NewsLetter - February 2020


I’m not sure how comfortable this would make me feel if I were a client; however, as Barbara Roper notes at the end, it is an impressive effort to meet the new CFP Board standards.

“Northwestern’s CFP disclosures put industry’s fraught questions in focus” – Financial Planning

“More than 1,000 CFPs affiliated with Northwestern Mutual now have to make their conflicts of interest abundantly clear and explain how they manage them in clients’ best interests.

“The insurer and broker-dealer has created a disclosure document intended to comply with the CFP Board's new code of ethics and standards of conduct. In the document, advisors tell planning clients outright that they’re incentivized to ‘sell Northwestern Mutual insurance products to a client often’ – and for the highest possible commissions.

“The CFPs at Northwestern also have a financial interest in selling permanent life insurance with higher initial premiums than term products. They’re encouraged ‘to sell more expensive products and services to you which will have the effect of increasing my compensation,’ the document states. They can be paid on an ongoing basis for selling a Northwestern variable annuity in a brokerage account with less than $50,000, but not for selling a mutual fund, the brochure says.

“‘I know that in the long run, I will benefit most by serving you well,’ it says later. ‘Your interests and my interests align in this respect because I rely heavily on the referrals I receive from satisfied clients. This in itself helps to mitigate the material conflicts of interest described above.’”

Financial Planning obtained the remarkable 8-page template, which is entitled “My commitment to you as a CFP professional.” The traditional brokerage and insurance incentives don’t stand out as much as the firm’s “sincere effort to explain those conflicts clearly,” according to Barbara Roper, director of investor protection for the Consumer Federation of America.

“I’ve read a lot of these types of documents over the years, and this is clearer than most, Roper said in an email.”