
Speaker 1: And so I think you're going to see long term
Speaker 1: care insurance continue to be at the forefront of what
Speaker 1: people need for financial security and uh, but just not
Speaker 1: in a standalone chassis so to speak. You mentioned where
Speaker 1: under ensured when it comes to products like long term
Speaker 1: care and what else are we as a nation under
Speaker 1: in short against what risks are out there? I would
Speaker 1: say that most Americans, and I'm generalizing, but I you know,
Speaker 1: I think this is generally true, are are underinsured when
Speaker 1: it comes to both in additional long term care. They're
Speaker 1: under insure when it comes to both life insurance and
Speaker 1: to disability insurance. UM. And we find that when our
Speaker 1: reps sit down with clients and go through a rigorous
Speaker 1: planning process, especially people who have loved ones, that they
Speaker 1: need to take care of the notion. Uh. They often
Speaker 1: have a notion that I've got a group d I
Speaker 1: policy or group life insurance policy and that takes care
Speaker 1: of me. And yet when they see what could happen
Speaker 1: if they would become disabled, especially in their twenties or
Speaker 1: thirties or forties with you know, twenty or thirty years
Speaker 1: of earnings, uh potential out the door or worse, a
Speaker 1: death um they find they're very much underinsured. You know,
Speaker 1: the problem we have as a as a industry is
Speaker 1: that everybody needs what we have, but nobody understands how
Speaker 1: much they need. And it's it's a it is typically
Speaker 1: all three of the products we're talking about, life, insurance, disability,
Speaker 1: income and long term care. Our products that are bought
Speaker 1: are not bought but sold. And by that I mean
Speaker 1: people don't wake up in the morning for the most
Speaker 1: part try to figure out how much of any of
Speaker 1: those they need and go out and buy it the
Speaker 1: way you get up and say I want to buy
Speaker 1: a car, I want to buy a refrigerator, I want
Speaker 1: to buy a vacation for my family. And so it
Speaker 1: is important that financial advisors understand these products that they
Speaker 1: can show the value of them to their clients. And
Speaker 1: typically when that's done, especially not in a product sale
Speaker 1: kind of way, but as part of a comprehensive plan,
Speaker 1: we're we're always pleased to see that people, for the
Speaker 1: most part, do want to buy more because most people
Speaker 1: do want to take care of their loved ones and
Speaker 1: plan for these unexpected events. And this is why, as
Speaker 1: I mentioned earlier, this ocean of integrating insurance and investments
Speaker 1: together is a is a we think a much better
Speaker 1: way to create outcomes for our clients that are valuable,
Speaker 1: rather than just engaging in sort of one off products sales.
Speaker 1: So let's talk a little bit about what makes life
Speaker 1: insurance somewhat unique in the world of financial services. It
Speaker 1: seems to be the only one that hasn't been disrupted
Speaker 1: by technology, as so many other industries, especially finance, has been.
Speaker 1: Why is that, Well, I think there's a short answer
Speaker 1: and a long answer. The main reason, sort of in
Speaker 1: the short run, why life insurance you haven't seen the
Speaker 1: disruption in life insurance that you've seen in other financial
Speaker 1: services companies, I think is because it's a very capital
Speaker 1: intensive business. And so for companies you know, either startup
Speaker 1: fintech startups or even established players like Amazon or whatever,
Speaker 1: to get into it, it's it's a very capital intensive business.
Speaker 1: It requires a ton of money from a capital perspective,
Speaker 1: and because rates are low right now, the return on
Speaker 1: that capital is much I think less attractive to many
Speaker 1: uh disruptors. Let's call it that then maybe other places
Speaker 1: they could go right now. So that's the short answer.
Speaker 1: I don't think that's um a reason not to be
Speaker 1: worried about disruption, and I'll talk about that in a minute.
Speaker 1: But I think there's um a lot of disruption coming
Speaker 1: our way. But I think in the long run, we
Speaker 1: really have been positively changed by technology, and I think
Speaker 1: COVID has accelerated that change in a huge way. And
Speaker 1: I'd like to say we're not in anymmore, We're in
Speaker 1: And that's sort of a glib way of talking about
Speaker 1: how the acceleration in our industry because of COVID has
Speaker 1: really taken a decade of change and compacted it into
Speaker 1: one year. Where you see the most disruption in the
Speaker 1: short run around our industry is around the client experience
Speaker 1: as it relates to purchasing our product. Companies are are
Speaker 1: simplifying the process of becoming a ensured by in terms
Speaker 1: of in the way you buy insurance. They're they're simplifying
Speaker 1: the application process, they're simplifying the underwriting process. They're doing
Speaker 1: it all sort of digitally with with no human interaction,
Speaker 1: and they're basically making it easier and easier for clients
Speaker 1: to who see the value of our product to buy
Speaker 1: the product. And so that's where you're seeing the disruption
Speaker 1: in the short run. And on the same side, on
Speaker 1: the wealth management side, you're seeing these robo advisors who
Speaker 1: are trying to sort of simplify many of the core
Speaker 1: principles of investing, diversification, dollar cost averaging, tax planning, all
Speaker 1: those kind of things. And ultimately, uh so I would
Speaker 1: argue that we are seeing disruption creep in our industry,
Speaker 1: both on the risk side, the insurance side, as well
Speaker 1: as on the wealth management side. Uh And by the way,
Speaker 1: I think that's a good thing for our industry. It's
Speaker 1: taking longer because, as I said, it's a capital intensive business.
Speaker 1: But but there's nothing about life insurance that would make
Speaker 1: me think that we're somehow, um uh immune from the
Speaker 1: kind of disruption we've seen in other parts of the
Speaker 1: financial services industry. And so the companies that are going
Speaker 1: to survive are the companies that are leaning into this disruption,
Speaker 1: that are UM experimenting around the customer experience um and
Speaker 1: so on. Ultimately, though, life insurance is a product that
Speaker 1: is really tied to two things, foregoing of money now
Speaker 1: and pooling those risks to protect everyone over time, that
Speaker 1: that that that core essence of the product is not
Speaker 1: going away, that stands the test of time. It's the
Speaker 1: only way you can really protect yourselves against yourself as
Speaker 1: an individual against catastrophic losses. And by that I mean
Speaker 1: risk pooling. And so in the long run, uh, I
Speaker 1: see the disruption in our industry more around the customer
Speaker 1: experience and the way customer way companies engage with customers,
Speaker 1: and less around sort of the basic mechanics of the product,
Speaker 1: which is as I mentioned, risk pooling, mortality, expenses, and persistency. So,
Speaker 1: so let's talk a little bit about those UM employees.
