What’s the Most Important Quality of a Financial Services Company?

John Schlifske is the Chairman, President and Chief Executive Officer at Northwestern Mutual

“What’s the most important quality of a financial services company today?” That’s the question I recently put to AI sensation ChatGPT before it disappointingly told me it lacked sufficient source material to answer it.

I don’t understand how ChatGPT came up empty on a question I can answer without a second thought. Hands down, the most important quality of a financial services company is old-fashioned financial strength. That was true yesterday. It’s true today. It will be true tomorrow.

Financial Strength Is Especially Critical Now

In under a minute, today I can open an account, move my money, or make a big trade with a few swipes on my smartphone. That’s an exceptional improvement in my financial life. But it also introduces new risks.

That convenience is compelling. It should be – like ChatGPT, it’s a step forward. But it can also cause consumers to be overly generous with their trust. The ease of doing business online – combined with slick marketing, user-friendly apps, and crypto-era easy money promises – makes people overlook much more important enduring qualities like financial strength.

Add this to the real challenges our industry has faced in recent years – the pandemic, inflation, choppy markets, and now fast-rising interest rates – and taking a hard look at a company’s ability to “walk the talk” and meet your needs not just now, but years from now, is as important as ever.

Financial strength helps a company to keep its promises and continue putting the customer first when the economy takes a turn. Financial strength can also help support outstanding product value year after year. Financial strength empowers a company to embrace fresh ideas, absorb the changes brought on by new technologies – like ChatGPT – and innovate thoughtfully rather than fall to disruption. (Bear in mind that Microsoft – one of Northwestern Mutual’s peers on the short list of America’s strongest companies – has invested $13 billion in ChatGPT’s success.)

At Northwestern Mutual, financial strength has been at the core of our being for 166 years. We value it so highly because it’s the most effective means to fulfill our defining commitment – to help our clients to not just survive, but thrive, through all economic conditions.

Choosing the Right Partner

Who benefits when the company succeeds?

It’s worthwhile to consider the economic incentives that motivate the company you partner with. As a mutual company, we succeed when our clients succeed. We aren’t beholden to shareholders on Wall Street or private equity firms engineering a cost-cutting turnaround.

At Northwestern Mutual, our incentives squarely align with our policyowners’. One example of how policyowners directly benefit from the economic value we create – we plan to pay an industry-leading $6.8 billion in dividends in 2023, more than three times our closest competitor.

Do they innovate for their customers?

In 2022, the proprietary technology we developed to build interactive financial plans for our clients received a FinTech Breakthrough Award. For many of our clients, getting life insurance is now an entirely digital process. We use AI and machine learning to help get them coverage faster, build a digital fortress around their personal data, and surface deep insights that help them achieve better, long-term financial results.

Here's the thing, with every investment in technology we innovate with purpose – to drive better outcomes for clients.

Do clients stick with the company?

Companies that keep their promises keep their clients. Ninety-seven percent of Northwestern Mutual clients maintain their life insurance coverage year after year – a clear indication of client satisfaction.

At Northwestern Mutual, especially when it comes to finances, we believe in the transformative power of human connection. So much exists digitally, but managing money remains a deeply personal endeavor. The trusted advisors that made us into the U.S.’s largest direct provider of individual life insurance build relationships with their clients that last a lifetime.¹

What do your financial providers do to attract and keep you? What would a life-long relationship with someone who understands your financial life and goals mean for you and your family?

Are they ready for rainy weather?

Today’s inflation, fast-rising interest rates and volatile markets are putting companies to the test, particularly those that have taken on excessive debt and risk. And when the pressure is on, many companies prioritize survival over their clients.

As a company founded in 1857, we think about being there for clients in decades and even centuries. So, we manage the company conservatively. That’s why we maintained a record surplus of $37 billion in 2022 – our “rainy-day fund” to ensure we can honor, unconditionally, the promises we make.

So much in financial services is about longevity, which means leading on essentials like liquidity and access to capital. Thinking beyond a fresh brand with appealing technology, will your company deliver your funds when you need them?

What do the outside experts say?

Most of our relationships with companies begin and end at their product, with little-to-no thought needed for their financial soundness.

That’s not true for your financial company, especially one you’ll rely on for years.

So, it pays to be sure its financial house is in order, too. Are they regulated by state and federal oversight? Are your investments or deposits insured? Beyond that, are they in good, or better yet, great financial health?

The major credit rating agencies – Moody’s, A.M. Best, Fitch, and S&P Global – are in the business of accurately grading company strength similar to, but more comprehensively than, an individual’s credit score. This provides you an unbiased relative view of the soundness of the companies you do business with.

In 2022, Northwestern Mutual maintained the highest financial strength ratings awarded to any life insurer and was one of only five companies in all industries to receive those ratings together with a stable outlook from all four agencies.²

The Future’s Unknowable, So Be Ready for Everything

Did you predict the pandemic? The 2008 Financial Crisis? The return of inflation? Neither did I. Change is the only certainty. That’s why we should make our long-term choices carefully. When trusting a company with what you've built and are building, the top quality to look for is the financial strength to always put you first and be there when you need them. Period.

¹ Latest U.S. rank as of 2021 based on direct premiums written. Source: S&P Capital IQ Pro. Prepared and calculated by Northwestern Mutual.

² Among U.S. life insurers. Ratings are for The Northwestern Mutual Life Insurance Company and Northwestern Long Term Care Insurance Company, as of the most recent review and report by each rating agency. Ratings as of: 12/22 (Moody’s Investors Service), 06/22 (A.M. Best Company), 08/22 (Fitch Ratings), 07/22 (S&P Global Ratings). Ratings are subject to change.