Dan Houston
Dan Houston is the head of a $17.five billion international business. He is also the sort of CEO that, immediately after an interview, casually hands out his enterprise card as if you could possibly contact him later to talk about which earnings annuity to propose to your aging cousin.
Houston’s relaxed manner may perhaps stem in aspect from Principal Monetary Group’s Des Moines, Iowa roots (although to be fair, he met PLANADVISER shortly immediately after a enterprise trip in the Middle East and Asia). That demeanor may perhaps also come from his private history of joining Principal in 1984 as an insurance coverage sales representative. Or, it could be Houston’s practice of joining his teams for client meetings, each significant and tiny.
“I believe the worst factor you could ever do as a CEO is be holed up in an workplace and not get out and get your chops busted from time-to-time,” Houston mentioned. “You have to have to see what your experts are up against and what the actual challenges are out there.”
What ever the explanation, Houston’s strategy has kept him at the helm as Principal has taken on a dogged push in current years to concentrate on 3 core pillars: asset management, group insurance coverage, and retirement investing solutions.
In June 2021, the business announced the final results of a strategic overview in aspect due to a “cooperation agreement” from its biggest investor, the activist shareholder Elliott Investment Management. That overview resulted in the business focusing on its “higher-development retirement, international asset management and U.S. positive aspects protection corporations,” according to a release at the time. The firm also stopped sales of its U.S. retail fixed annuities and customer life insurance coverage items.
Considering that then, Principal has unloaded some of that life insurance coverage business—parts of which Houston had reduce his teeth on practically forty years ago—rebranded its asset management arm with an announcement on the Nasdaq stock exchange, and most lately folded its international pension corporations into asset management.
“We’re a significant asset manager about the planet in retirement plans that have absolutely nothing to do with recordkeeping,” Houston mentioned.
Rupiah Management
That most current move is aspect of a decade-extended shift in the so-known as emerging markets exactly where Principal operates, Houston explained.
A single aspect of the transition was that numerous nations that had when only permitted for neighborhood investments in retirement plans began to enable offshore choices. A second element, Houston mentioned, was that participants —who had extended noticed investing in compulsory retirement plans as a thing of a tax that may perhaps not return to them—began to see the retirement automobile much more like a 401(k) strategy in the U.S. that they could have later in life. Ultimately, numerous nations began to give wraparound items to the state-expected applications, so participants could voluntarily make “top-up” investments.
“Now speedy forward to now,” Houston mentioned. “In a compulsory technique it is 1 size fits all—it’s genuinely really hard to differentiate oneself. So exactly where does the differentiation come from? Asset management.”
Houston mentioned the international asset management shift announced this February is “all about framing it in a way that when we go to market place in Chile, Mexico, Brazil, Hong Kong, Malaysia, Thailand, Indonesia … it is coming with the complete force of here’s a international asset manager.”
“And by the way,” he added, “we also offer recordkeeping administration, compliance, testing, and participant services—but in these compulsory models, they appear a lot alike.”
In the U.S., Also
In the U.S., exactly where Principal does recordkeeping for more than 12 million participants, the story is somewhat comparable in terms of offering asset management and investing solutions to retirement savers, according to Houston.
In the U.S., the business “fell into a bit of a view that the retirement enterprise is recordkeeping. But it is not genuinely,” he mentioned. “What is it genuinely about? It is about managing assets. That is the jet fuel for the business.”
Principal does as a great deal DC investment-only enterprise as it does complete recordkeeping, Houston noted. That consists of offerings such as a target date solution, a mid-cap solution, a tiny-cap solution, and a fixed earnings solution for certified retirement plans, and separately, investment sleeves on significant platforms for co-mingled investments.
“Retirement also conveniently gets shrouded in ‘they’re the recordkeeper,’” Houston mentioned. “When we believe about retirement, we believe about how we offer items that are suitable for a certified retirement strategy, extended-dated, that preserve capital. If you appear at our $600 billion-plus in assets below management, and $1.five billion below custody, they are tied to retirement in some form—most of it ERISA.”
Decumulation
Whilst Houston feels Principal is effectively poised for the retirement accumulation stage, he mentioned the business is also focused along with the rest of the business on how to much better resolve for decumulation. In that case, he sees the market place continuing to move toward institutionally-priced, in-strategy annuities that offer a assured paycheck in retirement.
He agreed that this in-strategy solution demands time prior to becoming place to mass use. But he noted that, now, the investment choices in certified retirement plans are vetted by trustees in the strategy, as effectively as a third-celebration provider, and that general there is a rigorous procedure involved.
“If you believe about it, you will have to have that identical sort of mechanism and procedure in spot for in-strategy annuities,” he mentioned. “So I believe we’re going to finish up competing there with an institutionally placed item … it will take time, but that is exactly where I believe items are going.”
Houston sees retirement earnings management continuing to evolve in coming years in aspect since throughout these client meetings he attends, “the subject of conversation about monetary safety and retirement is generally there,” he mentioned. “You can not get away from it.”
At the moment, Principal oversees 45,000 client plans and has much more than 155,000 tiny and medium sized enterprise relationships by means of other employer solutions. Houston says these clientele, although becoming served by unique touchpoints, are all connected in some way to asset management.
“We’ve never ever been a monoline enterprise,” he mentioned. “There’s a lot of overlap of our tiny-to-medium sized enterprise that has each retirement arranging and positive aspects. We have the biggest practice of ESOPs since we’re in the retirement enterprise. We’re the biggest player in the nonqualified deferred compensation space, why? For the reason that we’re in the retirement enterprise. We’re the biggest administrator of defined advantage plans, why? For the reason that we’re in the retirement enterprise. And we’re in the asset management enterprise since each and every 1 of these corporations demands asset management.”
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