Speaker 1: Given the circumstances and how everybody has been working from
Speaker 1: home and remote, how challenging has it been to find
Speaker 1: and train new advisors? What what's it like recruiting under
Speaker 1: a lockdown? Uh, well, it's been a lot harder, I
Speaker 1: will say that. UM. At the end of the day,
Speaker 1: I think though, the fact that we were prepared for
Speaker 1: this pandemic has has helped us be successful. UM. We
Speaker 1: didn't see the pandemic coming, don't get me wrong, but
Speaker 1: we we were well on our way to creating a
Speaker 1: digital experience both for our customers and for the people
Speaker 1: who sell our product, our advisors. And so when we
Speaker 1: went to a quarantine situation and then obviously the lockdown,
Speaker 1: we were able not only to service our customers and
Speaker 1: sell our products to our customers solely through digital channels,
Speaker 1: but we're also able to recruit people. In fact, we
Speaker 1: had a record year of recruiting in people join us
Speaker 1: as advisors UM And what I think is really noticeable
Speaker 1: about those recruiting about that recruiting class, it's more diverse
Speaker 1: than ever, more women, more people of color, and it
Speaker 1: really represents, I think a continuation around this notion that
Speaker 1: this is a great, noble profession. At the end of
Speaker 1: the day, people who work for Northwestern Mutual and others
Speaker 1: in our industry are really helping people become financially secure.
Speaker 1: We know that most the average American doesn't know where
Speaker 1: they're going from a financial perspective. They don't know how
Speaker 1: to get there. They leave they have they have cluttered,
Speaker 1: sort of centered less financial lives, and they ultimately need
Speaker 1: someone to bring that all together. And so this notion
Speaker 1: of being able to attract exceptional talent to this business,
Speaker 1: uh is not as hard as I thought it was.
Speaker 1: Going to be in a virtual world because the two
Speaker 1: things this notion that we have the digital tools, and
Speaker 1: because there's demand for what we do. We are not
Speaker 1: recruiting people to a dying industry were recruiting. We're recruiting
Speaker 1: people to an industry that really has a really bright
Speaker 1: future because of this notion that most Americans have to
Speaker 1: provide their financial security to themselves. Think about my father's
Speaker 1: generation had a pension plan, the equity value in his
Speaker 1: house and so security and that's really all he needed
Speaker 1: in retirement to be financially secure. But it's much more
Speaker 1: complicated today and and people are on their own. They're
Speaker 1: not getting sort of those corporate UH defined benefit plans
Speaker 1: of you know from the days of old, and so
Speaker 1: this there is strong demand for what we do, and
Speaker 1: I think when you add all that up, UH, it
Speaker 1: creates an ability for us to recruit into it. And
Speaker 1: then you add to this notion what we called the
Speaker 1: abundance mentality, which is that people UH support each other.
Speaker 1: People in our system they help each other. Our veteran
Speaker 1: advisors work with young advisors, they mentor them, they coach them,
Speaker 1: they do joint work with them, and all of that
Speaker 1: I think has put together for us a very robust
Speaker 1: year in terms of growth, even in the midst of
Speaker 1: this notion that it's not a face to face company anymore.
Speaker 1: So we're a growing company. We grow UH in single
Speaker 1: digits every year. We're never going to be a double
Speaker 1: digit growth company given our size and our our history.
Speaker 1: But the fact that we could continue to grow in
Speaker 1: such a strong way in twenty I think it's a
Speaker 1: proofpoint on the notion that there is a demand for
Speaker 1: what we do really really interesting. You mentioned it was
Speaker 1: a record year of recruitment, and you were successful in
Speaker 1: recruiting women and people of color. Lots of firms in
Speaker 1: finance have found that to be very challenging. What is
Speaker 1: Northwestern Mutual doing make UH their recruiting drive so successful
Speaker 1: when it comes to increasing diversity? Well, I think it's Uh.
Speaker 1: We're we're on about an eight to ten year journey
Speaker 1: in this UM regard. And by that, I mean we
Speaker 1: started about eight to ten years ago, and and we
Speaker 1: really decided at the time that it wasn't just going
Speaker 1: to be a one kind of year and done program.
Speaker 1: And and so the first let's say five years or so,
Speaker 1: all we focused on was the culture in our offices.
Speaker 1: We knew that we had a male dominated, white, male
Speaker 1: dominated workplace culture, not that there's anything wrong with that,
Speaker 1: but it wasn't as inclusive as it should be, and
Speaker 1: we needed to change the culture of those offices so
Speaker 1: that women and people of color felt just as comfortable
Speaker 1: in them as as a you know, a twenty five
Speaker 1: year old white guy. And so that was the beginning
Speaker 1: of this journey, which is, let's look at those aspects
Speaker 1: of our culture that needed to change so that it
Speaker 1: became more inclusive, more welcoming. You know. My favorite example
Speaker 1: is one of the one of our network office leaders
Speaker 1: used to have a contest for for new employees and
Speaker 1: if you won the contest, you've got a tuxedo. Well,
Speaker 1: the problem is women don't want a tuxedo, right, so
Speaker 1: that was never an incentive for them. It's a little point,
Speaker 1: but it shows you all the nuances that we had
Speaker 1: to do around culture to create this welcoming environment for
Speaker 1: anybody who wants to be in it. Then we spent
Speaker 1: the next five or six years really focusing on this
Speaker 1: notion of meeting people where they are and so you
Speaker 1: don't you don't recruit the same way necessarily for a
Speaker 1: white person at a big ten university, as you might
Speaker 1: uh a person of color at a historically black college,
Speaker 1: or a woman or who might be a career changer
Speaker 1: or all those kind of things. And so we really
Speaker 1: focused on meeting people where they were recruiting people who
Speaker 1: were in environments UH that um that they didn't like
Speaker 1: that they could see we had a better one. But ultimately,
Speaker 1: I think what happens and I think this is uh,
Speaker 1: this may sound a little bit like motherhood and apple Pie,
Speaker 1: but I think it's true. At the core of what
Speaker 1: we do is we help people become more financially secured.
