principal financial

Fortune Staff

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A financial services provider offering retirement plans, insurance, and asset management, Principal Financial climbed 18 places on the this year's ranking.

Principal Financial | 2022 Fortune 500

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Principal Financial

Principal Financial | 2022 Fortune 500 | Fortune

Dan Houston has saving advice for individuals, employers, and policymakers

Principal Financial CEO on how to grow enough money to retire

Leadership

Principal CEO on how to grow enough money to retire

great to see you again. This must be a difficult time for your customers at Principal financial. First there was the pandemic and all the disruptions that came with that and now we have all the volatility in the financial markets that's impacting many people's investment portfolios. What are the main concerns you hear the most from your clients these days? Well, the first thing I would say is a lot of our, a lot of our customers, our retirement plan customers and they tend not to get nervous, they tend not to make changes. So that's sort of my going in bed. But I would tell you one of our biggest challenges with employers is attracting retaining talent and employee benefits is a great way to do that. What's number one on their mind is labor more importantly, and I think more specifically to your question individuals, they're sticking to it, they're sticking to their plan. And that's one of things we encourage people to do is to have a plan and to know that there's going to be volatility and in those choppy waters know that you have to dollar cost average into the marketplace. So we're seeing very, very few people moving out of the market or moving the money market, these tend to be very long term investments because in large part we're more managing retirement plan dollars that won't even be used for another 20 or 30 years. Well, one concern that we hear a lot these days that people are worried about their, if they're gonna have enough money to retire or are they going to outlive their retirement savings. And that's why we're seeing many people not retiring and continuing to work when people raised About their long term financial health, what are your financial advisors in you tell them to do? Yeah. The first thing is you need to take full advantage of any sort of employer workplace savings opportunity, right? Because there's a couple of reasons many times employers make profiteering contributions, they make matching contributions. But over the course of your and I working careers, you've got to save about 15% between the employer and your employee over the lifetime career of your salary to replace 85% of your post retirement, your pre retirement income. And so when you think about it in that context, and the average deferral today being about 7.5 to 8% plus an employer match of another two or three were still underfunding our retirement plans by about a third. And this is why I know that you have been very concerned over the years that we've known each other about the issue of Financial security and that's why you created and just recently launched the global financial inclusion index. Tell us what does it measure? And what were the key findings. What it measured was through 42 different countries. Adequacy of the system and allowing a person to have financial well being retirement and how inclusive is it? It was measured across three spectrums, what the government does, what broad based financial services does, and lastly, what the employer does, number one on the list, top to bottom Singapore, number two, the good old United States. But the bottom line is we know that the top 15 had something in common and those things were that they had sort of equal weightings around government, broad based financial services and employer models in place to allow people to achieve financial success in retirement. Well, even though the United States came in at the in second place, in that ranking, the overall inclusion still fell short in a number of categories. And you point them out in your report, people who work full time, have more access to financial support than people working part time. And then of course, the so called gig workers, even less women are more excluded than men. Blacks and Hispanics have a harder time to find financial products, have access to them and financial support. What do you think needs to be done to correct these disparities? There's a number of things we can do. We all need to recognize individual individual retirement accounts are accessible to all their ubiquitous. You can get it from the principal financial group or any number of organizations. It's the payroll deduction through employers. That makes this so powerful. And I would tell you, I think you'll continuously products emerge which encourage gig workers, individual workers to voluntarily contribute to an ira and I think when you sort of peel it back susie and try to understand what's at the core, cause in many of these instances they just don't have the discretionary income to safer retire. That gets us into a debate about financial literacy, not in high school, but in elementary school. To start these kids off on the right path principle is very focused in the middle schools and high schools on this topic of financial literacy. And yes, it does take a long time, but you have to start somewhere in order to do that. This is a huge problem to solve. I mean, what do you think it's take to develop better financial help across the american population, especially when you're talking about basic things like just financial literacy, it does start there, it is financial literacy. So you get there one or two ways you can get there through a voluntary methodology of education around literacy, leveraging, employer leveraging, the platforms, the ecosystem that we know of today in the US or you can shift to a government retirement schemes. Most countries including the U. S. Are not in a financial position to do that, This is a really serious issue and we have to set people up for success, and the best way to do that is when they're very young just entering the workforce. You have also said that it takes leadership. I spent a lot of time on Capitol Hill advocating on the part of workers and small to medium sized employers and you know, I will tell you that there's very little reluctance. There is a strong desire around government to to do the right thing and to do everything we can to improve coverage and adequacy for american workers and it is as we all know, a system built on the private and public sector and we have to keep building on that. Well. Principal Financial has been around for more than 100 and 40 years and over all those years, it's been helping people uh, satisfy their financial needs. How would you say that what you're doing today is different than your predecessor? Do you know? It's not, I think it's just like it was in the beginning 100 and 43 years ago our our founder Edward Temple stood up a company on the basis of there must be a better way at the time policies, financial products and protection policies were not reliable and some dishonesty. And so the idea of shifting it and selling our products and services through banks and through financial services companies that had stronger reputations that continues on today. We still, when we think about products and services, there must be a better way. And so generation after generation, decade after decade, what we're trying to do is to create cost, affordable, simple solutions that help self solve problems, life insurance, disability, lifetime income and retirement. It's not a secret that the demand for those products is very high and principle just as fortunate to be 143 years and uh, you know, evolving ourselves to making sure that we stay ahead of the curve and making sure that our customers benefit from all of these years of experience.

