Northwestern Mutual Life Insurance Co. has joined the roster of insurers looking to compete with banks for wealthy clients by providing trust services.
Setting up trusts is a natural extension of the work we do with the Northwestern Mutual policyholder, said P. Edwin Glass Jr., president and chief executive officer of the insurers trust company unit. Northwestern Mutual Life in Milwaukee received a limited federal thrift charter last August and opened Northwestern Mutual Trust Co. in April.
A significant number of Northwestern Mutuals policyholders fit the profile of a trust business target customer 55 or older, married, college graduate, small-business owner or professional, and with household income of at least $100,000 a year, along with liquid or investable assets of $1 million or more.
We have a large number of wealthy clients who need asset management and preservation, Mr. Glass said. In the past, he said, Northwestern Mutuals agents had to refer customers to banks or other financial institutions for trust services.
With its trust company, Northwestern, which has $92 billion of assets and 2.8 million policyholders, is now in a better position to attract from such clients assets that would normally go to a bank.
For example, if a customer dies with a multimillion-dollar insurance policy, an insurer could set up a trust for the beneficiary and keep control of the assets, said George McKeon, assistant vice president at the insurance research firm Conning & Co. in Hartford, Conn.
Offering trust services also helps strengthen the ties between clients and their insurers, Mr. Glass said. Its all about permanent relationships, he said. The relationship they developed as a policyholder now can be extended with a company in it for the long haul.
Mr. Glass, who came to Northwestern last March from First Union Corp. in Charlotte, N.C., where he ran its personal trust group, would not give details of the new trust companys sales, or project them for the future. But he did say that Northwestern has fielded numerous requests from agents for information about setting up trusts for clients.
Northwestern is the latest insurer to offer trust services: Hartford Financial Group Inc., Phoenix Cos., and Massachusetts Mutual Life Insurance Co. have all opened trust units within the past two years.
Though he had no statistics on these ventures performance, Connings Mr. McKeon said anecdotal evidence suggests that trusts are a good business line for insurance companies with a high-net-worth clientele.
In most cases, he said, an agent specializing in wealthy clients must send the trust business elsewhere. From that perspective, he added, it is a logical step for the insurer who has been providing a lot of advanced expertise.
James Campbell, a senior vice president of Reagan Consulting Inc. in Atlanta, which specializes in banks and insurers, said the trust business gives insurance companies a great opportunity but that going from selling life insurance to setting up a trust can be a big leap.
A more natural fit, he said, is the addition of insurance products by a bank trust department. Theres a special kind of personal relationship between a bank, a bank trust department, and a client, Mr. Campbell said. Once that relationship is there, building on it if the bank has to add life insurance or other products is easy, he said.
Life insurance agents may lack the kind of close relationships with customers that would prompt them to form a trust that could span several generations, Mr. Campbell said.
But if Northwestern Mutual succeeds, he said, it could both deepen its customer ties and turn a tidy profit, since the trust business can be very lucrative.
Trusts are part of a group of financial planning products and services offered by Northwestern Mutual and its subsidiaries. These include life insurance products, annuities, estate planning, IRAs and other retirement products, disability and long-term care insurance, and mutual funds.
The company accepts all types of personal trusts from Illinois, Minnesota, and Wisconsin and plans to add more states during the next three years.
