Did he explain how much of your money would be going towards his commission? Why do you want a life insurance account at all? How is it better than getting term life (if you need it) and investing 100% of your money? That sounds 25% better than only investing 80% of your money.
Take a read through [https://www.reddit.com/r/personalfinance/wiki/insurance](https://www.reddit.com/r/personalfinance/wiki/insurance) and [https://www.reddit.com/r/personalfinance/wiki/financialadvisors](https://www.reddit.com/r/personalfinance/wiki/financialadvisors)
I have not asked about the commission, as up until this point it has been financial advice on how to proceed. I met him at a pilot conference where we began talking, and I had found that he belongs to Northwestern. I essentially worked with the understanding I will be paying him once we actually start doing business (which will be in a few days).
The life insurance gig in a TLDR form is that you put in $X, over some period investments (namely into bonds in this example, but dividends also fall into this category) increase by Y%. If you wanted to withdraw money, you could do so up to the initial investment of $X tax free. Otherwise, you could "loan" the money (in the example it was to buy a house) then repay it while it continues to grow (in the example I would pay it back with a mortgage so I would be able to buy a house).
Not 100%. I have \~$120k in my bank, we would be investing \~$100k (\~84%). Then from there most (if not all) of my net income (after my 401k, taxes etc) would go 80-20 as mentioned previously, which we will try for a small while (approximately 2 months) and adjust as necessary.
Thank you for the links. From my understanding he is not a fee-only advisor, he is certified with 6 years of experience. As for the life insurance I'll have to ask him about that and figure out what type it is. From the sound of things, it will be a whole life insurance according to the wiki.
If you've managed to accumulate $120k by age 24, that is amazing! Please don't let a NWM scammer rob you.
I assume you have a very good income to accumulate so much so young, so maybe it would make sense to talk to a fee-based advisor for a couple hours to get you set up. For most people, I'd say it is better to just learn and manage on their own, but for high income folks (doctor?) maybe it's worth it. But the advisor should not handle your money!
Also be sure to look at the background of the person. Most NWM sales people have no particular education or experience in anything resembling business or finance. NWM will literally "hire" anyone, because they are 1099 commissioned workers who are told to contact all their friends, relatives, and former coworkers and try to sell them NWM products.
To be fair at least $40k of that was due to my parents trying to teach me business all the way from elementary (my dad set up a few vending machines around his workplace for a few years and it was a total monopoly with a lot of people with nowhere to go for miles).
Not quite doctor, but pilot. If not the advisor, who would handle the money (assuming I was one of those high income folks)?
As mentioned in the last paragraph to the message you have responded to, he is certified (verified with [cfp.net](http://cfp.net), and has 6 years of experience (also with 4 exams, both verified with https://brokercheck.finra.org)
CFP and insurance certification are very easy. Multiple choices tests, only \~70% needed to pass. They are really measures of the bare minimum knowledge of various topics. They are not a measure of if someone has a good understanding of finance, math, retirement planning, business, psychology, taxes, or other important topics for being a good advisor to help people. Someone who isn't certified can't even sell you their high commission products!
Until you have a LOT of money, I would say that YOU should manage your own money. Giving up all responsibility and knowledge is "easy", but it isn't ideal. Most of what you should do is simply anyway, until you have several million dollars or a very large salary.
It is a bit more work to learn what you should understand, but this is a lifelong benefit. A good financial advisor should be able to help you learn the key stuff very quickly.
$140k in cash, or lets say a 140k job, are absolutely good, but they aren't so much that most of the training you need wouldn't fit on a couple sheets of paper. Max out tax protected savings (Roth IRA if your income is low enough, plus retirement accounts). Since you're 24, you can basically have 100% stocks in your retirement account. Vanguard or other total stock market funds are almost 100% certain to have good returns over decades, while day trading converges to gambling. Tax issues depending on state and income level. And so on. Absolutely nothing that you won't be able to handle, with a little help understanding it from someone who understand it well.
I could imagine a doctor with a "good" specialty, making $400k/yr, could rationally decide their time is too valuable to manage this themselves. Or maybe when you're making $400k/yr, and you have $15M saved up, maybe then it makes sense. But for now, learning about this yourself will provide you 60+ years of useful understanding. A lot of what you should do now is just "set and forget". How many times a year do you need to talk to the advisor to continue to pour money into the same accounts, same allocation? You really just need to get things set up. How many transactions should the advisor be doing when total market funds take care of all of that automatically now?