Houston says liquidity and listening to employee concerns has helped Principal weather the crisis so far.

Principal Financial's Dan Houston on biggest risks and predictions for the COVID-19 pandemic

Houston reveals what helped Principal weather the crisis.

Principal Financial CEO on pandemic risks and predictions

[ MUSIC ] Dan you know, these days when people talk leadership and in particular business leadership, their expectations have changed a lot in recent years, and dramatically. Whether it's employees, or customers, or even the public. They once CEOs to do more than just make money for their companies. For sure. They want them to do good. Mm- hm. What does that mean to you? Well, I think it starts with legacy. And we're fortunate, we're nearly 140 years old, in 2019 we will be. And we have a long- standing history of giving back to the communities in which we do business. We have a global platform, we do business in 80 countries. And so what we do here in the United States Back into the community are those same things we're doing in India, we're doing it in Chile, we're doing it in Mexico, so that history, that heritage of giving back to the community is part of the DNA of the organization, it's the basic ethos of the company. You mentioned that Principal Financial is coming up on on 140 years and going back over all those years, the company was always focused on helping people with their financial Issues, but I'm wondering for you as the CEO, how are things different today than it was for your predecessors .>> You no longer again have the luxury of having the head of HR send out a memo talking about the good works. I have to live, you're involved in the habitat for humanity and you're helping build, you're helping In the poverty- stricken areas of cities in which we do business, where you're volunteering your time. We provide to our employees eight hours every year of voluntary time off. Whatever they find interesting to them. And the tens, and nearly hundreds of thousands of hours now that are given back to the community. Before, you did it through payroll deduction. Today Payroll deduction, and through your hands, and making sure that the community is benefiting from our involvement in that community. You know we see a lot of CEO's or at least many CEO's who speak up very vocally on a lot of social problems. How much preasure to do you feel to adress social issues? I think it has to be taken seriously because there's some really serious issues. And we talk about it in the board room that these are matters that principal needs to engage. We have committed ourselves to diversity and inclusion not because it became popular in the last ten years, but because its been part of the organization for the last 50 plus years. Including people to be part of diversity is just a standard practice. We have great diversity among our board members, great diversity among our senior management. And we also enjoy that same diversity among our employees. Why, because that's what our customers look like. They, our board our senior management should look like our customer base. Do you feel a lot of pressure that Principle success and it's ability to hire talented people depends a lot on how the company addresses social problems. Millennials increasingly higher percentage of sort of job satisfaction from the environmental issues. What are corporate governances? How do we treat our employees? Are we doing good? For the commune reason what we're doing increasingly they're gonna be the largest percentage of our workforce and so if we're not conscious of that, Paying attention and taking concrete steps to embrace that then we'll find ourselves in a very difficult position to recruit the right talent for the organization So I wanna ask you a question and you fill in the blank I am making the world better because. I'm having a profound impact on the number of people that have retirement savings when they most need it in their old age. [ BLANK_AUDIO ]

Principal Financial CEO: Gain Trust By Giving Back to Community

Dan Houston says companies must give back to the community in which they serve.

