Name: Northwestern Mutual CEO: 'Look at volatility as an opportunity not a risk'
Uploaded: 2022-04-13
Duration: 10 min 20 s
Description: CEO John Schlifske says 'recession is a long way off.'

CEO John Schlifske says "recession is a long way off."

Northwestern Mutual CEO: "Look at volatility as an opportunity not a risk"

John E. Schlifske - CEO, Northwestern Mutual

Leadership

Northwestern Mutual CEO: "Market Volatility is not a risk" 

john, so good to see you again. Thank you so much for joining us. Uh, you know, you probably hear this every day from your clients at Northwestern Mutual. How do I protect my portfolio? You know, people are getting panicky because of these messy financial markets we have and the confusion about the global landscape. What's your best advice? What are you telling people? The best advice that I can give and that we give to our clients is focused on the long term and stay focused on that regardless of what's going on around us. The war in Ukraine is an example. It's, it's a heartbreaking, uh, war, the devastation, the loss of life. Uh, and it's easy to get distracted by that as an investor. But ultimately, if you focus on the long run and don't let sort of these short term gyrations take your eye off the ball, That's the best advice we can give. Don't let the fear of what's going on on one side or the greed of euphoria if we get there cause you to do something different instead just focus on the long run because we know in the long run markets go up. Well, you know, the last time that you and I talked, it was just at the beginning of the coronavirus pandemic and your investment advice back then was stay the course and you said just because equities are down is no reason to sell them. But you know when people see all this news about huge market selloff, they feel they should be doing something and it's risky not to do anything. So how is this market volatility affecting the way that you're advising your clients and how you talk to them? Well, I think you have to look at volatility as an opportunity, not as a risk. And so when stock prices go down, uh, my personal view is that the time to buy them, right? So you, you never want to be buying something that you want when it's the most expensive, you want to buy it when it's the least expensive. And the opposite goes for when markets are at the top, That's probably a time to maybe lighten up a little bit and diversify into some more stable asset classes. And you're right. People do feel that they need to take some action when something happens. And we're okay with that on the margin. When stocks are down, put a little bit more inequities when they're up. Maybe take a little bit off the table and diversify into some safer asset asset classes if that'll make you feel better. But in the long run, stick to your plan and use volatility not as a, as a mechanism for risk, but as an opportunity. Well, it's april and as you know, this is national Financial literacy a month. So teaches some of the other critical dues and don't for individual investors three keys first. You need to say more than you thought in investment returns are probably going to be lower in the future. So you need to say more. Second of all you need to have a plan, it's just investing money isn't enough. You need to know where you're going, how you're going to get there and what the instruments to do that are. And then lastly, you need to work with a trusted advisor. This notion that you can do it yourself is crazy in the investment world as it is in the medical world. And so work with an advisor that helps you get where you want to go. When your clients or other people ask you, how do you feel about the situation? Economic and market wise, are you optimistic or pessimistic? What do you say? I'm quite optimistic right now about the economy. I think we're probably closer to the end of the game if you want to, if you want to think about that for maybe where there's a recession coming. But right now the consumer balance sheet has never been stronger, unemployment has never been lower wages and salaries are rising at a fast rate. So from a consumer perspective, we've never been in a better position. In fact, in some ways this is the best it's ever been. But you talked to any consumer and they're aware of all of the headlines about inflation. Uh and they say that they can feel it when they go grocery shopping and when they're paying for their uh gasoline and as a result now, we're hearing from economists, I'm saying we're in for a severe downturn, maybe a recession. So does that sound right to you? Uh, inflation is real right now. I know it hurts when you're buying certain things, especially anything energy related and, and we're seeing our costs go up. But at the end of the day, a huge part of this inflation I think is transitory, it's related to supply chain issues and it's going to go away over time. So even though it may hurt right now, it's going to get better. And I think the recession is always a possibility. But I think it's a long way off. There's just too many good things going on in the economy right now, inflation that was standing to even come close to derailing the economic progress. We've got, well, let's talk a little bit about Northwestern Mutual itself, you've just come off of a really strong year, Revenure rose to an all time high. Uh, your company set an industry record in 2021 for the most life insurance sales of any company. It was an increase of 52 Has the start of 2022 changed all of that. Or do you see the same trend lines going