>> hi, i am anthony scarmucci. everyone always talks about stocks and bonds. but today, we give you a new alternative to boost your portfolio. gary: the head of the insurance company of the united states joins us to show how insurance is an unexpected tool to help secure your future. >> this show has never been solely about investments during we have talked about anything money. from time'

city, the new wall street week. anthony: we are pleased to welcome john shifts away of northwestern. we like starting every week with people' s backgrounds. john: i went to carleton college in minnesota. i studied economics, history, philosophy. i wanted to get in the business world. gary: did you play ball there? john: yes. our motto is we may be small, but we are slow. [laughter] anthony: gary and i can make the team. john: it was fun playing sports in college. then i went to kellogg at northwestern to get my aba. anthony: now you are thinking

about your life and the jobs you are going to have your what were interested you? company. was 13. i was working outside in dirty conditions, cleaning up after all the drivers. i want point in my life, i got a bank. all of a sudden in a clean office environment. people wore suits and ties. people were polite and at one another -- polite to one another. that was the epiphany. gary: it was because of a well-known insurance executive in omaha that that you interested in insurance. john: that' s right. i always wanted to be in the investment side of the business world. warren buffett was speaking. i can' t remember the environment. he mentioned, if you really wanted to get into investments, the best place was in insurance. anthony: and his explanation was

what? john: they have tax auto invest. he based his whole career on an insurance company. i was 23 years old at the time. i didn' t know any better but it made sense to me. i was lucky that metropolitan life was recruiting. gary: a lot of the kids coming out of business school or college, they want to get involved in the business world. but they think the investment world is stocks and bonds. how do describe how insurance fits into that whole asset product category? john: we are selling products, making promises to people to sell -- two pay them 20, 30 years in the future. to make good on those promises, we have to invest that money. northwestern mutual

invests into the markets. securities, new markets, new sectors. preponderance in mixed income? john: our asset allocation is fixed income and 17% in what we call risky assets. private bonds. insurance companies tend to be because of the way it works. we still have a huge investment approach in risky assets. anthony: can you talk to us a little bit about how western mutual is structured and how the business actually operates. john: we are in business to help people achieve financial security. we think there is this huge gap in america between what consumers want and need in order to get there and what most companies are providing. all you hear is investment advice. by this, by that.

make -- deeper combination and making sure your novel honorable and investing for the future. our advisors have lifetime relationships with their clients. they are there for their entire life cycle, when you' re just starting out through their retirement. and we help achieve financial security through investments. gary: how should life insurance fit into the individual' s financials? john: we believe to be really financially secure, you need to solve your risk needs first, becoming disabled, long-term care. let insurance provides an important foundation in terms of allowing you to do other things in life. it is always like a swiss army life. it can really help you achieve financial security in many different ways. it builds value over time. it provides excellent retirement benefits. life insurance really is for summons entire life. and then you have to add on to it all the other things you

need, savings accounts and things like that. anthony: what have you found historically makes the most sense for creating a strategic long-term plan? john: we believe the markets are like this big casino. you can either bet with the house , diversify, dollar cost average, keep your emotions out of it. and then you are accruing the benefits that the house gets in a casino. or you can play the markets like the people who go to vegas and try to win. and most of the time, you end up losing. gary: so betting with the house is a long-term, patient investment plan, and again distracted by the ticker or the financial news taking, but more focused on what they need to do over 10, 15, 20 years. john: yes. it is taking your emotions out of the equation. fear and greed is the driver for so many people' decisions. that is the opposite of what you should be doing. you should buy would people are buying. anthony: we will be back with

more. anthony: what you say to a young person who thinks they are going to live forever? john: life insurance is a just for death protection. we have a $26 billion revenue company. we are out about $26 billion of revenue over the last five years. announcer: sign up for the free newsletter where we recap the financial markets and dive deeper into the weekly episode with articles and primers. sign-up today. "wall street week" is sponsored in part by hightower, an unobstructed view. >> imagine a business best on a premise that delivering straightforward advice is the right thing to do.