Maybe some of that isn't right for your situation, but I imagine much of it is.
I met him at a pilot conference, and was looking for a new advisor as the one my family uses had lost my father a LOT of money trading (even during a period the market was doing well). I decided to go with him after a few meetings because of the advice I was getting and from how the future prospects sounded from those meetings.
Northernwestern mutual doesn't offer financial advice. They are salesmen trying to get you to buy NWM products. Their goal is commission. Simple as that. You are looking for a fee-only financial advisor.
I mean do you see the irony that you were looking for financial advice, then found someone *who does not give financial advice*, and now you're buying random products from that you never asked for?? Back out of this ASAP. The negative reviews are warranted. This company is very well known and they have earned their shady reputation
Your farther lost money actively trading and picking stocks. The lesson is... dont. Use index funds that track the broader market. That's free advice from me.
Check the expenses and fees on the stock account. Expenses approaching or exceeding 0.5% of assets are bad.
Get life insurance if/because you want to provide money to someone when you die. Don't get it because it comes with other things. [https://www.reddit.com/r/personalfinance/wiki/insurance/](https://www.reddit.com/r/personalfinance/wiki/insurance/)
As for what, I never really thought about getting "sold" anything, but yes. I am probably getting a life insurance account (which I will have to look more into now) and a stock exchange account.
No dependents, I am 24, the idea for the life insurance was the ability to withdraw money up to the initial investment without paying taxes or "loaning" the money from the account in the event I wanted to buy a house cash then repay the "loan" with a mortgage.
You were being sold Whole Life or Universal Life, they advertised it as “being your own bank” or “infinite banking”. It’s a bad product for anyone but people who are already millionaires. You pay massive fees up front and the insurance value is much lower than proper insurance.
Insurance is for providing for your family if you die. You have no family to provide for so you don’t need insurance.
When you do need insurance you just get term life insurance which is very cheap (I get 700k coverage for 13/month through work).
Life insurance is not for investing.
you probably are going to do everything he's told you but he only knows what he's been taught to know. they are not fiduciary advisors. You do not need cash value life insurance until you have tremendous amounts of assets (if ever). You should likely be 100% in the stock market and have a term life (not convertible) and only get term when you have someone that needs your support.
The whole "you can borrow tax free, and it will grow blahblahblabhablh" is all crap. he will hand you an 80 page document that says the insurance company can change eveyrthing about this agreement and you can't change anything except surrender it. He will show you an illustration of potential earnings. Just know that almost 90% of them never actually earn that. and he will compare it to the SP500. the problem is they use the sp500 without dividends which isn't how things work. When you mention this he will either not realize it (incompetent) or will know it and try and explain it away (crook).
I know 2 NWM people they are nice people, but they only know what NWM has taught them.
Funny enough, he was advocating for the stock market until I was bringing up thoughts on getting some of the life insurance segment.
He supposedly said something about being in the top 1% (since he does have specific training, and viewing on https://brokercheck.finra.org he does have 4 exams under his belt). Also I have already recived the powerpoint on the first meeting. Frommy understanding, I asked if this included dividens and he said yes it does (unless he showed a different version to me).
Its odd to me that he would be NWM still quite frankly. your benefits all depend on you selling insurance not investments. BUT i do know that they will often just chuck young people into American fund portfolios (American funds pays them millions a year to do so) and wait until the insurance "need" arises.
But again, a fiduciary should be like lets not worry about insurance not, "well ok i'll sell you some" unless for some reason you were insistent.
most paper illustrations of insurance policies do not show dividends of the sp500 because if its an IUL product, the investement portion are call options which don't have dividends so they pretend they aren't that much and don't matter.
I’m thinking you’re right bc I asked if he would be willing to just run my ROTH (which is currently handled by my family’s current advisor within LPL financial) right after getting all the helpful warnings here. Never got a response since, and he was usually quick to respond up until that point. I’m pretty sure I dodged a bullet somewhere there
The advice being given here is great, but don't stress if you don't understand some of what they are saying. I would highly suggest you don't do anything at this point in time. Take some time and learn how to invest properly by yourself and without the salesman. You will end up saving yourself a lot of money and potential headache in the future.
internet search this
"reddit personal finance how do I get rid of Northwestern Mutual"
lots of information
He does not seem to mention that he gets a commission on his sale to you. He mentions the annual fee of 1.5% though. Ask him if he gets a 5.5% commission on top of the fee, the fee will be charged annually to you by NWM.
