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Citing 'societal need' for planning, Northwestern Mutual makes M&A play

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The largest insurance company-owned independent broker-dealer has boosted its investment in advisory services, bucking the trend of such firms’ retreat from the space.

Northwestern Mutual, the parent of No. 5 IBD Northwestern Mutual Investment Services, took a majority stake in consulting firm ClientWise, the two firms announced this week. The partnership will give Northwestern’s advisors access to coaching and digital tools while providing ClientWise with capital.

The two firms didn’t disclose the terms of the deal.

Several insurance firms have spun off their IBDs in recent years as the fiduciary rule led to costly changes. Jackson National Life Insurance sold the assets of National Planning Holdings to LPL Financial in August, while Kestra Financial and Advisor Group changed hands from insurance ownership in 2016.

Milwaukee-based Northwestern moved in the opposite direction, launching a $50 million fund called Future Ventures in January 2017 aimed at fintech investments. The firm also acquired online planning firm LearnVest in 2015, later appointing the tech firm’s executives to leading corporate roles.

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Funding for the ClientWise stake came from the firm’s general account rather than its venture capital fund, according to Christian Mitchell, president of Northwestern Mutual’s wealth management unit. The purchase shows how the firm is “doubling down on that advisor-centric approach,” Mitchell says.

“There’s just really, really a deep societal need for what we offer,” he says. “The best way of helping someone achieve financial security is through an advisor.”

Northwestern’s roughly 7,000 advisors and other producing representatives can tap ClientWise through a digital exchange, individual meetings and quarterly team meetings, says CEO Ray Sclafani. ClientWise, which works with all types of financial professionals, will remain an independent firm under the deal.

Coaching serves as an essential tool as the industry shifts to multi-generational teams with succession plans and from “professional selling organizations to professional advisory organizations,” Sclafani says.

“Those advisors that seem to be ahead of the curve in thinking about these issues are actually growing their businesses more quickly,” he says.

Northwestern’s annual IBD revenue jumped more than 50% to $842.9 million between 2012 and 2016. In the past year, the firm’s assets under management grew 25% to roughly $125 billion, according to Mitchell.

“Our partnership with ClientWise is part of a broader effort to really help the top firms within Northwestern Mutual increase their sophistication, their depth, so they can really serve clients on a multi-generational basis and be there through thick and thin,” he says.

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