forward? We see the same trend lines going forward, customers of ours are policy owners. They need financial security more than ever. It's more of a latent demand. I'm not sure people wake up in the morning saying I'm gonna get financially secure, but they know it's there And that notion that I need to do something right now to become even more secure or begin to become secure financially has never been stronger. Well, that huge jump in your life insurance sales is unusual in your business. Do you attribute that to Covid and that people just felt for health concerns, I need a life insurance policy or was there something else? I think it's more than just Covid. Covid is definitely part of it. But if you look at our Uh, sales increases increases, it was both in 2020, and 2021, it was substantially higher than the rest of the industry. So there's something going on at northwestern mutual where we're sort of breaking out from the rest of the pack as it relates to life insurance. And I think it gets back to this notion of relevance combined with planning and a trusted advisor and and that value proposition is really resonating with our clients and their and they're really calling us up asking for help and advice versus us having to call them, which is a unique situation to be in. But it's very, it's very enjoyable for us right now. I understand that it's also help because you have pushed through this a digital approval process. Tell us how that technology has also been a factor in increasing your life insurance policy. So one of the things that we're working on pre pandemic, was this notion of improving the customer experience for our policy owners and our investment clients and that involves basically taking a lot of sort of old analog processes, filling out applications, uh doing telephone interviews, all that kind of stuff and digitizing it, trying to make it both easier to do faster to do. And actually in the end create a process for clients that's that's more satisfying. They know where they are, they know where they stand, they know what's going on and it's not quite as mysterious as it used to be. So, I think the digitization has been to help. I also think frankly this notion of being able to communicate more effectively through electronic devices on your phone when you want it when you need it. Not, not always having to talk to someone. That whole notion of of creating more digital processes has really increased our relevance with our client base. Yeah, yeah. I heard you were doing now zoom meetings as opposed to having somebody come to your house and talk to you. So it sounds like it became a much faster process. Maybe a couple of days instead of a couple of months. Is that it? Yeah, we've accelerated the purchase process substantially. And a huge part of that is zoom meetings. And when the pandemic started, we didn't know if people would like engaging with our our advisors through digital means like zoom and it's actually turned out not only do they like it, but they like it better. There's, there's something about zoom, you know when it's going to start, you know when it's gonna end, you can factor it into your calendar more easily. And I, and I think from our, from our advisors perspective it allows them to be more productive to, so when you add all that up plus the cycle times are much faster. We're in a much better place. Yeah, A lot of things have been changing in, in your industry. You wrote an op ed piece for fortune. Covid has rewritten the rules on financial planning and you say that the pandemic shifted expectations about some of the hard fast rules um that we're all used to retiring at 65 making sure you have a six months of savings of an emergency funds. What are the new reality first of all that the retirement isn't the end of the game, but it's the beginning of the game when it comes to investment. So you need to be just as uh sort of invested in your retirement savings and the way it's invested as you ever did before. Second of all this notion of a 60-40 portfolio, 60% equities, 40% fixed income is going to carry you in retirement doesn't work anymore. You need to feather in other, more secure assets like permanent life insurance and things like that that help you deal with the longevity risk in retirement because people are leaving leading longer and longer. And then lastly, I think at the end of the day, you need to think about In retirement how you're going to spend your money differently. You need an emergency cash for unsure. But this notion that I'm just locked into a 4% of my portfolio spend limit is crazy. Need to capitalize on that, enjoy retirement and spend appropriately while you can. Well, the pandemic has also changed our expectations about leadership. Um john you've worked at Northwestern Mutual for 35 years, 12 of them as Ceo in the last two years. How has your job as Ceo changed when there's a crisis like this going on? The role of a leader is not to sit back and wait, but it's too lean into it and to really a effectively deal with it. And we did that back in March and april and it's paid off and I keep telling people that that's I think part of the success that we're having right now now to do that, you have to have trust, you have to have financial strength, you have to have confidence. All that has to be built ahead of the, ahead of the whatever is going on. But ultimately where, where I think what people are looking from, C. E. O. S. Is leadership and leadership means taking advantage, leaning in doing the right thing when these things are going on