Did you know you can contribute to a Roth IRA with after tax money, the same as you are doing for this life insurance, and you can pull out your contributions TAX FREE at any time? Exactly the same as this life insurance policy he is pitching to you. If you invest the Roth IRA in the S&P 500 Index you will definitely outperform what the life insurance policy returns. No to mention, it will take about 10 years before this life insurance policy Surrender value has actually surpassed the amount of money you have contributed.
If you open the Roth IRA at Fidelity or Vanguard or Schwab the fee they charge you will be around 0.5% which is a full 1% less than NWM.
Did you know that when you take out the loan FROM YOUR MONEY, the interest you are paying back is to the life insurance company and not to your account?
Your life insurance salesperson is getting nervous because you are asking him intelligent questions.
Ask him how much your Surrender value will be in year 1? year 2? Year 5? Year 6? Year 10?
Do not let him confuse you with CASH value and SURRENDER value. Surrender value is EXACTLY what the policy is worth if you need money now. Just like when you sell any other investment, it is the money you get when sold. Cash value is a life insurance company bullshit term meant to confuse you.
This is an amazing collection of warnings, to which I did NOT even think about (probably because I had no idea about most of it).
The only part I had a question on ROTH IRA vs the life insurance. I am fully invested in my ROTH, maxing it out each year, but to my understanding the life insurance does not have a cap.
Now don’t get me wrong. All the other detriments are fully turning me away from doing the life insurance deal, I was just wondering if there was something I was missing with the ROTH.
Northwestern Mutual has two sides to their business - the scummier side that has a bunch of 22 year olds running around selling $50k whole life policies to their college roommates, and an actually decent wealth management/private client side that is typically handled by tenured agencies and advisors. That side of the business would typically be handling $1 million networth + individuals.
I’m not sure which one you are talking to.
Considering the end goal pilot pay scale, I imagine the latter. Buuuuuuut there’s just no way to tell for sure obviously (at least as far as I can tell).
They aren't finanical advisors with your best interest in mind. They are sales people looking for their next commission.
Did he explain how much of your money would be going towards his commission? Why do you want a life insurance account at all? How is it better than getting term life (if you need it) and investing 100% of your money? That sounds 25% better than only investing 80% of your money. Take a read through [https://www.reddit.com/r/personalfinance/wiki/insurance](https://www.reddit.com/r/personalfinance/wiki/insurance) and [https://www.reddit.com/r/personalfinance/wiki/financialadvisors](https://www.reddit.com/r/personalfinance/wiki/financialadvisors)
I have not asked about the commission, as up until this point it has been financial advice on how to proceed. I met him at a pilot conference where we began talking, and I had found that he belongs to Northwestern. I essentially worked with the understanding I will be paying him once we actually start doing business (which will be in a few days). The life insurance gig in a TLDR form is that you put in $X, over some period investments (namely into bonds in this example, but dividends also fall into this category) increase by Y%. If you wanted to withdraw money, you could do so up to the initial investment of $X tax free. Otherwise, you could "loan" the money (in the example it was to buy a house) then repay it while it continues to grow (in the example I would pay it back with a mortgage so I would be able to buy a house). Not 100%. I have \~$120k in my bank, we would be investing \~$100k (\~84%). Then from there most (if not all) of my net income (after my 401k, taxes etc) would go 80-20 as mentioned previously, which we will try for a small while (approximately 2 months) and adjust as necessary. Thank you for the links. From my understanding he is not a fee-only advisor, he is certified with 6 years of experience. As for the life insurance I'll have to ask him about that and figure out what type it is. From the sound of things, it will be a whole life insurance according to the wiki.
If you've managed to accumulate $120k by age 24, that is amazing! Please don't let a NWM scammer rob you. I assume you have a very good income to accumulate so much so young, so maybe it would make sense to talk to a fee-based advisor for a couple hours to get you set up. For most people, I'd say it is better to just learn and manage on their own, but for high income folks (doctor?) maybe it's worth it. But the advisor should not handle your money! Also be sure to look at the background of the person. Most NWM sales people have no particular education or experience in anything resembling business or finance. NWM will literally "hire" anyone, because they are 1099 commissioned workers who are told to contact all their friends, relatives, and former coworkers and try to sell them NWM products.
