Is Northwestern Mutual a pyramid scheme? No. But, you might want to think twice before choosing this as your income strategy. Here is why.
Northwestern Mutual employs over 6,000 financial advisors and representatives across North America.
The financial services company ropes in young college graduates. This includes those seeking to break into the financial and insurance industries. However, the company’s actual goal is to sell life insurance to your friends and family.
In this income idea guide, I will discuss my personal experience with Northwestern Mutual. I will also delve into the company’s compensation structure.
This also includes your potential earnings as one of their financial advisors. By the end of this guide, I hope you understand the various pros and cons of working for Northwestern Mutual.
This article was penned by our Editorial Team at Incomepedia with the help of a former Northwestern Mutual Financial Advisor.
Table of Contents
My Personal Experience
My story with Northwestern Mutual began in late 2020. I had just graduated with a Finance degree and was eager to find a lucrative career. I had a couple of summer internships under my belt. Therefore, I was confident I’d be able to secure a job at a financial services firm in my city.
My confidence subsided once I began looking up entry-level job posting firms in my area. Can you believe I found only SEVEN results for entry-level financial advisor roles in my city? That was the total number of results I found on job sites like Indeed, Monster, and LinkedIn combined.
It seemed most firms weren’t hiring fresh graduates at the time. This was presumably due to the COVID-19 economic downturn.
Most of the postings I found were for internships at large financial firms. However, these positions were probably receiving thousands of applications from people. Most likely people who were in the same boat as me.
After three months of filling out job applications in tangentially related fields such as business management and accounting, I stumbled onto a financial advisor position opening at a company called Northwestern Mutual.
The name “Northwestern Mutual” sounded familiar, but I wasn’t sure if I had ever heard of them before. After all, “Northwestern Mutual” is a very generic-sounding company name.
I looked over the job posting details. I was surprised to see they accepted applicants with as little as a high school diploma. I grew confident I would be selected for the role, given that I had a finance degree.
So I filled out the job application and eagerly waited for a response from the company. I heard back from their hiring manager a week later and was invited for an interview at their local office.
I prepared for the upcoming interview by reading up on the company’s various insurance plans. I also went through employee reviews on Glassdoor to learn about the company’s various pros and cons.
Some people seemed to enjoy the flexible work hours the company offered. Others complained that it felt like a pyramid scheme. However, they didn’t specify how.
I underwent the interview later in the week. The hiring manager was very polite. However, he seemed most interested in knowing if I was passionate about sales. He didn’t really ask me about my qualifications or prior work experience.
This should have been a red flag, but I was eager to get the job. I interview went well, and I was hired on the spot. The hiring manager told me to arrive at the office the following Monday to start my new job.
The seven months I spent at Northwestern Mutual definitely felt mixed. I spent most of my working time at the company promoting its insurance policies to other people. This included family and friends.
I performed some of this promotion myself. In other cases, I was partnered with another financial advisor. The compensation wasn’t bad, but the work environment felt very stressful.
I was definitely having difficulty selling insurance. This was also a time when most people were being conservative with their spending. The pressure eventually got too great, and I quit my role.
I eventually found a job at another financial services company. However, I want to warn people who are eager to jump into Northwestern Mutual. Their financial advisory role may be attractive. However, it may not be right for you.
What is Northwestern Mutual
Northwestern Mutual is a popular financial services company based in Milwaukee. The company has been operating for over a century. In this time, it has steadily built a name for itself in the financial world.
The company has over 6,000 financial advisors at offices across the United States. These advisors sell insurance policies such as:
- Life Insurance
- Disability Insurance
- Long-Term Care
Northwestern Mutual reported annual revenue of $34 billion in 2021.
History
Northwestern Mutual was founded in March 1857 in Janesville, Wisconsin. The company’s original name was Mutual Life Insurance Company of the State of Wisconsin.
This firm relocated to Milwaukee in 1859. It then received its first insurance claims shortly after. Two people who had purchased insurance from the company died in a tragic train accident. The losses amounted to $3,500. However, the company possessed only $2,000 at the time.
The company’s President and Treasurer personally lent the remaining funds needed to pay the claims. This helped the firm establish itself as a reliable name in the insurance industry.
The Mutual Life Insurance Company of the State of Wisconsin focused primarily on life insurance in the decades that followed. However, they also began investing in minerals in the mid-1900s.
