Business of well-being - Principal Financial CEO Dan Houston on retirement and his career journey


Principal Financial CEO Dan Houston is in the business of changing lives. For almost four decades, Dan has dedicated himself to setting people up for financial success, and on the latest Walker Webcast, he details his career journey, his advice for retirement planning, and so much more.


Today’s Walker Webcast features Dan Houston, Chairman, President, and CEO of Principal Financial Group. He joined Principal in 1984 right out of Iowa State University, was named Senior Vice President in 2000, Executive VP in 2006, and President/CEO in 2014. He is a member of the Business Roundtable, past Chair of the American Council of Life Insurers, and Chairmen of the Greater Des Moines Water Trails Initiative.

To begin, Dan shares his philosophy and gratefulness to be able to wake up every day and make personal and professional contributions. Born in a small town in Iowa, he spent many childhood summers there with his grandparents after his family relocated to Houston. These summers helped him understand people who were less fortunate and how hard it can be to make a living in farming. Self-sufficiency and putting in a hard day’s work were a few lessons instilled in him to this day.

Dan is a huge proponent of servant leadership. He shares a tradition he observed in his family during the holiday season, in which they purchased and personally delivered turkeys to community members who had lent them a hand in the past. Dan himself does a fair amount of volunteerism and operates in such a way that ensures everyone, regardless of financial positions, is treated equally. 

In his line of work, Dan says you have to always keep revenue increase in mind, but there will always be certain products that don’t quite catch. Principal has a long history of thinking strategically towards the future in regard to market trends and demands. This ensures their market strategy will allow the company to capitalize in the future. Mistakes arise when one spends too much time analyzing the past instead of considering the inevitable changes to come. Dan shares a misstep made in the past as an example of this.

Then, Dan shares what we should all consider to save for retirement and afford the ability to live comfortably in the future. Regardless of who he is speaking with about this topic, Dan breaks it down simply. If you work a 40-year career and set aside 15% of your income via employer match, investments, savings, etc., it will match 85% of your pre-retirement income alongside social security benefits. Principal works to create services to allow the lowest income earners in every industry to save for retirement. Although they’ve had the fortune of a healthy job market, Dan shares that baby boomers are actually the worst example of a demographic’s regular savings practice.

Next, Dan discusses the prospect of bringing Principal employees back to the office. His largest concern is not around keeping employees safe but the community-centric DNA of the company. The company’s current success is thanks to the tenure already held by many employees. Employers who have been onboarded in the last two years will not have the same sense of comradery. Finally, he touches on the complexity of Principal’s global reach but local community-oriented mentality. Principal does business with over 200,000 small businesses and the fortune 50. Every facet of their corporation revolves around helping people achieve financial security.

In closing, Dan reflects on the things we should all be feeling grateful for right now. He urges everyone listening to consider the ways you are bringing joy into other people’s lives daily.

Key Ideas:

0:48 - Willie gives a recent market update. 
3:44 - Willie introduces today’s guest Dan Houston. 
5:34 - Dan’s early days in Iowa. 
8:45 - Dan’s college experience. 
11:22 - What brought Dan to Principal Financial Group?
13:15 - Dan’s most impactful mentors.  
21:42 - Dan reflects on previous decisions made by Principal. 
29:11 - What should we all be considering about saving for retirement? 
37:22 - How savings methods differ amongst various age demographics. 
39:20 - Bringing employees back to the office and the importance of relationships in companies. 
43:46 - Principal’s global reach, but local community mentality. 
50:15 - Closing words. 


Learn more about Dan Houston
Learn more about Principal Financial Group.  
Check out Walter & Dunlop’s website

Webcast Transcript: 

Willy Walker: Thank you, Susan, and good morning to those of you in western time zones. And good afternoon to those of you on the east coast. It's a real pleasure for me to have Dan Houston with us today. Before I dive into Dan and his bio and the many questions I have for him, because it is a true pleasure to have someone with his background, his success, and his character on the Walker Webcast. I was talking with a friend and a client of Walker & Dunlop yesterday who said to me, you've gone a couple webcast without giving your take on where the markets are, Willy. And he said, we love hearing your update on where the markets are and what's going on. And I said I've had such great guests that I just felt like I needed to dive right in. And Dan Houston is no exception to that thought that I really want to dive in with Dan, but I will do what my friend Marshall Boyd asked me to do, which is just a quick take on where the real estate markets are at the broader backdrop. 

We have been watching the markets and interest rates bang around a little bit, but there are two things that have been very, very consistent. And I would go back to Peter Linneman who has been a consistent guest on the Walker Webcast in saying that rates were going to stay low, and that asset values were going to continue to appreciate. While we are seeing rates tic up, rates are back down in the mid 150sright now in the 10-year. And while the markets have gyrated a little bit, the DOW is right around 36,000 and continues to gain momentum. We obviously have a very big call today, the FOMC, we will see what Chairman Powell comes out with as it relates to his view on inflation. I had for a long time bought into Peter Linneman's commentary that inflation is more transitory than permanent. At the same time, I would say that one of the things that Peter was banking his data on was the federal top up in unemployment benefits when that burned off at the beginning of September, that that would have a big impact on the labor markets and that people would go back to work. And I think one of the things that is a little bit of a curve ball to that scenario, if you will, is the fact that the Delta Variant, paused back to office, it has paused a lot of economic activity, and it is also seemingly paused a big pick up in the employment numbers. What that does to the overall cost of labor and how that plays into the inflation numbers, I think, is still TBD. But other than that, things continue to go very, very well.