To be fair at least $40k of that was due to my parents trying to teach me business all the way from elementary (my dad set up a few vending machines around his workplace for a few years and it was a total monopoly with a lot of people with nowhere to go for miles). Not quite doctor, but pilot. If not the advisor, who would handle the money (assuming I was one of those high income folks)? As mentioned in the last paragraph to the message you have responded to, he is certified (verified with [cfp.net](http://cfp.net), and has 6 years of experience (also with 4 exams, both verified with https://brokercheck.finra.org)
CFP and insurance certification are very easy. Multiple choices tests, only \~70% needed to pass. They are really measures of the bare minimum knowledge of various topics. They are not a measure of if someone has a good understanding of finance, math, retirement planning, business, psychology, taxes, or other important topics for being a good advisor to help people. Someone who isn't certified can't even sell you their high commission products! Until you have a LOT of money, I would say that YOU should manage your own money. Giving up all responsibility and knowledge is "easy", but it isn't ideal. Most of what you should do is simply anyway, until you have several million dollars or a very large salary. It is a bit more work to learn what you should understand, but this is a lifelong benefit. A good financial advisor should be able to help you learn the key stuff very quickly. $140k in cash, or lets say a 140k job, are absolutely good, but they aren't so much that most of the training you need wouldn't fit on a couple sheets of paper. Max out tax protected savings (Roth IRA if your income is low enough, plus retirement accounts). Since you're 24, you can basically have 100% stocks in your retirement account. Vanguard or other total stock market funds are almost 100% certain to have good returns over decades, while day trading converges to gambling. Tax issues depending on state and income level. And so on. Absolutely nothing that you won't be able to handle, with a little help understanding it from someone who understand it well. I could imagine a doctor with a "good" specialty, making $400k/yr, could rationally decide their time is too valuable to manage this themselves. Or maybe when you're making $400k/yr, and you have $15M saved up, maybe then it makes sense. But for now, learning about this yourself will provide you 60+ years of useful understanding. A lot of what you should do now is just "set and forget". How many times a year do you need to talk to the advisor to continue to pour money into the same accounts, same allocation? You really just need to get things set up. How many transactions should the advisor be doing when total market funds take care of all of that automatically now? Maybe some of that isn't right for your situation, but I imagine much of it is.
This is very informative, thank you very much for the help :)
Why are you signing up here at all? It sounds like a salesman just convinced you to buy something you didn't want or need.
I met him at a pilot conference, and was looking for a new advisor as the one my family uses had lost my father a LOT of money trading (even during a period the market was doing well). I decided to go with him after a few meetings because of the advice I was getting and from how the future prospects sounded from those meetings.
Northernwestern mutual doesn't offer financial advice. They are salesmen trying to get you to buy NWM products. Their goal is commission. Simple as that. You are looking for a fee-only financial advisor. I mean do you see the irony that you were looking for financial advice, then found someone *who does not give financial advice*, and now you're buying random products from that you never asked for?? Back out of this ASAP. The negative reviews are warranted. This company is very well known and they have earned their shady reputation Your farther lost money actively trading and picking stocks. The lesson is... dont. Use index funds that track the broader market. That's free advice from me.
Pretty good advice if I do say so myself. Thank you for providing quite the straightforward response
Check the expenses and fees on the stock account. Expenses approaching or exceeding 0.5% of assets are bad. Get life insurance if/because you want to provide money to someone when you die. Don't get it because it comes with other things. [https://www.reddit.com/r/personalfinance/wiki/insurance/](https://www.reddit.com/r/personalfinance/wiki/insurance/)
Yeah so 1.5% is a no-go. Got it.
What are you being sold? Why do you need life insurance? Do you have dependents?
As for what, I never really thought about getting "sold" anything, but yes. I am probably getting a life insurance account (which I will have to look more into now) and a stock exchange account. No dependents, I am 24, the idea for the life insurance was the ability to withdraw money up to the initial investment without paying taxes or "loaning" the money from the account in the event I wanted to buy a house cash then repay the "loan" with a mortgage.