The company introduced a disability insurance plan in 1969. It added long-term care insurance to its plans in the 1990s. The company renamed itself Northwestern Mutual in 2000. This change was to reflect its wider range of services.
Northwestern Mutual launched its wealth management division in 2001. It was called Northwestern Mutual Wealth Management Company. They also completed the construction of their skyscraper head office in Milwaukee in 2017.
Northwestern Mutual has $308.8 billion in assets as of 2021. They have $2 trillion in active life protection and annual revenue of $34 billion.
CEO and Staff
Northwestern Mutual’s President and CEO is currently John Schlifske. Schlifske received an Economics degree from Carleton College. He received a Master’s degree in Finance and Accounting from Kellogg Graduate School.
Schlifske joined Northwestern Mutual as an investment specialist in 1987. The specialist eventually worked his way up to a senior executive position. He later headed various parts of Northwestern Mutual’s business operations. Schlifske was then appointed the company’s CEO.
Northwestern Mutual officially has approximately 33,800 employees at its corporate offices, according to its LinkedIn profile. Around 6,000 of these employees are financial advisors.
Is Northwestern Mutual a Pyramid Scheme?
So is Northwestern Mutual a pyramid scheme? I can’t answer this question without first defining what a pyramid scheme is.
I’m no legal expert, so I will defer to the United States Securities and Exchange Commission (SEC) definition of a pyramid scheme.
According to SEC, a pyramid scheme is “an investment fraud in which new participants’ fees are typically used to pay money to existing participants for recruiting new members.”
The agency states that pyramid schemes typically have each of the following traits:
- No genuine products or services are sold;
- Members are promised high returns in a short period of time
- Members are told the business model allows them to make easy money or passive income
- There is no demonstrable revenue generated from retail sales
- Members must make a purchase to sign-up
- The business has a complex commission structure
- The business model places a high emphasis on recruiting
Why Northwestern Mutual Isn’t a Pyramid Scheme
Northwestern Mutual isn’t a pyramid scheme because it doesn’t have most of the traits specified above. Some of the reasons I don’t believe it is a pyramid scheme include:
#1. Northwestern Mutual Sells Offers Genuine Services
Northwestern Mutual offers a wide range of financial services. As a financial advisor, I sold many types of insurance plans. This includes life insurance, disability care, and long-term care.
I also recall instances where the company’s insurance plans helped clients with hospital bills. Therefore, I can confirm their insurance plans are genuine.
#2. Northwestern Mutual Doesn’t Promise High Returns in a Short Period of Time
You don’t need to pay to start working at Northwest Mutuals. Therefore, I can’t claim the company made any promises about returns.
#3. Northwestern Mutual Doesn’t Say Their Business Model Allows You to Make Easy Money or Passive Income
Northwestern Mutual offers a generous commission cut. However, they don’t state you will make “easy money” or “passive income” through their business model.
#4. There is Demonstrable Revenue Generated from Services
Northwestern Mutual generated a whopping $34 billion in revenue in 2021. The company’s annual disclosure mentions this revenue came from premiums and retail investments.
#5. Members Don’t Need to Make a Purchase to Sign Up
You don’t need to pay to sign up with Northwestern Mutual. The company offers free training, so you won’t need to bear any expenses.
#6. The Business Has a Simple Commission Structure
Northwestern Mutual stands out from pyramid schemes and multi-level marketing companies because it has a simple commission structure. You get commissions from the plans you sell.
#7. Northwestern Mutual’s Business Model Doesn’t Require You to Recruit New Members
Northwestern Mutual doesn’t encourage you to recruit new members. This is an important trait that separates it from pyramid schemes.
The company is more interested in getting you to sell insurance to your family and friends. I would assume they don’t want you to recruit new members because they bear training costs.
Limiting the number of financial advisors may also help keep their work environment less competitive. However, I still recall the environment I was in being fairly competitive.
Why Do People Think Northwestern Mutual is a Pyramid Scheme?
So why do people think Northwestern Mutual is a pyramid scheme? The company doesn’t check off any of the boxes in SEC’s definition.
It’s difficult to deduce why some former employees on Glassdoor believe the company is a pyramid scheme. However, some possible explanations include:
#1. Northwestern Mutual Targets Young People
Remember when I said the Northwestern Mutual job posting included applicants with nothing more than a high school diploma? That wasn’t a mistake.