Final thing I would say is that CBRE reported last week, JLL reported this morning. Walker & Dunlop reports tomorrow. CBRE and JLL's numbers were very, very strong on both year-on-year basis, but more importantly, on quarter-to-quarter basis. There is a ton of liquidity in the marketplace. And I'm very much looking forward to our earnings call tomorrow morning and showing our investors what Walker & Dunlop did in Q3. With that, let me turn to our guest, Dan. 

First of all, Dan thank you so much for being here. Let me read through your bio for a moment and then we'll dive into the conversation. Daniel Houston is chairman, president, and chief executive officer of Principal Financial Group. Houston joined Principal in 1984, right out of Iowa State University. He was named senior vice president in 2000, executive vice president in 2006, and president of retirement and income solutions in 2008. He was named president and chief operating officer in 2014, before assuming his current role in 2015. He is a member of the Business Roundtable in his past chair of the American Council of Life Insurers, and as chairman of the Greater Des Moines Water Trails initiative and serves on many other boards. Dan, I pulled the Greater Des Moines Water Trails initiative, because I have some real interest in that and want to get to that at some point. You have a lot on there. 

So, Dan let me start here. Nice guys are supposed to finish last, not first. You are consistently finishing first. How does a nice guy like you finish first?

Dan Houston: Those are undeserving comments, I suspect, Willy. Appreciate the kind words. I wake up every day fortunate to be here and making a contribution both personally and professionally. I've had a good fortune to work for a company that really values culture. They put a great deal of value on individual contribution and the ability to bring teams together. And so, it was thirty-seven years, almost thirty-eight years career here, at Principal, and having frankly, the privilege of leading this team. I'd like to think most of my success comes from 18,000 employees around the world that help make us do a great job serving the needs of our customers.

Willy Walker: You were born in Iowa, but moved to Houston, Texas, at I think at the age of ten. But you would go back to Iowa in the summers to spend time with your grandparents. From what I understand those summers in Iowa had a big impact on who you are.

Dan Houston: It was incredible. And I only wish my kids could have had a similar experience, Willy in that it was interesting to spend three months out of the year in a town of 400 and the other nine months in a town of a million people with a thousand families a day moving to Houston. And so, you had this big city experience, you had this small city experience. But frankly, living with my grandparents in the summers helped in many ways, help me understand people who are less fortunate, how hard it is to make a living on a farm, when my grandfather was pulling a plow behind a team of horses and had to live through the Dust Bowl and through some of the most difficult times. And so, being self-sufficient, being true to yourself, putting in a hard day's work, all of those things really in large part came from spending summers on the farm and just so happened by the time I was 15 found my wife of now nearly forty years and we've been together for 45 in some capacity.

Willy Walker: I want to talk about Joanie in a moment but talk about Frank the Bank. What it was like to be where you knew everyone who did everything.

Dan Houston: Yeah, it's a great take. So, Frank the Bank ran the bank. Freddie ran the hardware store, Freddy's hardware store. Ralph ran the DX, Margaret ran the variety store, and of course there were two bars anchoring the main street there. But you had a chance to see how bankers made money. You saw how groceries made money. And of course, as you know back then, in small towns, they extended credit. I still remember the first time I encountered a counter check, a blank check, lined up the ten banks that would be in western Iowa there. And you’d pick up your bank check, which would say, Dow City bank at the top. And then you would fill it in, write down your account number, and they would literally physically move those checks between those ten communities that you may have written on a gas station or grocery store. But you knew and you saw how those entrepreneurs, and again, congratulations to you and having been recognized by E&Y in this entrepreneurial nature. But you saw exactly how a person ran a bank or ran a hardware store or ran a gas station. And frankly, as you very well know, a lot of that is around doing what's right for the customer. When Amazon came out with delivery services, I couldn't help, but think of the Conoco station being run by Ace Edelman. And Ace's father would deliver groceries to individuals who were shut in, usually older female homeowners that were unable to make it to the grocery store. That level of service certainly informs and reminds me of how every person out there has a different story and has a different need. But home delivery is not new for Dow City, Iowa.

Willy Walker: So on to Iowa State you went, and as you said, you met your wife Joanie when you were 15, but the two of you got married after your sophomore year at Iowa State. Talk for a moment about your college experience of both being married and then also having to work to put yourself through college.

Dan Houston: Yeah, so I left Texas and my parents weren't necessarily thrilled about that. They thought maybe staying in state tuition was a better option, but I made the choice and followed Joanie to Iowa State. She's a year ahead of me in school and actually encountered some financial difficulties because I had run out of money because my responsibility was paying the out of state tuition portion, which was 2x the number of in state and had a very fortunate encounter with the head of admissions who had agreed that if I would pay in state tuition that I could pay in state tuition but in exchange for that, I'd have to do something good for Iowa someday. Ironically enough, when I graduated a couple years later, there was only one company of the three job offers that was an Iowa based company and in large part, that's why I stayed here today in a building that was built in 1938. That's based in the middle of Iowa, here in Des Moines.

Willy Walker: So you got a job working at Sears, and rather than working on the floor, selling clothing or shoes, or hardware, whatever else, you became a certified mechanic. Why did you become a certified mechanic?