Speaker 1: That is our mission, and that is an attractive proposition,
Speaker 1: regardless of your race or your gender or anything like that.
Speaker 1: And so ultimately, the more we can demonstrate to people
Speaker 1: that there's a home for you and that people want
Speaker 1: what you do, I think it's really um it's been
Speaker 1: one of the hallmarks of why we've been so successful
Speaker 1: from a diversity perspective and recruiting. It's because this is
Speaker 1: not a it is not a white male only mission.
Speaker 1: It's a mission that anybody uh can can look at.
Speaker 1: And if you look at let's say Black America, that
Speaker 1: is traditionally underserved when it comes to financial security. There's
Speaker 1: a huge opportunity for other African American and Blacks to
Speaker 1: come into this career and and make inroads into that
Speaker 1: um sort of let's say, neglected part of our economy.
Speaker 1: Me and so, I think it's really it's a it
Speaker 1: is an abundance mentality, and it's one in which we've
Speaker 1: started to make some notable successes. Were far from perfect
Speaker 1: on this the journeys now we're close to being over,
Speaker 1: but I really feel like we've started down the right
Speaker 1: path and we've got some proofpoints that it's working right now.
Speaker 1: So that's really interesting. How does that apply to the
Speaker 1: c suite and senior executives? A lot of big firms
Speaker 1: have been successful in recruiting people to the upper echelons
Speaker 1: of of the organization, but they've been less successful in
Speaker 1: retaining that talent. Yeah, we're very proud of our record. Day.
Speaker 1: I always start with our board, my board. So we're
Speaker 1: a Fortune one company, and only of our board is
Speaker 1: white male. That means six of our board is diverse,
Speaker 1: either in terms of gender, ethnicity, race, or or some
Speaker 1: combination of the three. And so we we start, we
Speaker 1: walk the talk right from the beginning, right at the
Speaker 1: top of our organization. The other thing I would say
Speaker 1: is that we tend to be a company that likes
Speaker 1: to develop talent internally. UM. Now we have some senior
Speaker 1: people who were recruited from the outside world, but by
Speaker 1: and large, UH we think the way to create a
Speaker 1: more diverse and inclusive company is not just from recruiting
Speaker 1: UH people to it, but from growing homegrown talent. All
Speaker 1: of my senior team, we all have a personal goal
Speaker 1: that that we hold ourselves accountable to. It affects our
Speaker 1: annual incentive plant payouts and our long term incentive plant payouts,
Speaker 1: and it's around diversity. UH. We we have to be
Speaker 1: moving people up in this organization. We want to see
Speaker 1: more people of color at management levels and up. We
Speaker 1: hold ourselves accountable for that. Every UM open job, when
Speaker 1: we look at a slate of people, has to have
Speaker 1: at least one diverse candidate on it. When we're considering
Speaker 1: UH filling those jobs we want to promote from within.
Speaker 1: The same thing is true if we've recruit from the
Speaker 1: outside for a job, that slate has to have at
Speaker 1: least one person and hopefully more that our represent diverse candidates.
Speaker 1: So we walk the talk from the very beginning from
Speaker 1: a recruiting and promotion perspective, and then we have fairly
Speaker 1: elaborate what I would call support mechanisms. By the way,
Speaker 1: they're not perfect, that they're getting better, but so that
Speaker 1: people of color and women in our organization feel they
Speaker 1: have the same mentorship that maybe I had as a
Speaker 1: white male back in the eighties. And so I think, uh,
Speaker 1: And as as we've talked about on this podcast, I've
Speaker 1: been here for thirty four years. And when I look
Speaker 1: at our our level, our management ranks, and I look
Speaker 1: at the women and the people of color in it,
Speaker 1: you know, I'm very proud to say a disproportioned share
Speaker 1: that is homegrown talent. And uh. And I'm hoping they
Speaker 1: see the same opportunities I did, the same mission that
Speaker 1: I have, the same mission that we have going forward.
Speaker 1: Uh And and so you know, I do think we
Speaker 1: can we can hold on that talent. But I will
Speaker 1: say the other thing is that when someone recruits away
Speaker 1: one of our black employees or or let's say a
Speaker 1: woman senior woman, I take great pride in that because
Speaker 1: what it says to me is that we're developing talent
Speaker 1: that other people value and are hiring away from us.
Speaker 1: And just like we lose white males to the recruiting process,
Speaker 1: sometimes when we lose people of color and women, I
Speaker 1: do that as a proofpoint that we are growing talent
Speaker 1: that other people value. So I think that's that's just
Speaker 1: this whole ecosystem is from a diversity perspective. Is you.
Speaker 1: It's not just one thing. It has to permeate your
Speaker 1: entire culture. It has to permeate your entire way of
Speaker 1: doing things. And as that happens, the roots take place.
Speaker 1: There's roots everywhere, and you're not really dependent on one
Speaker 1: or two people staying in order to hit some sort
Speaker 1: of metric. So so let's talk a little bit about, uh,
Speaker 1: the financial services world. One of the big themes has
Speaker 1: been the move away from the traditional wirehouses and towards
Speaker 1: more independent channels. How has that impacted your investment business
Speaker 1: if at all? You know, I wouldn't. I would say
Speaker 1: we probably had a handful of our career advisors go
Speaker 1: to independent channels. And the fact the matter is is
Speaker 1: that if a career advisor leaves Northwestern Mutual, it's almost
Speaker 1: it's almost inevitable that they go the independent route. But ultimately,
Speaker 1: our retention rate right now is about I think around
Speaker 1: which means the vast majority of our veteran advisors are
Speaker 1: staying with Northwestern Mutual year after year. I think, I
Speaker 1: think there's there's two things that we're doing to create
Speaker 1: sort of that stickiness, because we never you know, you
Speaker 1: never want to compete on, uh, anything that's a commodity,
Speaker 1: and so from our perspective, uh, I think our our
Speaker 1: sort of value proposition to our our veteran advisors is
Speaker 1: what's keeping them there. And it all starts with sort
Speaker 1: of our what we call our unrivaled holistic approach to clients.