Dan, when you were tapped to become CEO of Principle Financial, this is this first time that you've ever held a CEO job. So what have you learned in this past year or so about what it takes to be an effective leader? Communications, you've got to constantly be reminding our employees what our strategy is, what our culture is, living the culture of the organization. Communicating the culture of the organization. Reminding people of what our strategy is. And then of course encouraging them to reach and satisfy the needs of our customers. What is the one leadership skill that you wish you knew when you took the CEO job but you know it now? Yeah, so I really think it's patience. And I'm an impatient person. And you expect people to come along on the voyage with you. And that they're keeping up with you. When in reality, you have to retrace your steps from time to time. Reiterate why we're doing what we're doing, and why it's important. If it's something that's important to me because I think it's important to our customers and to our shareholders, then I have to continue to be patient. And communicate it, and communicate it, and communicate it. I don't know if you've heard this before, but it's been said that a good leader knows how to manage people, but a great leader knows himself. In your experience, have you found that knowing yourself is a precursor to being a great leader? I think keeping your ego in check is always in good order, no matter what you're doing for any company. But I do believe that's part of it. My view is, managers manage a process, leaders lead people. That's how I would distinguish the difference between managers and leaders. What are you doing to groom the next generation of leaders? Collaboration. I really believe you've gotta have a collaborative environment. From my perspective there's nothing more important than culture. What's the DNA of the organization? What's the ethos of the organization? If you don't have collaboration, if you don't have good teaming in today's day and age, if you're not able to work across your business lines and fully leverage the resource of the company You'll be suboptimal, and today you can't be a suboptimally run organization. Mhm, I know you're also trying to create a culture of innovation at Principal, what are you doing on all levels of the company to get all of your employees to take more risks, to try new things, to experiment rather than going The old fashioned comfortable way in playing it safe. I'll give you one example we are in partnership with an organization called Plug and PLay. Plug and Play is an innovation center that is located in Silicon Valley. WE have people Pool that will be working with these very creative entrepreneurs trying to extract some of those great ideas. Partnering with them even though they're not employees but partnering and hearing and understanding and leveraging their thinking and how we can bring that to our customers. So what is your message to your executives and employees on every level about Doing things differently. Yeah, I think it's just that. I think it's having an open mind. The reality is this, if we can have self- driving cars people will figure out much of what we do in principle. So how do we add value to our customers? How do we differentiate our product relative to the competition? And at the end of the day it's getting better outcomes for our customers. Dan you joined Principal right out of college. I did. So you spent your whole career with the company I'm sure you had a lot of mentors along the way. What is the best leadership advice you ever received and why did it stick with you all the years .>> The best piece of advice I got from my Father who got it from my Grandfather. Which is you think you have a big problem, take nine other executives sit around a table. Throw in the worst problem that you think you've got. By the time you hear the other nine, you'll find out that your problem isn't that big. It's good leadership advice for me, because at times you can get a bit of a brain cramp. Or you can get locked into a certain way of thinking, when in reality you know your industry. You know how to solve problems. Figure it out.

Principal Financial Group CEO shares what he learned on the job.

Year	Revenues ($M)	Profits ($M)	Assets ($M)	Total Stockholder Equity ($M)
2021	$14,742-9.1%	$1,3960.1%	$296,628	$16,559
2020	$16,22213.9%	$1,394-9.8%	$276,088	$14,618
2019	$14,2371.0%	$1,547-33.1%	$243,036	$11,390
2018	$14,09313.7%	$2,31075.5%	$253,941	$12,849
2017	$12,3943.6%	$1,3176.7%	$228,014	$10,227

Principal Financial

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