The future belongs to the trustworthy

I was recently talking about Northwestern Mutual’s corporate strategy with a prominent wealth management advisor and was excited to have the opportunity to ask him for candid thoughts on what he needed from us to be successful. He told me this:

“Aditi, there is one thing that I have that I want to keep, no matter what. If I go out for dinner and I see a client of mine at the restaurant, I want to be able to go say, ‘Hello,’ and not feel like I need to run out the back door. That’s it. If your strategy builds on the trust we’ve built, sign me up.”

The “restaurant test” is the perfect analogy to underscore the importance of trust. As I think about the countless talks I’ve given about the importance of our company’s strategy, when I boil it all down to its most basic form, it really comes down to trustworthiness. It’s the essential fuel for every sector, especially an industry like wealth management. Consumer trust in U.S. financial services companies has experienced double-digit declines in recent years . As a result, any organization that excels in building trust stands to have a significant competitive advantage.

When it comes to trustworthiness, leaders in every industry need to know that they are in the driver’s seat. And every leader can earn trust by doing the right thing in service to others. When I think about the essential elements of trustworthiness, here’s what I encourage other leaders in business to prioritize.

Build solutions with the strength to thrive in any scenario

As a consumer, few things are more frustrating to me than a product that works well only under the most pristine conditions. As a younger professional, I recall buying a light jacket from a New York City boutique. I loved how it looked, but it offered almost no protection from rain or wind. Ultimately, I stopped wearing it – because there were so few days that I could wear the jacket comfortably in the city.

The products and solutions we create should help people solve problems, not just in perfect conditions but in the real-world scenarios that each of us actually encounter.

That’s the sentiment that inspires the unique way that Northwestern Mutual approaches financial planning.

Our approach combines both protection and prosperity – risk management and wealth management – all in one cohesive financial plan. This helps to ensure that our financial plans perform in the best financial times and worst times. That plan, shaped with the support of an expert and empathetic financial advisor, can help provide peace of mind with clients – leading to trust.

And I’ve experienced this personally. It’s been a years-long, bucket list dream for me to take my tennis-obsessed son to London to see Wimbledon with his own eyes. But as they say, a goal without a plan is just a wish, so I planned for it. I met with my advisor, mentioned it in our annual check-in, and we set specific plans for me to save that wouldn’t sacrifice any of our family’s long-term ambitions or unduly expose us to life’s risks. This summer, in the face of economic uncertainty, we made that journey with full confidence – and it was a trip of a lifetime.

Build companies with the strength to thrive in any scenario

Building trustworthiness is a somewhat simple and shallow proposition when the economy is booming, the markets are rising every day and it feels like the financial fates are on our side. But it’s in the economic downside slides – the volatile times – when it’s much more challenging. These are the times when a company’s mettle is tested and true trustworthiness is built.?

Today, there are widespread fears of a recession , especially if early efforts to curb rising inflation are unsuccessful and interest rates continue to rise. The risk of economic recession in the near future is far from zero, so the question must be considered: “What can we do to ensure that our companies maintain trustworthiness, even in a down economy?” Headwinds and external forces must never be an excuse for losing trust.

It starts with financial strength. Northwestern Mutual is one of just six companies to receive a Aaa financial strength rating and a stable outlook from Moody’s , the prominent ratings agency. We’ve earned that rating, in part, by building a significant financial surplus – totaling over $37 billion – to help us weather any economic environment. That unrivaled stability is also reinforced by the way we go to market. None of our products prop up another; each stands on its own. That simple fact is powerful to clients. Their financial plan and products within it are designed to stand the test of time.

At Northwestern Mutual, we believe in something we like to call our intergenerational compact. It’s the belief that we are a part of something that’s bigger than ourselves. Some might call it “paying it forward” or leaving things better than you found it. We believe we have an obligation to create a greater good, building on the work of the generations who came before us for the benefit of generations to come.

This compact is the cornerstone of our business: every generation is treated equitably from our oldest policyowners to our youngest. It’s our responsibility to build for the next generation. We must fulfill every promise we’ve made and each one that’s yet to come. We know the compact is key to our success as 97% of our clients kept their life insurance coverage with us.

Alongside the compact, our CEO has challenged us to “remain on offense.” For our institutional investments team, that’s meant setting aside a healthy surplus reserve to endure and act opportunistically amid a possible downturn . It has also meant actively managing our company’s $270 billion general account with even more prudence and scrutiny. We are constantly analyzing global markets in search of value that ultimately benefits policyowners in the form of product values, financial strength and dividends. In the second half of 2021, we began de-risking our General Account portfolio, because we believed that market volatility was likely. Meanwhile, our carefully underwritten real estate portfolio – designed to perform well during inflationary periods – continued to deliver strong returns. These portfolio moves among other savvy decisions are driving this year’s strong performance: enabling us to keep the promises we made to policyowners.

Build an exceptional experience that satisfies customers in any scenario

The pandemic proved to even the greatest cynic the value of connection as a key component of trustworthiness. Today, the organizations that were able to remain open, facilitate connections, offer solutions, provide dynamic digital ecosystems and foster meaningful relationships are well-positioned for success now and in the future.

Over the years, Northwestern Mutual has been investing heavily to provide clients with not just expert advice, but also always-on service and resources to facilitate their ongoing planning, wealth management and risk management needs – at anytime from anywhere.

Those investments are driving strong business outcomes. Today, Northwestern Mutual ranks third overall in overall customer satisfaction on J.D. Power’s 2021 U.S. Individual Life Insurance Study and is tied for third on its 2022 U.S. Full-Service Investor Satisfaction Study . Notably, our company is the only company ranked among the top 10 in both studies. That combination of trust and satisfaction contributed to Northwestern Mutual’s most successful year on record in 2021 .

Leaders who care about the growth, competitiveness, and relevance of their businesses tomorrow must focus on the trustworthiness of their organizations today. And to do it, companies must work intentionally to do the right thing in service to others. They need to pass the “restaurant test” that my colleague so aptly described. At Northwestern Mutual, that commitment to trustworthiness has been our winning strategy over the past 165 years, and it’s how we’ll continue to earn wealth management business and drive results on behalf of clients in the years to come.

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Total surplus includes Asset Valuation Reserve and surplus notes.

Northwestern Mutual continues to have the highest financial strength ratings awarded to any U.S. life insurer by all four of the major rating agencies: A.M. Best Company, A++ (highest), June 2022; Fitch Ratings, AAA (highest), July 2022; Moody’s Investors Service, Aaa (highest), May 2022; S&P Global Ratings, AA+ (second highest), July 2022. Third-party ratings are subject to change and are a measure of the company’s relative financial strength and security but are not a reflection of the performance or stability of funds invested in a company’s separate accounts. Ratings are for The Northwestern Mutual Life Insurance Company and Northwestern Long Term Care Insurance Company.

Persistency rate based on internal data.

Policyowners are not investing in the general account portfolio when purchasing insurance or annuities. They're buying products backed by the financial strength of Northwestern Mutual.?Dividends are not guaranteed.

No investment strategy can guarantee a profit or protect against a loss.?