Sunday, November 9, 2014

Financial Representative & The Principal Agent Model

Over the summer, I interned at Northwestern Mutual. Northwestern Mutual has its financial representatives create holistic plans for individuals. This means that the financial representative will obtain clients and have a financial plan be put in place which includes life insurance, disability insurance, health insurance, long term care, mutual funds, stocks, bonds, 529 educational plans, 401K plans, and several other plans that the client feels that will best suit his or her financial plan.

The financial representative has a responsibility of managing and making money for both the company and its clients.  My boss over the summer was Joe Guin, who is one of the top producers in terms of the amount of money he brings in for the company and himself. If he never worked a single day for the rest of his life, he would bring in a million dollars since he has so much money in his assets under management.


He brings out the example of a standard principal agent model, as he found the balance of making money for himself, his clients, and the company. Northwestern Mutual takes in a certain percentage of the money that Joe brings in, and Joe makes the remaining percentage of the money that he brings in for the clients. The clients keep the profit that the whole life insurance policies bring in during the long term, as well as the profits from the bonds and stocks that are in place. Joe found the balance of bringing money in for Northwestern Mutual, himself, and his clients.  He is the perfect example of how to deal with different goals or views and bring them all together: everyone wants more money.

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