Comments (14)

  • Analyst 1 in IB - Cov

It's a MLM

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dan_yo23, what's your opinion? Comment below:

1) It's basically a multilevel marketing company. You're supposed to sell to your family and friends. They buy because they know you, not because the product is superior. They are your first clients at the time your commission is lowest. So the company keeps most of the profit, you burn out after you burn through your easy sales, the company has made little to no investment in you, and they rinse and repeat. Your tiny entry level commission is just the marketing fee they pay to get to your closest friends and family.

2) its mostly life insurance. Term life insurance has its place, but they focus on whole life insurance which is not a good investment vehicle.

3) see #1 above. MLMs are shit- they do all kinds of motivational work to make you think you are an owner, make you think that if you fail at this you will fail at life. They harness that inner desire to control your own destiny but twist it into thinking if you walk away, you aren't cut out for freedom. When in reality, they don't care if you walk away- its mostly commission anyway, so they don't lose much if you leave or underperform.

  • Intern in ER

what about other insurance companies? Aren't they all like that? - have salesmen sell their shit and poach desperate college kids to sell

dan_yo23, what's your opinion? Comment below:

The difference is the lack of leads- Giving you a list of numbers to cold call is one thing. It sucks, but that's part of the process. My understanding is that NWM doesn't even do that- you have to source your own leads, which ends up being your parents, grandparents, aunts, uncles, etc. It's humiliating. The company knows people won't turn down the calls/meetings out of kindness towards family, and most will buy out of kindness. It's monetizing relationships for an inferior product which is a shameful thing to do.

Pepperoni Toni, what's your opinion? Comment below:

Agree with all the above - I intered at a NWM equivalent in college (not knowing any better), and on my first day, my financial advisor mentor told me to "forget everything you learned in your college classes, it doesn't apply to 'real finance'" - meaning any knowledge gained through portfolio management, financial markets, corporate finance, and any other finance class should not be followed. Not that I went to Harvard or anything, but really? A 30 year old financial advisor living in the suburbs knows more about how markets work than any business school ever? This is a big red flag just right off the bat. Whole life used to be big in the 1950's-1980's and possibly made sense at that time, but now that mutual funds, ETFs, and other related investment vehicles are around for any retail investor to buy, whole life doesn't make sense. 

Additionally, one sales pitch the financial advisors gave to prospects was "top executives at the biggest companies always have whole life insurance policies, if you don't believe us then just look at public balance sheets." - which is true that execs can often have whole life insurance policies that would make sense for their portfolio (keep in mind that it would be a VERY small fraction of their entire retiremenet portfolio), but they conveniently leave out that the execs' investment goals and state of their portfolio is vastly different than the average retail investor who the FA is pitching this theory too, so that logic doesn't apply. 

Last, when I was in an interview for a NWM equivalent after the internship, they showed me a PPT on how they charge clients and a FA's commission. So much of the whole life insurance premiums (depends on the firm, but over 30%) go directly into the FA's pocket as "commission," rather then get invested in any type of fund. Compare that to fees for the traditional mutual fund or ETF, which are usually less than 1%. 

I quickly realized what a scam these shops were after my internships and interviews and went to the investment banking route - never looked back

  • Associate 3 in IB - Cov

Spot on. There are all sorts of tax incentives that make a WL Executive Bonus plan appealing. One of the few realistic use cases for the product. Again this is .01% of "advisors" actually implementing these as opposed to the other 99.99% saying "executives have this so why wouldn't you?" to a middle class parent that has no need for it.

  • Associate 3 in IB-M&A

I did the internship when I was in college and I mostly agree with everyone on this thread. However, Im not as put off by others on selling to family / friends. If you want to be in PWM, the best network you have is your family / friends.I really don't like how NWM gets off on describing themselves as PWM. When I was there, it seemed like no matter the problem, whole life insurance was the solution. There are many issues with whole life - it's very illiquid, returns are below what they would be in an index fund AND reps make ridiculous (like 50%+) commissions from the premiums. The last point in particular means that it takes years before the investment value that you can withdraw equals the exact amount you put in, which seems ridiculously inefficient (and shady). And because the premiums for whole life insurance is higher than term insurance or traditional investments, reps are incentivized to push out this crap.

dan_yo23, what's your opinion? Comment below:

Selling to your family/friends is fine if it is something that they would be looking to get anyway. Investment services are heavily based on trust and relationship, so it makes sense to get involved in your community and to build your book through people around you. Selling electronics, cars, etc is fine too- you don't need to convince your family and friends they need that stuff or to buy it when they didn't already want it.

Where it goes sour is pushing things they would not otherwise have gotten, like multi thousand dollar knife sets (cutco), overpriced low quality athleisure (zyia), overpriced low quality toiletries (arbonne, monat) or any of these other MLMs that are 50% more expensive than even branded products. This also includes pushing whole life when someone really just needs a basic retirement strategy and an ETF.

bigdicnick, what's your opinion? Comment below:

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