Speaker 1: So it's the it's sort of the merger of a
Speaker 1: trusted advisor, a robust lining process with proprietary planning software,
Speaker 1: the integration of insurance and investments at the client level,
Speaker 1: which is somewhat unique in our industry, all backed up
Speaker 1: by a rich digital platform and omni channel service. So
Speaker 1: those five things do set us apart from most of
Speaker 1: the independent channels. They can't bring all of that sort
Speaker 1: of skill to bear, um, you know, to to a client.
Speaker 1: The second thing we have is obviously we have arguably
Speaker 1: the best products in the industry when it comes to
Speaker 1: our insurance products, are our long term value in our
Speaker 1: permanent life insurance product the second to none. We're a
Speaker 1: low cost producer in the industry. So you you combine
Speaker 1: those two things, and we we think that there's there's
Speaker 1: a home for advisors that creates something for them that
Speaker 1: they can't get anywhere else. And that's ultimately how we
Speaker 1: compete in the marketplace. And it's just creating a proprietary system,
Speaker 1: if you will, that ultimately works with clients. And we
Speaker 1: think we can demonstrate better outcomes over the long term
Speaker 1: with our clients, better outcomes from an investment perspective, and
Speaker 1: better outcomes from a risk perspective, and certainly when you
Speaker 1: integrate them, better outcomes. And so I think at the
Speaker 1: at the end of the day, that's what's causing this
Speaker 1: strong retention in our in our career advisors, is because
Speaker 1: the independent channel can offer everything that we do. So
Speaker 1: life insurance salespeople have gotten a bad rap um in
Speaker 1: popular culture. Is that is that deserved or unfair? And
Speaker 1: and what do you do to try and reduce that?
Speaker 1: I think it's totally unfair. I think I think the
Speaker 1: bad rap is because nobody wants to buy life insurance
Speaker 1: right It's it's the ultimate self sacrifice. It's giving up
Speaker 1: money today. Uh you know as a policy owner that
Speaker 1: I'll never see it will go to my loved one
Speaker 1: someday when I die, hopefully many many, many, many many
Speaker 1: years from now. But ultimately there's life insurance is a
Speaker 1: self sacrificing instrument that nobody really wants to deal with.
Speaker 1: And and you layer on that, nobody wants to talk
Speaker 1: about their own mortality. And so I think that's why
Speaker 1: the rap is unfair. I don't think it's because of
Speaker 1: the product itself. Whether you're talking about Northwestern Mutual or
Speaker 1: almost any of our competitors, the persistency in their product
Speaker 1: lines is substantial. People keep life insurance for a very
Speaker 1: very very long time, and the reason they do it's
Speaker 1: because it has a positive impact on their lives. Whether
Speaker 1: it's at Northwestern Mutual or at any of the other
Speaker 1: major carriers, those products that we're selling ultimately have value
Speaker 1: that people see decades from now. And so I think,
Speaker 1: and by the way, I don't think you can be
Speaker 1: truly financially secure without life insurance. It has um It
Speaker 1: benefits you throughout your life cycle. As a young adult,
Speaker 1: when you're taking care of your family as your near
Speaker 1: retirement in terms of the optionality it gives you, and
Speaker 1: then ultimately at the end of your life with a
Speaker 1: legacy either for charity or for your loved ones, and
Speaker 1: so this so I think it is a bad rap,
Speaker 1: but I think it's it's one that the industry has
Speaker 1: always dealt with, and we're proud to talk about it
Speaker 1: because we know that when clients by our products, they
Speaker 1: keep them. And I think that's a much better proofpoint
Speaker 1: than sort of this rap about life insurance salesman that
Speaker 1: see that that continues to go around and around and around. Interesting. So,
Speaker 1: so you mentioned um, managing risk over the long long haul.
Speaker 1: You're in the business as CEO of managing risks for
Speaker 1: the company. What keeps you up at night? Well, um,
Speaker 1: you know, I think the biggest thing that keeps me
Speaker 1: up at night is some of the stuff from the
Speaker 1: external environment. If if you look at our business model
Speaker 1: per se. Obviously we're still in the midst of a transformation,
Speaker 1: so we've got to execute well. But the nuts and
Speaker 1: bolts of our operation do not make me nervous. In fact,
Speaker 1: you know, one of the things we like to talk
Speaker 1: about is last February, when when COVID was on the
Speaker 1: horizon and everybody was freaking out, we were very, very
Speaker 1: a calm about it because we had done all the
Speaker 1: scenario planning UH for both a pandemic and a stock
Speaker 1: market crash with low interest rates well in advance of
Speaker 1: last February in March. It's not, by the way, it's
Speaker 1: not because we knew that was coming this this past year.
Speaker 1: It's because that's what we do to make sure that
Speaker 1: we're always in operations for decades to come, and so
Speaker 1: I don't really lose sleep over the nuts and bolts
Speaker 1: of our operation. Where I get nervous is about UM
Speaker 1: A lot of the things going on. From a federal
Speaker 1: government perspective. I think we're in the midst of one
Speaker 1: of the biggest experiments we've ever seen in terms of
Speaker 1: government spending UH and modern monetary theory. I don't think
Speaker 1: we actually know how this experiment is going to end,
Speaker 1: and I think that's something that causes me to get
Speaker 1: paused and to be all, you know, another reason why
Speaker 1: UH we value financial strength so much. By the way,
Speaker 1: we're a triple A company, one of only two triple
Speaker 1: A companies in America that has a stable outlook and
Speaker 1: that financial strength is uh is what gives me comfort
Speaker 1: in in this sort of thing. The other thing I
Speaker 1: would say that causes me to lose sleep a little
Speaker 1: bit is this notion of operating in a virtual world.
Speaker 1: Northwestern mutuals culture and I hope you've heard this as
Speaker 1: I've talked, and our mission is is is steeped in
Speaker 1: all of our employees, and yet we've hired thousands of
Speaker 1: people in who have never said spend a day in
Speaker 1: the office seeing that culture firsthand. And so this virtual
Speaker 1: world that we're in I think has uh eaten away
Speaker 1: a little bit at that cultural piggy bank that we have.