The financial services company aims to hire young people as financial representatives and advisors. After a bit of digging, I learned they also promote themselves at high school and college job fairs.
This is similar to multi-level marketing companies such as Primerica and Arbonne. These companies seek to hire young people with a limited understanding of the professional world. This enables them to maintain a workforce that doesn’t know if they are being underpaid or overworked.
#2. Northwestern Mutual Makes Money Even After You Leave
You might be surprised to learn Northwestern Mutual keeps profiting even once you leave the company. These profits are from the insurance premium clients pay.
You will get a cut of these deductions while you are an employee. However, the company will get these profits after you leave. This structure gives Northwestern Mutual an incentive to bring on new employees.
How Much Money Can You Earn from Northwestern Mutual?
You’re probably wondering how much you can earn from Northwestern Mutual. The insurance company hasn’t publicly disclosed how much its financial advisors make. However, I can offer an estimate using salary postings on Glassdoor.
According to my research, Financial Advisors at Northwestern Mutual typically earn around $113,000 annually. The lower end of this range is $55,000 per year. The upper end is $190,000 per year.
Your salary will definitely be closer to the lower end once you start working at this company. This pay is fairly good for a financial advisor role that requires little prior experience.
How to Earn Income Through Northwestern Mutual?
Northwestern Mutual allows you to make money in two ways. These are:
- Commissions from Sales
- Annual Bonus
#1. Commissions from Sales
As a financial advisor, you are entitled to receive a commission each time you successfully get a client to purchase one of Northwestern Mutual’s insurance plans.
100% of your income will be commission based in your first year. This percentage will gradually increase as the company offers base pay. However, I didn’t stay with the company long enough to find out how much this base pay would be.
#2. Annual Bonus
Northwestern Mutual gives its Financial Advisors annual bonuses based on their performance. According to Payscale, this bonus is around $5,000.
#3. Service Awards
You can learn more about Northwestern Mutual’s commission-based pay in the following Youtube video:
3 Key Advantages of Becoming a Northwestern Mutual Financial Advisor.
Pro #1. Free Training
Northwestern Mutual offers free training for its incoming employees. This training helps you become familiar with the company and its background.
The training coaches also teach you about the company’s various insurance plans. However, the bulk of the training program is on how to pitch the company’s services to clients.
They typically go over cold calling techniques and how to get through to clients in different ways. These sales techniques will be useful even after you leave the company. Therefore, you definitely gain something by joining Northwest Mutual.
Pro #2. Flexibility
Northwestern Mutual lets you reach out to clients whenever you want. You’re under no obligation to meet a sales quota. However, you will need to keep up with your work if you want to make money. This is due to the company’s 100% commission-based earning scheme.
Pro #3. Getting Health Coverage
Northwestern Mutual offers many health insurance coverages for its employees. This includes a medical plan, a dental plan, and a vision plan.
This is much better than multi-level marketing companies that don’t consider you an employee. Such companies aren’t under any obligation to offer you health insurance. For this reason, you might want to work for Northwestern Mutual.
3 Key Disadvantages of Becoming a Northwestern Mutual Member.
Con #1. No Guaranteed Pay
The downside of having a 100% commission-based pay structure is that there’s no guaranteed pay. This means you won’t get any money if you don’t make any sales.
This factor can be concerning if you doubt your ability to make sales when you first start. The good news is that the insurance company does offer guidance. They will teach you how to approach clients and close the deal.
Con #2. The Senior Financial Advisors Make the Most Money
In some cases, you might encounter clients who are willing to pay extra for higher services. This includes wealthy people seeking specialized plans and financial planning.
You might be able to make more money if you close the deal. However, the corporate culture encourages you to forward such clients to senior advisors. Therefore, you might miss out on some very profitable sales.
Con #3. Ranking System
Northwestern Mutual also employs a ranking system to keep its work environment competitive. Advisors who top the rankings each month get extra perks such as an office. This can cause your fellow advisors to become absolutely aggressive in sales competitions.
You will also likely reach out to your personal contacts for sales at some point. No one wants to tarnish their relationships with business stuff. However, this is one of the things such a work environment promotes.
Major Northwestern Mutual Controversy.
Insurance companies often experience many lawsuits. Northwestern Mutual is no different. This American insurance company has been around for over a century, so there are plenty of cases to go through.
