Financial Strength And Strength Of Character – Both Are Needed For Success

Inflation, market volatility, restless shareholders, waning consumer confidence and a potential recession are putting pressure on a growing number of companies across industries. In fact, the latest Consumer Confidence Index revealed that confidence fell for a third consecutive month, and now stands at its lowest level since February 2021.

As a result, many companies are scaling back on investments and looking for short-term success to increase consumer optimism and drive revenue. At the same time, there are companies that are moving forward and acting strategically to ensure they deliver relevance, trustworthiness and value to their customers long into the future.

At Northwestern Mutual, we are always working to future-proof our organization. In my mind, the best way to future-proof a business is the pursuit of being indispensable to your clients, year after year. We have three distinct focus areas that help position Northwestern Mutual as indispensable: deepening customer relationships, prioritizing trustworthiness and creating a company for all economic seasons.

Today, it's not enough to deliver great products. Companies must also offer a superior customer experience or risk losing their relevance. In fact, according to a recent study by PricewaterhouseCoopers, about three in four American consumers say customer experience is an important factor in their purchasing decisions, but just half say companies are currently providing it.

In the financial services industry, personalized planning is core to the experience that clients crave. One of the fundamental ways we deliver this is through our proprietary and award-winning digital planning experience platform. It uniquely integrates Northwestern Mutual's entire client experience ecosystem and elegantly combines risk and investment solutions, allowing financial advisors to demonstrate to clients how the elements of an integrated plan work together to provide them with more protection, growth and flexibility. And with our retirement planning capability, advisors can run multiple scenarios to help predict the success of a client's retirement strategy, even if they encounter higher inflation, higher taxes, a disability event and a long-term care event.

While the process for developing our digital platform has been more challenging than purchasing one off the shelf, we now have an experience that fully aligns with our value proposition and our clients' needs, and will continue to grow along with us.

Prioritizing trust is essential

Consumers' trust in companies, in general, is at a historic low. In fact, 63% of people worry that business leaders are purposefully trying to mislead by saying things they know are false or gross exaggerations. Distrust is the default, with 59% saying their tendency is to distrust information until they see evidence that something is trustworthy. Too often, we see companies in the headlines for making decisions without their customers in mind, all in the pursuit of short-term self-interest. Trust is the foundation of all successful financial relationships. Consumers need to be confident that you know what you're doing, you'll honor your commitments and make them the highest priority. To do this, organizations must start with intent followed by ability. And in order to activate on good intentions, companies need depth in financial resources and reserves.

For most companies, but especially financial services organizations, building day-to-day trust begins with financial strength. In addition to investments in our advisor and client experience, we've also continued to make investments in our surplus reserve. Surplus is the amount of capital we hold over and above our policyowner benefit reserves. In 2021, we grew our total surplus by $4.7 billion to a record $37 billion in our reserve account. That incredible strength gives Northwestern Mutual the flexibility to respond to unexpected events, staying strong while upholding the promise to pay claims to policyowners whenever needed. As a result, clients can count on us to be a company for all economic seasons -- one that is well-positioned to be there for generations to come.

Financial strength also enables organizations to act proactively when the window of opportunity briefly opens. For example, volatile times are when Northwestern Mutual's investment teams shine. In March of 2020, when the markets sank precipitously at the outset of the pandemic, our company's institutional investment teams moved quickly to invest $14 billion, purchasing assets on deep discount. That decisive move can deliver strong value to our policyowners for years to come. And today, we are positioning our institutional portfolio to remain opportunistic and go on offense again when the time is right. I strongly encourage other organizations to proactively plan for the economic environments to come, as we have at Northwestern Mutual. As leaders, we may not know when a downturn will occur -- but if we believe one will take place at some point, we can prepare for that inevitable future accordingly and act when the time is right.

However, building trustworthiness is about more than just financial strength. It's also about doing the right thing, living sound values, helping talented employees reach their professional goals, instilling inclusivity, meaningfully investing in philanthropic causes, and ensuring that the mission of the organization is to make a larger, positive impact on society.

For those looking to future-proof their organizations and ensure sustainability, remember that there is no one-and-done solution. It's a daily and never-ending promise we make to ourselves and the next generation of customers. Years ago, our leaders created something we like to call the intergenerational compact. It's a shared belief that it is our duty to strengthen the organization for generations to come. It is a powerful tool to sustained success. As leaders look to the future, I urge them to stay true to their value proposition, create unique products, create companies that can earn trust and withstand volatility, build financial depth to thrive during difficult economic times, and ensure that customers remain at the center of it all.

(John Schlifske is chairman, president and chief executive officer at Northwestern Mutual.)