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john: i think people buy insurance for a variety of investment component. sales results are not correlated to market at all. there' s probably a slight flight to safety. back in 2008 and 2009, we saw a pickup in sales as people decided they had enough of the volatility and came in to life insurance. biological people buy it for protection. they buy it for long-term value. and that is sort of immune from market. gary: is the growth in the industry dependent on growth in employment, growth in gdp? what is the tracking economic data to look at how insurance is going to grow? industry has a lot of positive demographics on our side. if you look at the millennial generation, it is a bigger age cohort than just a number of

people -- in the number of people than the baby boomers. there is a large group of people entering adulthood which are all prime customers for us. anthony: what do you say to a young person who thinks they are going to live forever and they don' t feel they need life insurance? john: first of all, life insurance isn' t just for death protection. i would start with that. as i said, so many uses across your life expectancy. but also, i think that is a myopic view. t good. and you don' t control many of them. and you assume that you are invincible as many of people do. on the opposite side of that, insurance is cheapest when you' re young. anthony: i asked that question for a reason. i want to encourage other people to think about life insurance as part of their overall portfolio. typically, they have young children. john: i have never met anyone who says i have too much life insurance. gary: young people think

insurance is boring. again, they bought that casino mentality. what do you say to some uses, yeah, i understand the benefits like a bowling acid error -- asset allocation. john: i think we talked about long-term value. we talk about the fact that a goes up all the time. we take pride in the table between the tortoise and the we are the tortoise. we know that we are going to win over time. out of our customer base, we have a 97% persistency base, which means that they are praying -- they are paying their premium year after year. i don' t think it is fair to say that all the lanyards want the sizzle. there is a chunk of people -- that all millenials want the sizzle. there is a check of people who really want this. low interest rates ari headwind

insurance company. we are promising to pay you. it does put a drag on the revenue of our company. we did an analysis. revenue company. living through lately cost us about a year of revenue. we are out about $36 billion of twitty $6 billion of revenue in the last five years. gary: that' s a 20% decline. john: i went back to japan in 2008 and 2009 as part of a business trip. i was totally impacted by what japan had to live through with their low interest rates for a long period of time. we came back and moved our company into a much lower efficiency. that' s much better efficiency. we are really better position to thrive. gary: it sounds like you think the fed made a root -- made a

john: i think they just got to get off the dime. i heard somewhere, the last time they raise rates, there was no iphone. one out of seven people on wall street had never seen a rate rise. gary: which is pretty scary to the industry. john: and we can' t raise rates for fear of what the market does. they had just got to move past that. anthony: you mentioned to japan. japan is in a 25-your deflationary environment very do you think the united states is at risk of that/john: i think -- risk of that? john: if you look at all of the stimulus pumped into the economy, it is all going into asset prices. -- real production since the crash, most of it, 70% has been oil and gas. and that is starting to back off. we don' t have a vibrant, strong economy. but we have many things that japan doesn' t have that argue against a catastrophic depression. we have a net inflow of

we don' t have an aging population. i think we have a more entrepreneurial economy than they do. i don' t think we are in for a japanese-style depression or root -- our recession. yellen will not be able to move the tenure or the 30 year. there is too much -- the 10 year or the 30 year. there' s too much demand for those. the tale of two cities, best of times in the worst of times, i think the worst of times are over. i am not a bear in the sense that i think we are due for a 30 or 40 or 50% correction. those are all trending in the right way. i think the market is fully valued right now and we are a little nervous about it.

anthony: talk about the robo advisors situation, the impersonal nature to the advice. t. gary: so many individuals are under the impression that i can take my life insurance and

anthony: joining us, henry montag. let' s talk about this. tell us a little bit about your business. henry: the trust own life

we provide a marriage occasion for accountants and attorneys. we also do a good -- we provide education for accountants and attorneys. we also do a good deal of providing the institutional trustee information regarding the life insurance that they are responsible for managing. and lastly, we take the amateur trustee. usually the son of the daughter of any person' s client and we provide some clot -- some guidance. we try to give that individual some best practices and data and try to present that individual from advocating his responsibilities. anthony: you have been talking about an impending life insurance crisis. share that with our viewers. henry: a light the world of whole life come i will take it

life was very, very simple. there were two types of insurances. there was term insurance and there was whole life insurance. both of those were guaranteed to sell. it made life very simple. at that point, life insurance was a buy and hold asset. things changed after 1983 when ef hutton decided that they were going to bundle this insurance. when interest rates were upwards of 14%, people set the trigger at 14%. as interest rates came down, nobody bothered telling the trustee. daughter said insurance was not guaranteed and the 14% rate was starting to come down. gary: these policies that were sold in the 1980' s, do you think a lot of people on these policies today and they don' t