Dan Houston: Because in 1980, a mechanics wage was $10 an hour and working in appliances and in the shoe department was worth about $4.50. So, I was a bit of a self-taught mechanic back in the day. I think I was mechanically inclined, but may have overstated my resume, just a tad, as I accepted that role. I had a Honda 250 Elsinore motorcycle because Joanie had a car, she worked at a sporting goods store. I’d drive that Elsinore during the wintertime back and forth between student housing and north grand mall, which is where the Sears was at. I always thought the manager of the automotive department so kind to me because he allowed me to park that motorcycle indoors during the winter. So, it wasn't so difficult to start when I went home those evenings.

Willy Walker:So you come out of Iowa State, you have three job offers, all varying industries. I thought, given that you were certified mechanic at Sears that you would have taken the job offer from Goodyear tire and rubber company, given that you were a little bit of a grease monkey at that time. But talk about what it was that made you come to Principal. And what your first boss talked to you about is it relates to changing lives in your career.

Dan Houston: Yeah. So ironically enough, we were headed out to the airport having interviewed and it was at that point Willy, where no longer becomes the interview, the recruiting it started. We're driving out towards the airport, and he had said to me, he said, Dan, tell me a little bit about these other job offers you have. So, one was Georgia Pacific, he said, wow, you want to be in the plywood business the rest of your life? And I said, gee I don't know, Mr. Sims, I mean that may not be the best choice. What's your other offer? I said Goodyear Tire & Rubber. He said, you want to be in the tire and battery business the rest of your life? I said, gee, Mr. Sims, I don't know if that's the best choice. And he said, if you come to the Banker's Life Insurance company, you'll change lives the rest of your life. And that, by the way, for those people may not be as informed, before we changed our name in 1985, we were the Banker's Life before becoming the Principal Financial Group. And to Chad Sims credit, he was 100 % right, because we do change the lives. We changed them, and have changed them for 142 years, providing vehicles for people to save for retirement, provide for life insurance and all the disability insurance and, health insurance, and all the things that we do here to help individuals navigate their way through life successfully. So then hopefully at the end, there's a great deal of financial independence for those individuals. And I would say Chad Sims made a great sell when he did that. When I was asked to do his eulogy at his funeral several years ago, I had shared that story and I think people really appreciated the impact Chad had on an impressionable twenty-two-year-old coming out of college.

Willy Walker: You and I both know that type of insight and input and mentoring from someone like Chad is just wildly valuable. And to those of us, who have been fortunate enough to have great mentors, it makes the difference in careers. Are there a couple other mentors, Dan, that you can think of throughout your career who have had a big impact on sort of, if you will, what direction you took, either inside of Principal or potentially not leaving Principal to go after another opportunity that I'm sure you've been presented with?

Dan Houston: Yeah, I've been so lucky to have so many positive individuals influence my life from the very beginning. I mentioned my grandfather when we first started and understanding what hard work look like. Chad Sims was one of those guys who... he was old school. You looked apart, you dressed apart. You put in the time, and professionalism was something that he emphasized a great deal. I had a good fortune to work with Larry Zimpleman here at the Principal Financial Group. And Larry was all about details and execution of the strategy and again, very informative dot the i's, cross the t's, remember people's name, using your memory as an advantage in relationship building, relationship developing, etc.

And then frankly, my father was incredibly influential all the way along. And he just the kind of person that would never sugar coat it. As a matter of fact, he was just here for our son's wedding this past weekend after having had a stroke about eight weeks ago. By a lot of definitions, there's no way he should have been able to travel here on a plane to get here. But he got here out of pure determination. He never gives up and he pushes his kids, six kids hard, and he pushes himself hard, still at the eighty-eight years of age, banging away at it, really inspiring all of us to do more than we might think that we could do at any given point.

Willy Walker: As you think about being one of six kids, where are you in the birth order? By the way?

Dan Houston: I'm tied for number of five because I have a twin sister. She's tall, skinny, and blonde, and I got the other half. She's four, I'm five, I'm ten minutes younger than she is. And I never forget to remind her that our 60th birthday was back on August 6th, and I did call her and a remind her of that very issue.

Willy Walker: As you think about growing up in a family of six, and if you will, learning from your siblings, competing with your siblings, trying to figure out who is Dan going to be. And you think about the qualities that you bring to your leadership, which is truly what I think of as servant leadership, the way that you have run Principal and the way that you talk about what Principal stands for. What is it that makes Dan unique? I've seen it from outside. I've watched you and read a lot about you and watched a lot of videos on you. And the way that you both convey your vision for what Principal stands for, work with people, interact with people is incredible. But there's something in your formative years that allowed you to develop those skills. Where did that come from beyond having great parenting and some great siblings who kind of pushed you? Where's the inner drive come from? Because as I watch your career, there's something inside of you that drives you forward to achieve all the success that you've achieved. Yet you do it with incredible grace.

Dan Houston: Yeah, it's very kind of you to describe it in that way. I'm a big proponent of servant leadership, and I think sometimes that can get overused. But I gave an example of something I saw, my uncle, my cousin, and my grandfather do in that small town. At Christmas time, they would literally go to the Hy-Vee in Denison, and buy 20 or 30 turkeys and drive them personally out to homes of people that were... service providers of some sort. Maybe they did some part time work. Maybe they helped during the harvest for the planting season. Maybe they ran the DX station, Frank the Bank, or Ralph down at the DX station. But they didn't have to do it, but it was their way of saying thank you. The other thing I would tell you is they felt as everyone being equal regardless of their background, their socioeconomic background. It didn't make any difference. Everyone was treated the same. And I observed that, and I tried to do the same thing. I do a fair amount of volunteerism and do the best job I can to give back to the communities in which, Joanie and I have the privilege of living in. I think that has helped me growing up as a kid. When you're one of six, and your parents are willing to put you on a greyhound bus from Houston to Iowa. It probably tells you a little something, right? That there are, I guess, one of two things, either. If they lost one out of six, it would probably be okay. That was supposed to be attempt at humor.