Speaker 1: And I can't wait to get back everybody back on
Speaker 1: campus and back in the office is and back to
Speaker 1: work so that we can rebuild that culture over time.
Speaker 1: I'm a little bit worried about that right now, and
Speaker 1: that's one of the things that we're losing a little
Speaker 1: bit of sleep over. But fortunately, I think with the
Speaker 1: vaccinations and everything, I think we're closer and closer to
Speaker 1: the end of this. And then ultimately I think low
Speaker 1: rates are uh you know, continue to be UH problem
Speaker 1: for us. We you know, we we UH were built
Speaker 1: to last. It's not going to affect our company long term.
Speaker 1: But persistent low rates are very is a very sort
Speaker 1: of slow pressure on life insurance companies, and so we
Speaker 1: have to be uber vigilant about expenses. We have to
Speaker 1: be uber vigilant about where we place our bets. We
Speaker 1: have to be uber vigilant about execution because we don't
Speaker 1: have a margin of error when rates are so low,
Speaker 1: UH to make mistakes and waste money or or go
Speaker 1: down the wrong thing. So you know, those are the
Speaker 1: things that keep me up at night. And then of
Speaker 1: course the government. You never know where regulation is going
Speaker 1: to go, where corporate taxes are going to go. Those
Speaker 1: are wild cards that we can't control. We're lucky in
Speaker 1: that our industry is generally a bipartisan issue. We work
Speaker 1: with both sides of the aisle, and so when there's
Speaker 1: a new administration, we've got to build new relationships with
Speaker 1: the administration. But generally speaking, UH, our relationships in UH Congress,
Speaker 1: and you know, both in the House and the Senate
Speaker 1: are strong, but you never know what's going to happen there,
Speaker 1: and that's a wild card. I think that almost any
Speaker 1: business has to worry about. So generally speaking, I feel
Speaker 1: good about where we are. I'm not losing sleep at night.
Speaker 1: Being the strongest company in the industry helps. But you've
Speaker 1: you've just got to be uber vigilant about all these
Speaker 1: things that are going on, because you just can't make
Speaker 1: mistakes when rates are as low as they are. What
Speaker 1: about social unrest as a risk factor During last summer,
Speaker 1: during the Black Lives Matter protests, you were pretty vocal
Speaker 1: on social media. Tell us what motivated your voice and
Speaker 1: how it was received when within the company and within
Speaker 1: the industry. Yeah, so I was particularly moved this summer
Speaker 1: by some of that. And the reason I was moved is,
Speaker 1: as I said, we're very proud of our record around
Speaker 1: diversity inclusion. But after the George Floyd killing and some
Speaker 1: of the social unrested followed, I made a point to
Speaker 1: call about twenty or twenty five of our black and
Speaker 1: African American leaders throughout our company, both in our home
Speaker 1: office in Milwaukee, but also in many of our network offices.
Speaker 1: And I think that the biggest sort of impact I
Speaker 1: had was this notion of hope being constantly deferred. And
Speaker 1: it's it's this notion and not just at Northwestern Mutual,
Speaker 1: but from a societal perspective, and so this notion of
Speaker 1: as a black professional in this country, you hope things
Speaker 1: are better, you hope you're getting to a point of
Speaker 1: full equality and things like that, and yet those those
Speaker 1: hopes get deferred because of some of what we what
Speaker 1: we saw, and so those conversations, combined with what we
Speaker 1: saw going on around the country, really had an impact
Speaker 1: on me in a in a way that I honestly
Speaker 1: didn't think that they would, And so I knew that
Speaker 1: there was a lot of work to do. What what
Speaker 1: I'm proud of in terms of the way Northwestern Mutual
Speaker 1: Approach did is that we didn't just the issue press
Speaker 1: really says, and we didn't just donate money to this
Speaker 1: cause or that cause. Those are easy things. I'm not
Speaker 1: saying they're bad things, but they're easy. But what I'm
Speaker 1: really proud of is the hard work that we did.
Speaker 1: So we farmed, we farmed the task force. At I chair,
Speaker 1: we call it sustained action for racial equality and and
Speaker 1: the I think the two key words in that are
Speaker 1: sustained action. We decided not to just do something that
Speaker 1: sort of met the summer unrest head on, but something
Speaker 1: that we could be proud of five, ten, fifteen years
Speaker 1: from now. And we have a strategic roadmap. We're investing
Speaker 1: in our communities, were investing in our culture. We're investing
Speaker 1: in financial literacy for African Americans and blacks, and we're
Speaker 1: investing in the professional development of Blacks and African Americans
Speaker 1: not just at our company, but in our communities. And
Speaker 1: I think that kind of work is what I'm proud
Speaker 1: of because ultimately, um and I tell this story, you know,
Speaker 1: in sort of a fast way, but you can approach
Speaker 1: diversity inclusion with your left brain or your right brain
Speaker 1: if you're let's say your left brains the analytical side.
Speaker 1: America is becoming more diverse. Okay. The notion that you
Speaker 1: can be a thriving, relevant company just catering to white
Speaker 1: Americans is crazy from just a purely objective perspective. So
Speaker 1: regardless of your feelings on this, there's a strong business
Speaker 1: case to be made, uh for diversity inclusion. But from
Speaker 1: the right, the right side of your brain, the more
Speaker 1: empathetic and emotional side, as I say, it's the right
Speaker 1: thing to do. We have a mission to make people
Speaker 1: more financially secure. That mission doesn't include labels like white
Speaker 1: or black or Hispanic, or male or female. And so
Speaker 1: we we this, this notion of doing the right thing
Speaker 1: for people who feel like their hope has been deferred
Speaker 1: too long fits right into the mission of this company.
Speaker 1: And there's no way we can't be just as good
Speaker 1: as that at that as we are as it comes
Speaker 1: to wealth management or risk products. And so, uh, this
Speaker 1: is a skill that we're gonna build. It's a skill
Speaker 1: that Northwestern Mutual is going to be world class at
Speaker 1: and something that I'm proud that started. It's too bad
Speaker 1: it had to start because of a killing and social unrest,
Speaker 1: but maybe that's one of the bright spots in this
Speaker 1: that ultimately it's going to lead to something that's much
Speaker 1: bigger and better than anything that was going on before
Speaker 1: or really really interesting. Um. A couple of years ago,
Speaker 1: you guys built a brand new headquarters. G it's about
Speaker 1: five years ago. UM, I know there was an element
Speaker 1: of sustainability in that new um h Q tell us
Speaker 1: about Northwestern Mutuals sustainability efforts. Well, uh, look at me.