? henry: so many individuals are under the impression that i can put it in the bottom left-hand drawer and not think about it. anthony: who are the people? henry: back then, you had were significantly lower. $700,000, you are buying life trust. but the majority of the institutional trustees, they had no clue. and by the way, institutional trustees make up approximately 10%. gary: do you see this as a potential crisis? john: we don' t sell much universal life. for us, it is not a big issue. there are probably people that have to deal with it and ultimately what it will requires to pay premiums to keep those policies from lapsing. i don' t know if it' s -- i

t call it a crisis, but there are pockets of insurance trust where they need to put more money into keep those policies above water. but in many cases, insurance companies have done a lot to keep those policies from lapsing. henry: with all due respect, i find that many of the sons and daughters haven' t a clue. keep in mind, back then, when universal life insurance became the in of the darling of the insurance industry, it became the insurance industry, it became that because it was significantly less expensive. 86% of the population doesn' t buy life insurance because it' s too expensive. so you have enough a lot of people lucidly are not aware. and over 20 or 30 -- a lot of people who simply are not aware. and over 20 or 30 years, you find that you have not paid the proper premium , think you have a -- john: it sure goes to the importance of having a trustee

that' s why we encourage all of our clients, if you want to name a relative as a trustee, make sure you have a successor trustee who is a over trustee who can step in and take area. anthony: how do you tell people to think about insurance when they think about their overall allocate some money out? henry: i have a different philosophy than you do, john. depending on the audience, if i am dealing with a younger individual, i am looking at protection. i look at insurance as a wonderful means to save it but sometimes the whole life contract can be more expensive and many individuals with younger kids would rather take that money and perhaps should take that money and place it in a lesser expensive form of insurance for a short period of time or universal, where there is no cash rally, and to become significantly less expensive, allowing individuals to purchase more coverage. so it depends on the individual.

anthony: so universal life, fixed coupon, fixed premium, when the coupon started going down, that means the premium has to go up to sustain the coverage. henry: therein lies the crisis. anthony: so where are we 10 years from now? are we going to be in a crisis? john: there are a number of carriers out there that are making unrealistic assumptions around universal life products. the way the product works, somebody is going to be on the to make that up. if we do stay low for long, those policies are going to be underwater. we are just much more conservative than that. we do sell those products and we don' t make those kind of return assumptions. we have much lower investment

t want to put our clients at risk. henry: many individuals are not in touch with their advisors as much as they should be. while the advisor of the company might have the client who either is relying on himself or on that and her uncle or son or daughter doesn' t have the right information. anthony: if i bought one of these policies, what is my next call? john: part of the problem is that many of these products aren' t sold through brokerage channels where the client has no relationship with the person who sold it to them. we expect a lifetime relationship so our people have a responsibility to their clients over the course of their lifetime to make sure the kind of seth henry is describing doesn' t happen. it is important, if you feel in that situation, to contact the person who sold you that and understand what is going on. anthony: we will be back with

anthony: we are back. gary: let' s move forward and talk about the robo advisor situation. there is an impersonal nature to the invites. -- to the advice. john: my personal view is that there is always going to be a segment that just wants a technology-based way to invest and save. but we don' t think that it is man or machine. it is man and machine. i have a personal trainer who

week, 5:30 in the morning. faster and stronger. the reason i pay him his sickly to ring that doorbell. i know without that discipline and that person coming to my house, i could have all the fitbit' s on my arm in the world but i will hit that snooze button. we think the human being as something that the robo advisor does not. it takes emotion out of the game. it helps you understand what you really want. oftentimes, people' s financial security is not correctly at that -- correctly articulated. you have kids, retirement, vacations, things like that. sometimes people cannot really articulate what they are thinking. i am not saying technology won' t payroll. i think it has added a lot to our industry. but i don' t think that it will display' s the human touch. anthony: how does the industry look tenures from now? john:

from our perspective, we really think our future is developing the customer experience as second to none. this is all around our ability to create an experience for our clients that is something that they actually look forward to. rather than having to feel like insurance is an expense, which you said earlier, really look at insurance as something you want to do. that sounds-looting, but we can create an expense were people' s financial security is something they want to do on a regular basis and in a positive way. anthony: how do you see the industry? henry: i think there will be a preponderance of more bundled products, the combination of the insurance along with the investment along with long-term care insurance. i also think there will be some additional compliance. anthony: we want to thank john and henry for spending time with us today. that is it for today. you can check in with us all

announcer: the preceding program

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