Willy Walker: I got that.

Dan Houston: There was a great deal of individual accountability and responsibility that was leveled on all of us. My first paper route, I was nine years old. And I did it from a bag in a basket and a bag around my neck and hard work and no job beneath anyone was certainly a big part of my growing up as a kid. And I still to this day. I'm not afraid. I still mow my own yard. I enjoy doing it. I'm probably a bit of a perfectionist. And I like looking when I'm done and say, hey, you know it turned out alright. I can still add value in some way.

Willy Walker: You've lived to a great degree, sort of the dream. I know you went back and spoke at Iowa State a couple of years ago, and I listened to that speech, which was fantastic. But you know, every student in that room sitting there going, this guy went to my university, went to the one of the, if not the largest employer in the state of Iowa, and is now the chairman and CEO of that company. You have lived that dream. Where did it come to you that you might have the opportunity if you stuck at Principal to be the CEO.

Dan Houston: It's funny. My dad worked at Coca Cola for an entire career and around our house you stuck it out, right? You hung in there and you kept working hard and never expecting it. And as rewards came about, you had that opportunity to step up into a new role. Willy, story you may find pretty interesting is when I joined the organization, I was responsible for west Texas, and it was as a pension consultant in a what you'd call a sales role. I was dealing with a lot of individuals in west Texas, and I was competing for the rookie of the year, if you will, that year. And one of the guys that was ahead of me, or we were kind of neck and neck the whole year long, a gentleman by name of Harvey Weinberg. He had worked in the home office for ten years. He had sort of a ten-year head start on me on product and knowledge and so on and so forth. He went to Milwaukee. I'd gone down to Dallas, and it got down to the end of the year and he beat me by 500 production credits. That was the difference between number one and number two. Harvey got a trip to Hawaii that year. I got a trip from Dallas to Des Moines in January and was in a smoke-filled room. I'm looking straight at the hotel, I was in at the Marriott across the street, because the number two runner up in the sales contest became a member of the marketing council, which is where you would come in, meet with the chairman, the CEO, the president, the divisional presidents, and share insights from what's happening out there in the markets. Probably not unlike what you do at Walker & Dunlop to try to get some valuable input. And on that date of which I lost, and I was number two, I just spent six hours with the president, the CEO, the chairman, the divisional presidents. I didn't know them when I went into that meeting, but they knew who I was when I left the meeting. It was the best number two finish of my life. It did allow me to get to know and establish some relationships incredibly early in my career. That was one of those fortuitous situations where you could have looked at it as I lost a trip to Hawaii, but frankly, it afforded me, frankly, a lot of other opportunities. So, life as you know could be serendipitous in many ways.

Willy Walker: As you've watched Principal go from being the old banker's mutual into the very large global company that it is today. If you had the ability to rewrite the script of the things that the company has either done or not done, what's the big thing that either did perfectly or missed opportunity that would have significantly transformed where Principal went from when you joined it too now? Because you have a very unique perspective on that, Dan, because I'm sure there have been lots of opportunities to acquire somebody else and become part of something or to a diversified product offerings into an area that you all looked at and said, let's go compete with fidelity on XYZ or PDQ and you either did or you didn't. As you look back at the history what's the fork in the road that either should have been taken or fortunately was taken?

Dan Houston: Yeah. So, the first thing I would say is I very seldom look backwards. I just never felt that incredibly informative, except through just history and understanding the implications on decisions that have previously been made, but I very seldom regret them. But I will share with you what I think to be somewhat of a unique perspective. And that is, you have to keep in mind that you gotta grow your earnings, you gotta grow your revenue, you gotta keep growing the company. There are going to be certain products, certain markets that won't have the tail winds for whatever reasons. When you were talking early about the economic environment you were thinking inflation was going to be transitory, and interest rates are going to stay low, you think property values are going to sort of hang in there. That's a view that you're taking. I think Principal has always had a long history. I'm the 15th CEO in 142 years. I think we've always spent a fair amount of time thinking strategically about what's the future. What's the future for commercial real estate, for equities, for income? What's the demand for the middle class? Going to be for retirement services in Chile, in Brazil, and Mexico and in China? Our lens is really trying to look as far ahead as we possibly can to understand what are those macro trends that are going to help us create a business model and a strategy that would allow us to capitalize on that future?

And where I think sometimes you can see mistakes is when you're looking in that rear mirror, somehow hoping things aren't going to change, that it is going to stay the way that it is. I think you have to challenge the status quo to say it just isn't going to work out. We're in the midst of that right now. We have a real estate portfolio worth $96 billion. And we're fortunate that a lot of our properties are already what I consider to be in the contemporary classification, life sciences, and warehouses and medical buildings and larger warehousing operations on the coast. As opposed to commercial office space in suburban Michigan. We don't have a lot of that exposure. Again, a lot of credit goes to Pat Halter and his team, for having the vision of seeing what's out there. As you well know, we partner with a lot of organizations like yours to try to anticipate what that next demands going to be around commercial real estate and trying to feed into that.