Speaker 1: You can't be a hundred and sixty plus years old
Speaker 1: and not care about the environment. Okay, I mean it's
Speaker 1: it's this we want to be around for another hundred
Speaker 1: and sixty years, and our sort of ecological sensitivities predate
Speaker 1: climate change and predate all the current things that are
Speaker 1: going on, because we all utimately want to conserve things,
Speaker 1: and we want to conserve things because that's what great
Speaker 1: companies do, and we don't want to be seen as
Speaker 1: wasting any resource, especially natural resources. So the building is
Speaker 1: a proof point around I think two things. One is
Speaker 1: the ability to create a building that can be green,
Speaker 1: that can that can create a wonderful work environment, but
Speaker 1: at the same time be at the forefront of all
Speaker 1: the efforts around energy conservation, UM and so on and that.
Speaker 1: And this building is and I can get into details
Speaker 1: around the windows and the cooling and all that stuff,
Speaker 1: but ultimately it is a very beautiful sustainable structure that
Speaker 1: has a great work environment as as part of it.
Speaker 1: But the other thing that's interesting, and this isn't right
Speaker 1: to your question, but it ties into your previous question,
Speaker 1: is when we built that building, we committed to the
Speaker 1: city that we would have a large portion of the
Speaker 1: work done by minority contractors. And that's another form of
Speaker 1: sustainability that doesn't necessarily tie right to the um, to
Speaker 1: our climate or our ecological resources. But by using minority
Speaker 1: contractors on a you know, a half billion dollar building,
Speaker 1: we were able to create sustainability for them. They were
Speaker 1: they were building skills, they were building financial resources, they
Speaker 1: were building a resume of pedigree around this kind of
Speaker 1: really important work. And so I think the sustainability of
Speaker 1: that building isn't just from a from an ecological perspective,
Speaker 1: but also from what we did as it relates to
Speaker 1: minority contractors and their ability now to go forward. And
Speaker 1: as you've seen other construction in Milwaukee develop our new
Speaker 1: fights or form where the Bucks play, other major office buildings,
Speaker 1: those UH construction projects are now learning from what we
Speaker 1: did and employing the same both sustainability issues and the
Speaker 1: same minority contractor issues, and it's just you can see
Speaker 1: the ripple effects of that, and it's it's why I'm very,
Speaker 1: very proud of that building. Now. Our employees will tell
Speaker 1: you they love it because it's great work environment, but
Speaker 1: I'm proud of it not just because of that, but
Speaker 1: because it's sort of the um the catalyst it became
Speaker 1: for all the things that we're talking about today. So
Speaker 1: the last big question I have is what are the
Speaker 1: looming large opportunities that you see when you look out
Speaker 1: ten or twenty years for both Northwestern Mutual and the
Speaker 1: financial services industry. Well, I think the I think this
Speaker 1: is a growth industry. It's just it's just amazing, you know.
Speaker 1: To repeat what I said, most people have fractured centator
Speaker 1: list lives from a financial perspective. They have too many things.
Speaker 1: They don't know how to pull it together. They're on
Speaker 1: their own. They're pioneers in the sense that there's no
Speaker 1: uh way, you know, agreed upon way to do it.
Speaker 1: They don't know where they're going financially, they don't know
Speaker 1: how to get there. They need someone to help them. Uh.
Speaker 1: And and it's it's unbelievable the demand that's out there now.
Speaker 1: It's latent demand. And by that I mean people don't
Speaker 1: necessarily know exactly how to get what they want. You know.
Speaker 1: Henry Ford had that famous uh saying, if I have
Speaker 1: people what they wanted, they would have said faster horses
Speaker 1: because they didn't see the view of the value of
Speaker 1: a car. And I think our industry faces that a
Speaker 1: little bit. People want financial security, they want to make
Speaker 1: sense of their financial lives. They want someone to pull
Speaker 1: it all together for them and make sense of it,
Speaker 1: but they don't necessarily see the way to do that
Speaker 1: is through a trusted advisor, planning and the integration of
Speaker 1: risk and investment. So that's our job. Our job is
Speaker 1: to show people the way to get the financial security.
Speaker 1: But but people are underinsured, people don't know how to
Speaker 1: say for retirement, people don't know how to take care
Speaker 1: of themselves financially, and uh it that that is the
Speaker 1: financial literacy in this country is I would say below
Speaker 1: average for where it should and could be. And so
Speaker 1: I think the opportunity for our company and for others
Speaker 1: like us is absolutely um unbounded. I mean, I really
Speaker 1: believe we're a growth industry. Now, We're gonna grow at
Speaker 1: single digits. As I said, we're not going to be
Speaker 1: the year over year thing. Because this is hard work.
Speaker 1: You've got to engage clients one at a time. You've
Speaker 1: got to meet with them and do the planning, the
Speaker 1: rigorous planning that they need and show them the way forward.
Speaker 1: But I as I see more and more companies shift
Speaker 1: away from sort of this product oriented cell where I
Speaker 1: just want to sell a product to move on to
Speaker 1: forming these lifetime relationships with clients and get them to
Speaker 1: have the outcomes they want, not the products they want,
Speaker 1: but the outcomes they want. I think our industry is
Speaker 1: going to continue to shine and uh so, I I
Speaker 1: am actually quite optimistic about our future. I'm sixty two
Speaker 1: years old. We have a mandatory retirement policy here at
Speaker 1: sixty five, so I've got three years left with this company,
Speaker 1: and I feel melancholy about that because I think our
Speaker 1: brightest days are ahead of us. I just think there's
Speaker 1: so much opportunity in this country to help people become
Speaker 1: more financially secure, and it's it's very exciting. And then
Speaker 1: when you overlay how we're using technology to improve the
Speaker 1: customer experience, to make it more, to make it frictionless,
Speaker 1: more seamless, better for our lillions um, I think I
Speaker 1: think that this is is a is a bright future
Speaker 1: and so as this company does both perform and transform
Speaker 1: at the same time, I think we are just having
Speaker 1: that one of the brightest futures that we've ever had
Speaker 1: as a company. And I'm really proud that we can
Speaker 1: deliver performance in the here and now, but at the
Speaker 1: same time build out this customer experience platform that's going
Speaker 1: to ensure relevance for years and years and years to come.
