Policyowners' Examining Committee (POEC)

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2016 Policyowners’ Examining Committee Report

Since 1907, a group of three to five policyowners has been given unrestricted access to the company to independently evaluate its operations, management and strategic plans. Each year, the committee’s findings are published in the Annual Report. Below is the 2016 report that has been reviewed and approved in full.

Transforming to meet clients’ changing needs from a position of strength

We appreciate the extraordinary opportunity to serve on the Policyowners’ Examining Committee at a time when Northwestern Mutual is pursuing its new vision to earn its place at the center of clients’ financial lives through a comprehensive planning experience. This experience brings together a trusted financial professional, engaging technology and exceptional insurance and investment products. We congratulate the company for embarking on this transformative vision from a position of strength. Its industry‐leading financial performance, product value, brand reputation, client loyalty, superior competitive position and strong leadership team uniquely position the company for continued success. What truly sets Northwestern Mutual apart is the deeply held and singularly unifying value of always putting us, the clients, first. That belief is at the core of the company’s vision and strategy.

Through our interaction with the company’s senior management, we have witnessed their support for the new vision and strategy, and the great progress that has been made. Leadership has had the courage to make difficult decisions that are driving the company forward – while maintaining its financial strength and without jeopardizing the many other qualities that have made the company strong for nearly 160 years. We appreciate that the company is anticipating the changing needs of its clients and taking action now.

Continued success depends on further deepening connections with clients

While the company has made tremendous progress, in order to fully achieve its strategic vision, Northwestern Mutual must continue to develop deeper and more intimate connections with its clients by focusing on five key areas:

  1. Consistent articulation of the company’s evolving value proposition, which includes the integrated insurance and investments “protect and grow” approach to financial security;
  2. A broader view of the client, which will further evolve the strategy;
  3. Best‐in‐class digital capabilities, which open new opportunities to proactively reach out and connect with clients in the manner they want to be engaged;
  4. Next‐generation distribution capabilities, by proactively promoting widespread adoption by financial representatives of both full‐service financial planning and digital tools; and
  5. An agile corporate culture that enables innovation and transformation, which accelerates the speed of change.

A consistent articulation of the company’s evolving value proposition

We strongly support the company’s integrated strategy to be at the center of its clients’ financial lives through a comprehensive financial planning experience that brings together insurance and investments products to “protect and grow.” As the company continues to evolve its strategy, we challenge leadership to continue to think critically about what products and services are necessary to deliver on the new value proposition.

“Across the enterprise, we witnessed the unshakable tenet of doing the right thing and putting clients first.”

A broader view of the client, which will further evolve the strategy

We also challenge the company and the field to broaden its view of the client. We suggest seeing clients as their entire household, or “inner circle,” not just as individual policyowners. We believe that broadening the view of the client and focusing on important life events within that inner circle will provide greater opportunity to build multigenerational client relationships.

The company is making significant strides in its strategic digital capabilities

We applaud the company for appreciating the critical importance of digital capabilities to meet growing consumer expectations. We recognize and acknowledge the company’s acquisition of online personal financial planning and education leader LearnVest as a big, bold, visible step toward developing industry‐leading digital capabilities and improving the client experience. We urge leadership to push forward to create a preeminent digital client experience.

We agree that a state‐of‐the‐art digital platform is critical to deepening the company’s relationship with its clients and enabling representatives in the field to deliver a more consistent client experience. We see these digital capabilities as a key way to grow and support the field.

We also see a significant opportunity in the digital marketing and social media spaces – particularly when used in conjunction with data and analytics – to enable the company and representatives to better understand clients and their inner circles.

“We firmly believe that all clients would greatly benefit from an integrated experience that includes comprehensive financial planning and access to the full offering of products and services, delivered through a dedicated financial representative and robust digital resources.”

Efforts must continue to deliver the integrated experience to all clients

While we commend the company for making necessary strategic changes from a position of strength, we acknowledge that driving change within a highly successful, independent field force of financial professionals can be challenging. We firmly believe that all clients would greatly benefit from an integrated experience that includes comprehensive financial planning and access to the full offering of products and services, delivered through a dedicated financial representative and robust digital resources. We see an opportunity in ensuring that more financial representatives bring the full suite of products and services to clients as conceived in this new vision. We urge leadership to continue partnering with the field to test different training and reward models to align with the new strategy.

We appreciate that some members of the independent field force may be reluctant to alter their already successful traditional business model. Therefore, we agree with the company’s approach of aggressively training new recruits to take advantage of the new integrated model, facilitating experienced financial representatives' transition to the new model, and continuing to support the traditional model. The importance of field leaders and veteran representatives visibly supporting adoption of the new integrated model cannot be overstated.

“Clients first” is the core value that will see the company through this transition period

We believe that shifting from a “home office or field” focus to a “clients first” mindset will help Northwestern Mutual more effectively manage the unprecedented magnitude and pace of change. Across the enterprise, we witnessed the unshakable tenet of doing the right thing and putting clients first. While the company is tackling the challenges that come with transformation, this core value can bring the entire enterprise together around a common theme.

We urge leadership to leverage those champions in the home office and field who are agile, forward thinking and change‐ready to help others who are struggling. And while the strategy requires change, leadership must continue to reinforce the “why” and remain mindful of preserving the values that are essential to the company’s identity and success.

The company is on the precipice of a milestone year: 2017 marks the 160th anniversary of the company, the 110th year since the inception of the Policyowners’ Examining Committee, and the 25th anniversary of the Northwestern Mutual Foundation. We encourage the company to see these milestones as opportunities to both celebrate the company’s past and emphasize the ongoing need for change.

A call to action to the field: Take full advantage of all that Northwestern Mutual provides to deliver financial security to your clients

Because the company cannot achieve its strategy without a growing and vibrant field force, we want to close our report with a call to action to the field:

We encourage you to adopt and leverage the many tools and capabilities that the company is creating to help you build stronger, deeper relationships with us as clients and our inner circles. We are looking to you to help the company execute its strategy by adopting and promoting an integrated, planning-based approach that addresses both risk and wealth accumulation so that all of your clients have access to the full value of their relationship with Northwestern Mutual and you, their trusted financial professional.

‐ Report submitted Jan.12, 2017

2016 POEC Chair

Jaime A. Montemayor

Retired senior vice president and chief information officer for PepsiCo.

POEC Member

Nicole Arnaboldi

Vice chairman of Asset Management and head of Direct Equity Partners business of Credit Suisse.

POEC Member

Bethany R. Smith

Senior vice president of finance and chief financial officer of Capital District Physicians Health Plan, Inc.

POEC Member

Alfred “Chip” Johnson

Chairman and CEO of Modulant, Inc.

POEC Member

Derrik Deyhimi

Founder and CEO of Iconixx.

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Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company and its subsidiaries. Life and disability insurance, annuities, and life insurance with long-term care benefits are issued by The Northwestern Mutual Life Insurance Company, Milwaukee, WI (NM). Long-term care insurance is issued by Northwestern Long Term Care Insurance Company, Milwaukee, WI, (NLTC) a subsidiary of NM. Securities are offered through Northwestern Mutual Investment Services, LLC, (NMIS) a subsidiary of NM, broker-dealer, registered investment adviser, member FINRA and SIPC. Fiduciary and fee-based financial planning services are offered through Northwestern Mutual Wealth Management Company® (NMWMC), Milwaukee, WI, a subsidiary of NM and a federal savings bank. Products and services referenced are offered and sold only by appropriately appointed and licensed entities and financial professionals. Not all products and services are available in all states.