So hopefully that helps sort of shape the thinking. We've exited a few businesses. We divested ourselves of our residential mortgage business back in ‘05 and ‘06 because we just didn't like the optics of the long-term financial metrics that were coming out of that. We thought residential mortgage was ripe for a downturn and turned out that to be the case. And frankly, we exited the health insurance business back in 2010. When we made that decision, we just didn't have enough scale. And we just felt, frankly, there was a better owner for that property than Principal at the time and divest of that to United Health Care. And frankly, they were outstanding partners as we shifted relationships. They had been with us for over fifty years to a different service provider. So those things do matter to us who that the new owner is and how to divest a property.

Willy Walker: Talk about the winding down of the health insurance business because I think it's very telling of you as a leader. You have the opportunity to sell that business overnight and let go of 1,500 people or to basically wind down that book over a three-year period and not let go of 1,500 people. At the end, 500 people lost their job and it was a far less impactful moment on those members of your team, who, as you just said, some of them have been around -- well you've been in the business for fifty years. Many of them have been in that business line for a long period of time.

Talk about that because I was really so impressed with the way in which you analyze the decision to be made on exiting, because many people when confronted with a bird in the hand, let's just sell it tomorrow and be out of it, versus sort of, two in the bush of, yea, we're going to get the same value over time. But there's a chance we don't get the same value over time. But it is going to have a far less impact on our partners and our employees if we do it this way. And to take that risk from a financial standpoint to get the outcome from a personnel standpoint that you ended up achieving.

Dan Houston: Yeah, I appreciate the opportunity to talk about that. And again, Renee Schaaf led that effort for us and did an amazing job. You're right. It was a three-year wind down of the business and a transferring of that business to a partner like United Health Care. The idea of spreading it out over a three-year period of time was going to allow us to fulfill responsibilities that we may have made. A two year, for example, rate guarantee to a client that we want to see that through, even in the idea of divesting the business to a second party. The economics were going to be a push whether or not we sold it overnight or we did it over three years. But our employment brand and our relationship with our customers was the highest priority. We had made promises to the customers, and we wanted the customers to have the ability to make a decision around, do they want to choose who Principal chose, which was United Health Care or somebody else. No matter who they chose, we were going to make sure that was a soft hand off to that new services provider.

As you say, if we did that over a three-year period of time, it would allow a lot of our employees to be absorbed because of attrition that takes place throughout the entire organization over a three-year period of time. We had some that were right on the verge of retirement, so allowed them to have a smooth transition. Frankly, I made personal phone calls and called on other health insurance providers, one of which is three doors down from where we are here who had been a major competitor and provided them with insights and perspective on this workforce that might be helpful to them.

So again, how you go about handling a delicate situation in 2010 helps inform people these last eleven years on why you may want to choose Principal as a provider of your services. Let alone a provider of employment and where you'd want to hang your hat, feel good about where you work every single day. So, we took a very similar approach in residential mortgage. The difference there was the buyer wanted the vast majority of those employees. And so, in that case, there was certainly around their employment in the case of health insurance, it was only a small percentage that would have had a guaranteed employment opportunity with the buyer in that case.

Willy Walker: As you said when you joined at that time, Bankers Mutual now Principal, you had the opportunity to change people's lives. When you talk to people about saving for retirement and you all are such a fantastic provider of those services and advice. Talk for a moment Dan about what we all ought to be thinking about is it relates to saving for our retirement. How much should we be putting away? What's the kind of, if you will, back of the envelope, elevator pitch for why someone ought to be working with Principal and saving for the future? How much do we need to be saving today to be able to live comfortably in retirement? And then let's take that into a little bit of the demographics of the world we're living in today. But let's start with that elevator pitch on how much we should be tucking away every year to be able to live the way you and I want to live when we actually retire?

Dan Houston: More than you think you actually should is probably the best way to answer the question. Ya know Willy, this is one where no matter who I'm speaking with, high school students, college students, if I'm speaking publicly on topics of around retirement savings, it is literally this simple. You don't need a computer. You don't need to read 250-page book. You don't have to go to a benefits calculator, none of those things. The average working career is going to be between thirty-five and forty years. People coming into the workforce today, they are not even eligible for social security benefits until the age of 67. People still think 65. If you work a forty-year career, and you set aside 15% of your wages, you put it in something that has a mix of equities, commercial real estate, and fixed income. If you do that, it's going to replace 85% of your pre-retirement income. That 15% could be made up of a lot of different things, including an employer match or employer profit sharing contribution, your own salary to deferral, but 15% plus whatever social security benefits you're going to have is going to replace 85% of your pre-retirement income.

Said differently. If today you save 15%, and on the day of your retirement, you were making $100,000. If you'd done what I had said over those forty years, you're going to have $85,000 a year of annual income for the rest of your life. It really is about that simple. Again, there are certain sequencing return sequences that cost people at any given time when they get in the workforce or when did they get out. But a forty-year period of time is going to absorb a lot of dollar cost averaging into the markets. And obviously, investing in well diversified portfolio makes a lot of sense. It's, frankly, one of the big, largest, most impressive innovations in our industry. Because for so long, as I think about when I started back in the early 80s, you can buy a five-year CD at the bank. And that thing was generating thirteen, fourteen, fifteen. Yeah, some got up to eighteen, but as you very well known, inflation was also chewing away at a lot of that. But there was a generation of savers that for years never had to make a decision on equities. Then equities came about and then it started becoming more difficult. So, when these target date portfolios or target risk portfolios allowed people to buy into these diversified portfolios of these various asset classes. It probably revolutionized 401K retirement savings as much as anything because it gave them literally an easy button on their computer that says, I don't know what to do. I know I need to say 15%. I'm going to retire in 2050. I hit the target date on 2050. If I don't touch it and I just let those dollars accumulate over time, I'm going to effectively fund my retirement in very seamless fashion.