I’ve summarized three of the most interesting lawsuits below:
#1. Reduced Payouts Lawsuits
In 2015, Northwest Mutual settled a lawsuit over claims it had reduced payouts. The lawsuit was put forward by a small group of clients. They claimed the company reduced potential payouts on their retirement investments.
The lawsuit covered 29,000 former annuity owners and 4,000 current owners. Northwestern Mutual denied any wrongdoing, even after settling. The company referred to the payout as “dividends” on short-term bonds.
#2. Brokerage Pocketing Cash Controversy
In June 2020, Northwestern Mutual was fined $350,000 for failing to protect client accounts. Records revealed that one of the company’s brokers had pocketed $570,000 from their former clients.
The broker in question deposited proceeds from fraudulently taken loans into the company’s accounts. This broker then withdrew cash from these accounts.
He was eventually charged with mail fraud and identity theft. However, the company was also fined for failing to prevent the theft.
#3. Unpaid Wages Lawsuit
In June 2009, three of Northwestern Mutual’s former financial representatives sued the company for $200 million. They alleged the company had denied them minimum wages and overtime pay.
The company countered by stating that Financial Representatives were independent contractors and not paid employees. The case’s outcome is not publicly known. However, Northwestern Mutual may have settled out of court.
Final Thoughts
Northwestern Mutual’s business model does offer many potential benefits for people who are willing to put in the effort. However, you should definitely be prepared to deal with a stressful work environment.
Selling insurance to people isn’t easy for anyone. A new graduate who has little prior experience as a salesperson will struggle even more. The good news is that the pay can be quite good once you become proficient at making sales.
The company also offers guidance and training to help you get better at your job. You might be able to make more money as a financial advisor at other companies. However, working at Northwestern Mutual might not be a bad idea if you want to learn a few things.
Who Would Northwestern Mutual Be a Good Fit For?
Northwestern Mutual would be a good fit for people interested in gaining work experience. The company seeks out young graduates. Therefore, you have a high chance of securing a job at Northwestern Mutual.
You should be prepared to deal with the stress that comes with a 100% commission-based model, though. You won’t make any money if you’re not willing to put in the effort. For this reason, you shouldn’t get into Northwestern Mutual expecting a base salary.
I wanted a safe and stress-free job that offered good pay. I chose to leave Northwestern Mutual because I didn’t find that at Northwestern Mutual.
This company definitely isn’t a pyramid scheme. But you might not be able to hack it if you’re bad at managing stress. Consider trying out this income idea if you’re up for a challenge.
Frequently Asked Questions
Does Northwestern Mutual have a good reputation?
Northwestern Mutual has operated for over 165 years. It currently has an A- rating from the Better Business Bureau. This implies it is fairly good at handling customer complaints.
Can You Lose Money as a Northwestern Mutual Financial Advisor?
You don’t have to pay to work at Northwestern Mutual. This places it above multi-level marketing companies such as Primerica that ask you to pay when signing up.
Does Northwestern Mutual force you to recruit people?
Northwestern Mutual doesn’t force you to recruit new members. But they do encourage you to sell insurance to your family and friends.
Sources
- Northwestern Mutual Insurance Plans: Northwestern Mutual Insurance
- Northwestern Mutual Annual Revenue: Northwestern Mutual 2021 Financial Results
- Northwestern Mutual Annual Revenue: About Northwestern Mutual
- Northwestern Mutual Company History: Northwestern Mutual History
- Northwestern Mutual Company CEO: Our Leaders
- Northwestern Mutual LinkedIn: Northwestern Mutual Profile
- Northwestern Mutual Annual Report: Annual Report 2021
- Northwestern Mutual Financial Advisor Salary: Salary Details for a Financial Advisor at Northwestern Mutual
- Northwestern Mutual Financial Advisor Bonus: The Northwestern Mutual Life Insurance Company Bonuses
- Northwestern Mutual Employee Health Coverage: The Total Rewards of Working at Northwestern Mutual
- Reduced Payout Lawsuit: Northwestern Mutual to pay $84 million to settle annuities lawsuit
- Brokerage Lawsuit: Northwestern Mutual’s brokerage fined $350,000 after broker is charged with pocketing customer cash
- Unpaid Wages Lawsuit: Northwestern Mutual Sued For $200 Million
- Better Bureau Rating: Business Profile Northwestern Mutual
