Insurer Investment In Coaching Firm Boosts Advisors

Northwestern Mutual’s investment in business coaching firm ClientWise amounts to an affirmation that advisors must migrate from solo practitioners to team builders and managers, experts said.

But it would be premature to conclude that Northwestern Mutual's majority stake in ClientWise portends a trend. In addition, the fact that a mutual insurer, not a stock company, invested in ClientWise is no accident.

The transaction, however, represents a different kind of deal for the life insurance industry that of late hasn’t been shy about planting stakes in insurance-specific technology startups or other companies. For examples, Northwestern Mutual purchased the online advice firm LearnVest in 2015.

“I think it is different and shows the importance of Northwestern Mutual supporting advisors in the best way possible,” said Edward Higham, managing director of Silver Lane Partners.

Silver Lane, which acted as financial advisor to the Northwestern Mutual-ClientWise transaction, declined to disclose financial details.

ClientWise, based in Mount Kisco, N.Y., will remain independent under CEO and founder Ray Sclafani.

Under terms of the deal, the business consulting firm will retain its other clients and remains free to work with them. But it’s a good bet that Northwestern Mutual has suddenly become a much more important client.

“Anytime you have strategic transaction like this, Northwestern Mutual is making a bet on ClientWise for practice management and the coaching of agents, so we expect Northwestern Mutual will be a larger client going forward,” Hingham said.

“It makes a lot of sense from a strategic perspective,” said Hingham, a former agent for New York Life.

The Bet on Multigenerational Teams

A scan of Sclafani’s blog posts reveals he has given much thought to how to press forward with advisor teams.

His bylined postings pepper his company’s blog pages with “Your Most Important Clients? It’s Your Team,” and “Advisory Team Leader Non-Negotiables,” or “Is Your Kid the Right Succession Plan for Your Business?”

Team-based expertise is one of the reasons Northwestern Mutual hired ClientWise in the past. It's also why this insurer, well-known for relying on a career agency force, appears to be committed to deepening the partnership.

For Northwestern Mutual, ClientWise is a big differentiator, experts said.

The deal will help the insurer recruit new advisors and retain existing advisors working to perpetuate Northwestern Mutual’s ethos. It also will help secure the insurer’s financial future through sales of products and service.

Only recently have advisors and agents given more thought to their agencies as a team, not as a solo endeavor.

“I’m not sure that many advisors 15 years ago focused on building multigenerational teams,” Sclafani said.

For Sclafani, team-based models – building teams, structuring interdependent teams, putting together sustainable teams – are the future for the advisory business.

Withering Soloists

Competent, even brilliant, solo agents and advisors litter the advisory industry.

But when those key advisors retire or call it a career, it’s clients who suffer.  Accounts head for the proverbial orphanage and the relationship value and the chemistry built over decades between advisor and client ultimately withers and dies.

And right now, with the average ages of founding advisors pushing into the high 50s and even low 60s, many of those client relationships are in danger of dying at a faster rate than they can be renewed.

Unless advisors are bringing in the next generation and nurturing talent, they are going to have to “turn out the lights on the way out, so it’s critically important if you want residual value in the firms you’ve built,” Hingham said.

Advisories with a clear succession plan in place fetch higher multiples when the time comes for the founders and CEO to sell. However, the fact that relatively few advisories have a solid succession plan remains one of the industry’s enduring ironies.

In any case, clients and heirs of client wealth are far better served when advisors follow a precise and detailed succession plan. This matters in an era when trillions of dollars are expected to pass from aging baby boomers to successors.

“Many of our competitors focus on consumer and direct channels,” said Christian Mitchell, president of Northwestern Mutual Wealth Management. “We here are investing in the advisors.”

Transfer the Trust

The challenge is for advisors is to attract new advisory talent, share and eventually transfer that trust to another member of the team.

But in a sales culture where the advisor owns the relationship with the client, in where the advisor has been framed as a solo practitioner, punting accounts to another, younger advisor may not sit well with clients, said Sclafani.

Expertise provided by shops like ClientWise is “just what the industry needs,” said Louis Diamond, vice president and senior consultant with Diamond Consultants, an advisor recruiting and consulting firm in Morristown, N.J.

“The way advisors solve for teaming or succession is either by not solving for it, which is bad for the firms and clients, or they look to sell the practices, and often that’s not done correctly so it’s bad for everyone,” said Diamond, whose company was not involved in the Northwestern Mutual transaction.

There’s no question that financial advisors looking to grow organically within the Northwestern Mutual fold will benefit from the management and coaching experience of a ClientWise as new advisors aren’t coming into the business fast enough.

For ClientWise, fast-track access to thousands of Northwestern Mutual advisors is “a massive, massive opportunity,” Diamond said.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].