And again, there's a lot of complexities to your other point, which is an important one, and one that's matters to me personally. There are people that you very well known that live in a world where their income doesn't really afford them the opportunity to set as much aside as they should have. Social security gets 40 or 50%. We have tried to create products and services that would allow the lowest income earners, the bottom 20%, if you will, for income and wages, to save for retirement. And there's a lot of vehicles out there allow that to occur, which is why when we're doing retirement savings planning for every industry and some of those are service industries. We try to make sure that there is a programming and communications and opportunities to communicate to 100% of that employee base, not just the top 10% or the top half. And if they're in the custodial service business, and they are a service provider to JLL, or whomever we want to make sure that they have an equal opportunity to save more, to save more for retirement.

Willy Walker: The actuarial tables are telling you that Americans are living longer and longer. I think I heard you say that if you're born now in an industrialized nation being born today, something like you, you tell me where we are as it relates to living to 100 years old. But that the cohort that's being born right now has a very good chance of living to 100 years. And I listened Eric Schmidt last week on the Tim Ferriss podcast and he was just talking about AI and how AI is just accelerating the research and development on the pharmaceutical side of things and the medical research. Where a doctor would go into the lab or a scientist and work on a compound and run seven scenarios on the compound during the day, go home that night, come back the next day and run seven more scenarios on the compound. After a certain period of time, you get something. Now you've got computers that are running millions of scenarios on those compounds every day.

How much does longevity and people living for longer impact the way that Principal is thinking about retirement savings and working with your customers?

Dan Houston: Yeah, it's a really good question. And the first thing I would say is Covid actually put a bit of a hold on those tables right now. And you mentioned the Delta Variant and I doubt we're done. I suspect we're going to be dealing with these kinds of issues in society for some time.

Now, because of the advances in science and creating the vaccines for the coronavirus, we have made probably they estimate as many as a ten-year advancement in vaccine production because of the science that's come out of this most recent pandemic. But you're right. People are going to live longer. This will be the first generation that there's a very high probability you will spend more years in retirement than you will having worked. Okay, forty-year career, forty years in retirement. It's never happened before. When social security was created many years ago in the late 30s the chances of you living beyond age 65 was remote. If you did, you're going to make it about six years. You might make it to the early 70s. And each year, those mortality tables have moved up and to the right and they've been leveling off.

But when you start getting into the science of hip replacement, knee replacements, some of the gene editing that's taking place and some of the neuroscience advancements that are taking place, I have no doubt your quality of life may not be great, but you are going to have the opportunity to live longer. We need to make sure that that doesn't get too isolated among just the most educated and the most financially well off. And so again, health care, we need to make sure is available to everyone. And that, they have a fair shot, and accessing health care that would allow them to prolong their life as long as humanly possible. I think that Walter Isaacson book on Jennifer Doudna and talking about gene editing gives you this window into the world of what's going to happen long before that baby is born and some of the changes around disease, whether is sickle cell anemia or whatever the case might be. But a lot of that will be done in the womb, which is also going to be a contributor to longevity. And so, I can't even, I think about what's happened these last fifty years. I can only imagine where technology takes us for the next fifty years.

Willy Walker: When you think about the buyers of your products, I think about it a little bit from a generational standpoint of Baby Boomers and Millennials and GenX what have you all seen as it relates to the propensity to save as you segment out various demographics?

Dan Houston: It's funny because people come to this conclusion that Millennials are not good savers that they spend everything at Starbucks. It's not a true statement. They actually are quite good and so are the GenX. The Baby Boomers are probably the worst example, although they've had some... they've had the good fortune of a very healthy job market and advancements in their careers and some inflation, and the Greatest Generation having retired. But they haven't necessarily been the best role models around saving money for retirement. And their kids are actually holding up better in terms of a percentage of their salary that they're saving for retirement. So that's actually a good sign. Back to your earlier comment about insurance, specifically life insurance and annuities. Remember, an annuity is how long a person is going to live, and they'll have that income through retirement. The other one is mortality. Those two things are a bit of a natural offset to one another. And they are here even at the Principal Financial Group as well. But I do think that individuals today have less confidence that Social Security is going to be there when they retire. I think it will be there, frankly, but there's less confidence that that's going to be there. So, to the extent that's a true statement. They're actually prioritizing it, saving more for retirement.

Willy Walker: When we talk about Millennials, both of us are confronted with challenge by back to office, and what does the work environment like in the future. I'd love to get your thoughts as it relates to what you're thinking on, bringing the workforce, at Principal, back to the office, whether in Des Moines or around the globe. And then I want to take that into what you did on the renovation of your corporate headquarters building and social responsibility. But let's start on the Millennials and getting back to the office.

Dan Houston: So it's not just the Millennials it's bit of everyone. I'll just go on the record and say I never left during the pandemic. I've been here, and my assistant Mary Pille has been here every day. We had my ourselves and our essential workers, and then we went about four months before making the building available for non-essential workers about four months later. And we've since instituted this past September, back to our formalized hybrid model and about 60% of our workforce here in Des Moines make it into the office about three days a week. So, we're marching our way back to what our new normal is going to be, which is this hybrid model. My single largest concern, it isn't around our ability to keep employees safe, because we can do that. We have a very safe working environment, two million square feet to spread out in. My single biggest concern at this point now that we've passed that initial hump of the pandemic and the potential to be contaminated in one form or another, it is the DNA of the company. It's the connective tissue. It's the relationships. I mentioned being in that boardroom and meeting senior people at that time. And although this is, today a podcast and hopefully everyone's enjoying it. We're not meeting in person, and I do think it makes a difference. The level of you and I work together every single day. And right now, the reason why we've been successful in a remote environment is we have a lot of tenure among our employees and the relationships are there, and they're able to be maintained. I don't think employees that have been on boarded in the last two years are going to have the same feeling that our employees who historically been onboarded in a face-to-face environment. So, we'll have some work to do to create the right interactions and hybrid model that promotes that. But the idea of a complete, remote work environment, I don't think it is the panacea that some people think it will be. And it's going to show up in not having the relationships that I think are just critical as you think about high performing companies.

