Dan Houston

Dan Houston is the head of a $17.five billion worldwide organization. He is also the type of CEO that, soon after an interview, casually hands out his enterprise card as if you could possibly get in touch with him later to go over which revenue annuity to suggest to your aging cousin.

Houston’s relaxed manner could stem in component from Principal Monetary Group’s Des Moines, Iowa roots (although to be fair, he met PLANADVISER shortly soon after a enterprise trip in the Middle East and Asia). That demeanor could 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 huge and modest.

“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 stated. “You want to see what your experts are up against and what the actual difficulties are out there.”

What ever the cause, 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 organization announced the final results of a strategic critique in component due to a “cooperation agreement” from its biggest investor, the activist shareholder Elliott Investment Management. That critique resulted in the organization focusing on its “higher-development retirement, worldwide 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 goods.

Because 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 nothing at all to do with recordkeeping,” Houston stated.

Rupiah Management

That most current move is component of a decade-lengthy shift in the so-known as emerging markets exactly where Principal operates, Houston explained.

A single component of the transition was that lots of nations that had as soon as only permitted for regional investments in retirement plans began to enable offshore choices. A second issue, Houston stated, was that participants —who had lengthy observed investing in compulsory retirement plans as anything of a tax that could not return to them—began to see the retirement automobile a lot more like a 401(k) strategy in the U.S. that they could have later in life. Lastly, lots of nations began to provide wraparound goods to the state-expected applications, so participants could voluntarily make “top-up” investments.

“Now rapid forward to nowadays,” Houston stated. “In a compulsory method it is one particular size fits all—it’s genuinely really hard to differentiate your self. So exactly where does the differentiation come from? Asset management.”

Houston stated the international asset management shift announced this February is “all about framing it in a way that when we go to industry in Chile, Mexico, Brazil, Hong Kong, Malaysia, Thailand, Indonesia … it is coming with the complete force of here’s a worldwide asset manager.”

“And by the way,” he added, “we also present recordkeeping administration, compliance, testing, and participant services—but in these compulsory models, they appear a lot alike.”

In the U.S., As well

In the U.S., exactly where Principal does recordkeeping for more than 12 million participants, the story is somewhat equivalent in terms of supplying 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 stated. “What is it genuinely about? It is about managing assets. That is the jet fuel for the organization.”

Principal does as considerably DC investment-only enterprise as it does complete recordkeeping, Houston noted. That involves offerings such as a target date solution, a mid-cap solution, a modest-cap solution, and a fixed revenue solution for certified retirement plans, and separately, investment sleeves on huge platforms for co-mingled investments.

“Retirement as well conveniently gets shrouded in ‘they’re the recordkeeper,’” Houston stated. “When we believe about retirement, we believe about how we present goods that are proper for a certified retirement strategy, lengthy-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

Although Houston feels Principal is properly poised for the retirement accumulation stage, he stated the organization is also focused along with the rest of the business on how to superior resolve for decumulation. In that case, he sees the industry continuing to move toward institutionally-priced, in-strategy annuities that present a assured paycheck in retirement.

He agreed that this in-strategy solution demands time ahead of becoming place to mass use. But he noted that, nowadays, the investment choices in certified retirement plans are vetted by trustees in the strategy, as properly as a third-celebration provider, and that general there is a rigorous course of action involved.

“If you believe about it, you will have to have that exact same sort of mechanism and course of action in spot for in-strategy annuities,” he stated. “So I believe we’re going to finish up competing there with an institutionally placed solution … it will take time, but that is exactly where I believe items are going.”

Houston sees retirement revenue management continuing to evolve in coming years in component for the reason that for the duration of these client meetings he attends, “the subject of conversation about economic safety and retirement is usually there,” he stated. “You can not get away from it.”

Presently, Principal oversees 45,000 client plans and has a lot more than 155,000 modest and medium sized enterprise relationships by means of other employer solutions. Houston says these customers, whilst becoming served by distinct touchpoints, are all connected in some way to asset management.

“We’ve by no means been a monoline enterprise,” he stated. “There’s a lot of overlap of our modest-to-medium sized enterprise that has each retirement organizing and positive aspects. We have the biggest practice of ESOPs for the reason that we’re in the retirement enterprise. We’re the biggest player in the nonqualified deferred compensation space, why? Mainly because we’re in the retirement enterprise. We’re the biggest administrator of defined advantage plans, why? Mainly because we’re in the retirement enterprise. And we’re in the asset management enterprise for the reason that just about every one particular of these corporations demands asset management.”