Speaker 1: So so here's an unanticipated question and a little bit
Speaker 1: of a curveball. I didn't realize Northwestern Mutual had a
Speaker 1: mandatory your retirement age. Have you even begun thinking about
Speaker 1: what you're gonna do in retirement or maybe that's the
Speaker 1: wrong word post Northwestern Mutual. Well, I haven't really started
Speaker 1: thinking about it, to be honest with you. I've still
Speaker 1: got a lot to do here and I'm really excited
Speaker 1: about what i want to do, and it's a full
Speaker 1: time job. Um. You know, in my heart, I think
Speaker 1: i'd like to teach after Northwestern Mutual. Um, but I
Speaker 1: haven't put much thought into it beyond that. But some
Speaker 1: sort of graduate business school environment where I could talk
Speaker 1: about all that I've learned and share it with people
Speaker 1: would be really fulfilling. And I think I get much
Speaker 1: more sort of joy out of that than a than
Speaker 1: a second gig somewhere in corporate America anything like that.
Speaker 1: So uh, But I, as I said, I've got plenty
Speaker 1: of time. I mean, Joe Biden and I are going
Speaker 1: to end our terms at about the same time. I'm
Speaker 1: sure he's not thinking about retirement, and neither of my
Speaker 1: I I've got a lot to do here. We've got
Speaker 1: a great team, and I really want to focus on
Speaker 1: delivering in the here and now. Great answer, Let's jump
Speaker 1: to our favorite questions that we ask all of our guests,
Speaker 1: starting with what are you streaming these days? Tell us
Speaker 1: what's keeping you entertained during this work from home era
Speaker 1: either Netflix or Amazon Time or whatever podcast or audio
Speaker 1: you might be listening to. What's keeping you busy these days? Well,
Speaker 1: I would say that from a streaming perspective, except for
Speaker 1: The Crown, my wife and I don't do much of
Speaker 1: that stuff. I when I am winding down, I'm much
Speaker 1: more about reading books than I am about streaming. But
Speaker 1: I will say we got sort of addicted to the
Speaker 1: series The Crown and love it. My mother's English. I
Speaker 1: went to English. I went to England every summer to
Speaker 1: visit my grandmother. So I'm a little bit of an anglophile,
Speaker 1: and that's that series really resonated with me. But to
Speaker 1: be honest with you, I'm much more interested in reading
Speaker 1: books when I have some free time. I think that
Speaker 1: quiet really appeals to me. And so uh um, that's about.
Speaker 1: That's about it. From a streaming perspective. Well, we'll get
Speaker 1: to books in a moment. Let's talk about your mentors
Speaker 1: who helped to shape your career. UM, I've been UH,
Speaker 1: I've been blessed with UM a lot of mentors. You know.
Speaker 1: I think that probably, UM, there's two Rather than name names,
Speaker 1: I would say two things really, UH I value in
Speaker 1: terms of the mentorship that I got UH as a
Speaker 1: as my career was developed. The first thing is I
Speaker 1: mentioned early on that Northwestern Mutual does a lot of
Speaker 1: leverage buyouts and UM and we continue to be very
Speaker 1: active in that part of the capital markets as a company.
Speaker 1: But back when I was making those investments, the opportunity
Speaker 1: to either sit on a board that we of a
Speaker 1: company that we were an owner of, or at least
Speaker 1: be part of a board meeting when I was in
Speaker 1: a more junior role and see all those CEOs in
Speaker 1: action and how they ran companies. And it wasn't just
Speaker 1: financial services, it was aluminum die casting and retail products
Speaker 1: and consumer products and things like that. That ability to
Speaker 1: see UH, different industries confront similar problems, I think was
Speaker 1: was really helpful. UM. And then UM, you know my board,
Speaker 1: I've I've been you know a CEO for now going
Speaker 1: on eleven years. Before that, I was very involved with
Speaker 1: our board, and what I would say is that um
Speaker 1: our board, my board has been unbelievable in mentoring me.
Speaker 1: I can't tell you how many times when I was
Speaker 1: a junior executive making presentations to our board where a
Speaker 1: board member would take me aside after a board dinner
Speaker 1: and sit down with me for fifteen or twenty or
Speaker 1: thirty minutes and tell me what I did right, and
Speaker 1: tell me what I did wrong, and tell me where
Speaker 1: my style got of out of hand and things like that.
Speaker 1: And I think a lot of times people sort of
Speaker 1: say their board has been valuable, but I really need it.
Speaker 1: The mentorship that I've gotten and sort of the the
Speaker 1: advice that I've gotten, not necessarily about strategic goals, but
Speaker 1: more around style and relating to people and engaging with people.
Speaker 1: I think those those two things have really had the
Speaker 1: biggest impact on my sort of development as an executive,
Speaker 1: and it's stuff that I'm very appreciative of. Really really interesting.
Speaker 1: You mentioned books. Let's talk about some of your favorites.
Speaker 1: What what are you reading right now and what are
Speaker 1: some of your all time uh mostly loved books. Uh. Well,
Speaker 1: I am a big fan of history books. So you know,
Speaker 1: early in my career, you know, people would give me
Speaker 1: books like Good Degrade and stuff like that, and I've
Speaker 1: read them and I think they're good. Uh And I'm
Speaker 1: not complaining about it, but I found that I learned
Speaker 1: much more from reading about actual history and how people
Speaker 1: dealt with it. And I and I tend to, uh
Speaker 1: you know, move from American history to European history. Uh
Speaker 1: and and I you know, I just have a huge
Speaker 1: interest in both of those. Right now, I'm reading this really,
Speaker 1: someone recommended this book. It's called Oliver wis Well and
Speaker 1: it's I can't I think it was published in It's
Speaker 1: it's it's the one exception to my rule because it's
Speaker 1: a fiction book. But it's historical fiction about the Revolutionary
Speaker 1: War told from the perspective of loyalists, so people fighting
Speaker 1: against the colonists and the militia and George Washington and
Speaker 1: it's and it's really interesting, um to see it from
Speaker 1: that point of view. But I just finished that book.