Willy Walker: Have you thought about adjusting either the recruiting strategy or the training programs to address those, what I believe to be extremely, both significant and real concerns as it relates to how people get into Principal, get trained at the Principal and get a sense of the culture of the Principal?

Dan Houston: We've completely rethought every aspect of onboarding employees, and part of what's, if you will, on the shelf, as we've gone to this hybrid model was leaders providing the right forums where people can get together in a safe environment, with the proper social distancing and with the proper care to start having those relationships. So, we start them, for example, in a virtual environment, and then come together as a team, have that personal interaction where they get a chance to meet one another on a more personal basis, and then sort of migrate back and again, sharing this model of both dialing in and dialing out technology to help enable that.
And again, the mentoring relationships, sponsoring relationships, still very much intact. As a matter of fact, one of the things we've done downstairs in our community learning center is, we make available that space after school, because I want a young people in the community, their disadvantaged, to be able to come to a work environment. It is professional. They're speaking to people at the security desk before badging in, coming up and having tutoring and mentoring and sponsoring sessions for personal development, for assistance in their homework, and helping them be as successful as they can possibly be. You can't do that in a pure virtual environment. You can do a few things on the edges. But it's getting those young kids in here, sitting across the table, sitting in a chair, chatting with one another about what their career aspirations are, and helping them move their professional careers along. That's what's imperative. So, we don't have it figured out 100%, but we're going to, and it'll be hybrid for the foreseeable future.

Willy Walker: You mentioned previously that you're the 15th CEO of Principal. You clearly, if you will, sit on the success of all those previous 14 leaders of Principal in such an incredible organization. But you're also extremely innovative as it relates to where you want to take Principal. And when you talk about having members of the community come to your day care center, and when you talk about the role that Principal plays in the Des Moines economy, in the Iowa economy, in the U.S. economy, you sit on the business roundtable with 200 of the largest corporations in the United States and you sit there, and they've all got global reach as you do. Yet I feel from having studied you and the way you lead Principal that there is something that is unique about a company with global capabilities in a global footprint, but it all comes back to local. I mean you did $6.5 million at your charity golf event last year when nobody actually swung a club. That's real branding there. That's a real sense of community when you can raise $6.5 million, and no one even actually shows up to the course. How is it that you manage having a global reach? You gotta understand, as you said, previously, what investors and retirees want in Chile. And at the same time, you're back to figuring out what needs to happen in the Des Moines community to make it so that when you exit a business, you're not just laying 15,000 people off overnight. That seems to be very complex, Dan. That seems to be an exceptionally challenging set of demands on you to be global, and at the same time act local. How do you manage those two things?

Dan Houston: I think the best way to think about it is we have to act locally because our customer base is local. We do business with over 200,000 small to medium sized businesses, and yes, we do business with the fortune 50 as well. But if you're going to reach 50 million customers around the world in one capacity or another, you've got to stay incredibly well aligned. And I say 50, that's our target. We're roughly 32, 34 million individual clients today. And everything is local. It's how we do business in Beijing and Kuala Lumpur and Santiago, Chile, and in Monterey, Mexico.

But yet at the same time, our ethos, our DNA, our culture, our customer experience, our technology is intended to be ubiquitous across the globe. One single platform, our efforts around foundation work. I was recently... now, it's already been almost three years because of the pandemic. When we were in India, we stood up an innovation center there, and it's around job training. And we chose to remodel a building that was just outside of a very impoverished neighborhood, because there is no mass transit to get them there. Not only do we recruit those high school dropouts in those very, very poor neighborhoods of India, and we put them in a professional learning environment and teach them a skill. Our real goal is to eventually to get them in our office building, to help in whatever capacity they can mature into.

And so, everything related to our foundation, everything related to our corporate giving ultimately is around helping people achieve financial security. It's in our DNA, we want people to have financial security, whether it's through the products and services that we have or for those that are in a much more difficult situation to do it through our foundation. You mentioned the Principal Charity Classic, $6.5 million, no one swinging a club. The following year $7.3 million since most recent charity classic, which was just completed. I went to a party last night at 9 o'clock after the polls had closed. We had a won a bond referendum for Polk County here to issue $65 million in bonds, $15 million of which is going to go to the central Iowa water trails, which is going to create kayak and canoe and fishing opportunities and activate a better portion of the major rivers coming down through Des Moines. It helps to attract talent and retains talent. It gives people that are less fortunate a place to fish off the shorelines and allows people to recreate and really take advantage of the water trails here throughout central Iowa. But we do that, we do it here. We try to do it in Charlotte, we do it in India, wherever we have significant operations, we try to do everything we can to help that community achieve success for its citizens and foreign employees.

Willy Walker: I think the stat that I read was that didn't 85% of the graduates from that center in India go on to get a middle-class job last year? It's got fantastic record of training and then getting those people who came from, really, really if you will, challenged upbringing, really good jobs. Am I correct on that?