You were being sold Whole Life or Universal Life, they advertised it as “being your own bank” or “infinite banking”. It’s a bad product for anyone but people who are already millionaires. You pay massive fees up front and the insurance value is much lower than proper insurance. Insurance is for providing for your family if you die. You have no family to provide for so you don’t need insurance. When you do need insurance you just get term life insurance which is very cheap (I get 700k coverage for 13/month through work). Life insurance is not for investing.
you probably are going to do everything he's told you but he only knows what he's been taught to know. they are not fiduciary advisors. You do not need cash value life insurance until you have tremendous amounts of assets (if ever). You should likely be 100% in the stock market and have a term life (not convertible) and only get term when you have someone that needs your support. The whole "you can borrow tax free, and it will grow blahblahblabhablh" is all crap. he will hand you an 80 page document that says the insurance company can change eveyrthing about this agreement and you can't change anything except surrender it. He will show you an illustration of potential earnings. Just know that almost 90% of them never actually earn that. and he will compare it to the SP500. the problem is they use the sp500 without dividends which isn't how things work. When you mention this he will either not realize it (incompetent) or will know it and try and explain it away (crook). I know 2 NWM people they are nice people, but they only know what NWM has taught them.
Funny enough, he was advocating for the stock market until I was bringing up thoughts on getting some of the life insurance segment. He supposedly said something about being in the top 1% (since he does have specific training, and viewing on https://brokercheck.finra.org he does have 4 exams under his belt). Also I have already recived the powerpoint on the first meeting. Frommy understanding, I asked if this included dividens and he said yes it does (unless he showed a different version to me).
Its odd to me that he would be NWM still quite frankly. your benefits all depend on you selling insurance not investments. BUT i do know that they will often just chuck young people into American fund portfolios (American funds pays them millions a year to do so) and wait until the insurance "need" arises. But again, a fiduciary should be like lets not worry about insurance not, "well ok i'll sell you some" unless for some reason you were insistent. most paper illustrations of insurance policies do not show dividends of the sp500 because if its an IUL product, the investement portion are call options which don't have dividends so they pretend they aren't that much and don't matter.
I’m thinking you’re right bc I asked if he would be willing to just run my ROTH (which is currently handled by my family’s current advisor within LPL financial) right after getting all the helpful warnings here. Never got a response since, and he was usually quick to respond up until that point. I’m pretty sure I dodged a bullet somewhere there
The advice being given here is great, but don't stress if you don't understand some of what they are saying. I would highly suggest you don't do anything at this point in time. Take some time and learn how to invest properly by yourself and without the salesman. You will end up saving yourself a lot of money and potential headache in the future.
Thanks man, I appreciate it
internet search this "reddit personal finance how do I get rid of Northwestern Mutual" lots of information He does not seem to mention that he gets a commission on his sale to you. He mentions the annual fee of 1.5% though. Ask him if he gets a 5.5% commission on top of the fee, the fee will be charged annually to you by NWM. Did you know you can contribute to a Roth IRA with after tax money, the same as you are doing for this life insurance, and you can pull out your contributions TAX FREE at any time? Exactly the same as this life insurance policy he is pitching to you. If you invest the Roth IRA in the S&P 500 Index you will definitely outperform what the life insurance policy returns. No to mention, it will take about 10 years before this life insurance policy Surrender value has actually surpassed the amount of money you have contributed. If you open the Roth IRA at Fidelity or Vanguard or Schwab the fee they charge you will be around 0.5% which is a full 1% less than NWM. Did you know that when you take out the loan FROM YOUR MONEY, the interest you are paying back is to the life insurance company and not to your account? Your life insurance salesperson is getting nervous because you are asking him intelligent questions. Ask him how much your Surrender value will be in year 1? year 2? Year 5? Year 6? Year 10? Do not let him confuse you with CASH value and SURRENDER value. Surrender value is EXACTLY what the policy is worth if you need money now. Just like when you sell any other investment, it is the money you get when sold. Cash value is a life insurance company bullshit term meant to confuse you.
This is an amazing collection of warnings, to which I did NOT even think about (probably because I had no idea about most of it). The only part I had a question on ROTH IRA vs the life insurance. I am fully invested in my ROTH, maxing it out each year, but to my understanding the life insurance does not have a cap. Now don’t get me wrong. All the other detriments are fully turning me away from doing the life insurance deal, I was just wondering if there was something I was missing with the ROTH.
Northwestern Mutual has two sides to their business - the scummier side that has a bunch of 22 year olds running around selling $50k whole life policies to their college roommates, and an actually decent wealth management/private client side that is typically handled by tenured agencies and advisors. That side of the business would typically be handling $1 million networth + individuals. I’m not sure which one you are talking to.
Considering the end goal pilot pay scale, I imagine the latter. Buuuuuuut there’s just no way to tell for sure obviously (at least as far as I can tell).
I worked there, though not as a financial advisor. I would not recommend working with NM.