Speaker 1: And I'm my wife and I just celebrated our wedding
Speaker 1: anniversary today as a matter of fact, and she gave
Speaker 1: me this book on Sunday, she jumped the gun a
Speaker 1: little bit. And it's called Lincoln's Mentors. That's by a
Speaker 1: guy named Michael Gerhard, and it's it's really about all
Speaker 1: the people in Lincoln's life that influenced his policy. And
Speaker 1: I'm not about it on page a hundred. I just
Speaker 1: started it, but it's it's really fascinating to see how um,
Speaker 1: the early people in his career Henry clay Is is
Speaker 1: the one I'm reading about now, and how influential they
Speaker 1: were in his sort of development as a leader. Um
Speaker 1: and so UM. I'd recommend both those books, the ones
Speaker 1: out of print. But this, this book by Michael Gerhard
Speaker 1: is I think it's relatively new and it's it's so far,
Speaker 1: so good. So that's what I'm reading right now. Very interesting.
Speaker 1: What sort of advice would you give a recent college
Speaker 1: grad who was interested in a career in either insurance
Speaker 1: or finance or both. Um. The the advice I got
Speaker 1: when I was twenty two is advice I followed at
Speaker 1: work for me, and so I always like to share
Speaker 1: it with other people. And one of my neighbors when
Speaker 1: I was just getting out of college, said the secret
Speaker 1: and he worked at a bank of fairly senior guy
Speaker 1: a local bank in Malwauke, and he said, if you
Speaker 1: work harder than anyone else between the ages of twenty
Speaker 1: five and thirty five and never stopped developing additional skills,
Speaker 1: so you're always learning, you'll set yourself up for a
Speaker 1: great career. And I've tried to follow that. Obviously, I'm
Speaker 1: well beyond thirty five now, but in my twenties and thirties,
Speaker 1: when you're young and you have bondless energy, there's no
Speaker 1: reason not to work harder than everybody else. And and
Speaker 1: I did that, and I think that was the foundation
Speaker 1: for the career. And then as as we talked about
Speaker 1: just reading books or finding other ways to constantly be learning,
Speaker 1: think about how Northwestern Mutual in thirty four years my
Speaker 1: career there has changed. It's dramatic how we've evolved and
Speaker 1: changed and transformed ourselves. And you couldn't do that if
Speaker 1: you weren't reading and learning and observing and being curious.
Speaker 1: And so I think I think those two things, working
Speaker 1: hard and never stopped being curious, never stopped looking at
Speaker 1: other industries or people for for skill sets or ideas.
Speaker 1: I think it's really ultimately a great way to build
Speaker 1: a career, regardless of whether it's an insurance and finance
Speaker 1: or probably anywhere else. Quite interesting. And our final question,
Speaker 1: what do you know about the world of insurance and
Speaker 1: corporate leadership that you wish you knew when you began
Speaker 1: your career thirty four US years ago? When I started
Speaker 1: at Northwestern Mutual, as I mentioned, I worked in the
Speaker 1: investment side. I could have cared less about life insurance.
Speaker 1: I just loved being a portfolio manager, investing in companies,
Speaker 1: watching them grow, etcetera, etcetera. If I wish I had
Speaker 1: known what a great industry this is back then, and
Speaker 1: maybe this sounds a little self serving, but our industry
Speaker 1: is vibrant, it's growing, it's full of innovation, and I
Speaker 1: think sometimes people aren't attracted to it because they think
Speaker 1: it's kind of boring and old and stagy, and it's
Speaker 1: really not that. And I wish I had known more
Speaker 1: about that. I probably would have paid more attention to
Speaker 1: things going on around me rather than just honkering down
Speaker 1: and doing the investment stuff. And uh um. From a
Speaker 1: leadership perspective, Um, you know, I'm still evolving there. But ultimately,
Speaker 1: what I've really learned about leadership that I didn't know
Speaker 1: back then is that you have to have both a
Speaker 1: keen um intellect and strategic mind, but you also have
Speaker 1: to have high emotional i Q emotional quotation and I
Speaker 1: and I really when I was younger, I thought, Wow,
Speaker 1: if I have a good idea to explain it, everyone
Speaker 1: will just buy into it and start working there. And
Speaker 1: I totally under appreciated how much how important it is
Speaker 1: to engage with people not just on an intellectual level,
Speaker 1: but on an emotional level, so that there's so that
Speaker 1: they know that you care about them. They know that
Speaker 1: the reason you have this idea is not for selfish reasons,
Speaker 1: but it's for the good of the organization. They believe
Speaker 1: that what you're doing isn't just for personal aggrandizement for
Speaker 1: the but for the for the good of the organization.
Speaker 1: I don't think I really appreciated that fifteen or twenty
Speaker 1: years ago. Maybe even ten years ago, I didn't appreciate it.
Speaker 1: But as I you know, as I as I've been
Speaker 1: in this job longer, you just can't underestimate the value
Speaker 1: of both of those things being integral to actually moving
Speaker 1: some things forward. Thanks John for being so generous with
Speaker 1: your time we have been speaking with John Schlifsky. He
Speaker 1: is the chairman and chief executive officer of Fortune one
Speaker 1: hundred company Northwestern Mutual. If you enjoy this conversation, well
Speaker 1: check out any of our previous four hundred interviews. You
Speaker 1: can find those at iTunes, Spotify, or wherever you get
Speaker 1: your podcast fix. We love your comments, feedback and suggestions
Speaker 1: right to us at m IB podcast at Bloomberg dot net.
Speaker 1: You can sign up for my daily reads at Rid
Speaker 1: Halts dot com. Check out my weekly column on Bloomberg
Speaker 1: dot com slash Opinion. Follow me on Twitter at Rid Halts.
Speaker 1: I would be remiss if I did not thank the
Speaker 1: crack staff that helps put these conversations together each week.
Speaker 1: Maroufal is my audio engineer atko. Val Bron is our
Speaker 1: project manager. Michael Boyle is my producer. Michael bat Nick
Speaker 1: is my head of research. I'm Barry Ritults. You've been
Speaker 1: listening to Master's in Business on Bloomberg Radio.