Dan Houston: You're exactly correct. The Lighthouse is the name of the initiative there. And these are kids that have the capacity. They didn't have the right opportunity. They didn't have the right skills, development. It can bring tears to your eyes because they never had a shot. Many of us were born on second base and thought we had a double. These kids are just trying to get out on the field. They just want to shot getting out from behind that dugout and get out there and have a swing at the plate. So, the degree that we can create that, we want to do that.

Willy Walker: You talking about... Born on second, I think we had a double, you were giving a speech and talking to students, and you were talking about stress. I think stress in our society today. I have a board member who flew out to our board meetings here in California, sat down next to someone on the plane and the person next to him immediately got on him about how he was wearing his mask, caused a whole situation on the plane. And I have to tell you this director is a very, very humble, quiet person. And the idea that anyone would kind of come at him on a plane I can guarantee you he wasn't the one who instigated it. And the guy sitting next to him in the seat ended up spilling orange juice on him purposely, trying to create a real situation on the plane all about masks. I don't want to get into masking policy here. What I want to say is that our society is filled with a lot of stress right now. And you in this speech sat there and said to these students, you think you've got stress as it relates to getting into a class and managing the social activities and getting a job and all that stuff. Stress to me is a single mom with two kids carrying two jobs and trying to save for her future. And I think it says so much about you as a leader. But it also is so important for all of us to put perspective around where we are in our careers, in our lives. And then also, as it relates to this pandemic, and that while we are in no way done with it, being appreciative of how quickly we got a medical solution to this. How quickly we've gotten back to life relatively as normal and keeping all those things in perspective. I found, as I've listened to you, you're incredibly good at giving those anecdotes to the people who work with you and interact with you about, let's make sure we don't get ahead of ourselves here.

Dan Houston: Yeah, exactly right. And I really do think people need to really do more self-reflection on how fortunate we are. For goodness sakes, we have the vaccine available to us in this country. And it was developed in less than fourteen months. Remarkable effort, and I do think, I know you listen to some of the other speeches when I did a commencement address, I talked about the movie, The Bucket List. The reason I think it is interesting to bring this out is my mother had given me this movie The Bucket List with Jack Nicholson in it, and Morgan Freeman. And I didn't watch the movie. I set it aside. That's gotta be some stupid, but there was one of those cold winter days when I finally put it in there, and CD, long before streaming. And there is a part where they're standing on the pyramids in Egypt, and Morgan Freeman was being challenging Jack Nicholson on this notion of getting into heaven. And his comment was that the Egyptians had a belief. And loosely, it's an accurate story that the Egyptians have a belief that you have to only answer yes to the following two questions, in order to get into Egyptian heaven. The first question is, have you brought joy to your life? And of course, Jack Nicholson said he had done that. He brought joy in his life in his own sort of way of defining it. Then the second question, have you brought joys to others' lives? And he wasn't able to answer that as well as he would have liked I’m certain. I think about that a great deal. Are you finding joy in your life? And then secondly, do you bring joys to other people's life. Intentionally inciting a disturbance on a plane, on a confrontation on a mask or spilling orange juice is anything but trying to bring joy to someone's life. And I just think life is too short. As I've said, you live about eighty-four years. The last two are in diapers, the first two in diapers. That gives you eighty years in the world has been around for 6 billion years to make a difference. And that's how you intend to make a difference? That's just irresponsible. So how are you going to use your life to improve your life and to help other people? It's probably maybe a good closing comment that relates to this notion of trying to do the right thing for people.

Willy Walker: I think it's a wonderful closing comment, and I will say I had a long list of questions as it relates to the economy and where you see interest rates going. And all of that. And I'm happy we didn't go to that because your leadership of Principal and the way that you’ve guided that organization is so much more telling and important, at least from my perspective. I'm sure there was someone listening in today who wanted to hear your thought on rates or the markets. How you're investing the trillion dollars that Principal has under management.

But how you run Principal every day is going to have so much more of an impact on the outcome of the numbers of the people who work at Principal and on investing people's capital every day to save for their retirement. Then, if you will, and by the way, I love the story about your chief economist being someone who went to, I believe Iowa State as well, then was a farmer for twenty-five years and then went back and got his PhD and is now seventy-nine years old and giving you great insights on the market. I'd love to sit down with him for an hour and pick his brain on things. But I just find it to be so important, there's so few leaders like you, Dan, who have such perspective on taking care of their companies, the environment, the communities that they are from. And it's just been a real pleasure to sit down and talk to you about the way that you build Principal and continue to lead Principal on a day-to-day basis.

Dan Houston: It's an honor of a privilege. And if you want to get together and talk about top-down thematic sector, rotational investment strategy, we can do it, but I've just never found it to be that interesting. But, certainly we have a lot of views on the markets and interest rates and inflation and currencies and, as you know, doing business in 80 different countries around the world were not short complexity. We have a lot of products that involve long dated liabilities. And of course, it's one thing you and I share in common, which is a passion around commercial real estate. Very seldom, do you find an asset class that has such longevity with the risk that you have. And so, if you ever want to get back on another pod cast and talk about these bigger issues, be more than happy to do so. But it's truly been an honor and a privilege to be with you today.

Willy Walker: Thank you for spending the time today. Congratulations to you and Joanie on the marriage of your son. I'm thrilled to hear that your dad made it to the wedding and thanks again, Dan for taking the time. It's been a real pleasure.

Dan Houston: Have a wonderful day. Thank you so much. 

Willy Walker: Bye bye.

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