Principal Launches Workplace Personal Investing Program for Mass Affluent

Principal Financial Group is moving more directly into participant financial advisement by targeting emerging and “mass affluent” savers, top executives said during the firm’s annual investor day conference on Monday in New York.

The firm started the program with about 160 salaried financial advisers toward the end of this year’s third quarter, said Chris Littlefield, Principal’s president of retirement and income solutions. “Workplace personal investing” is targeting participants who would otherwise fall through the cracks for advisement due to relatively lower account balances. 

“We want to serve our emerging and mass affluent customers—people with less than $1 million to $2 million in investable assets—and we want to serve them not only with education, but advice,” Littlefield said. “One of the main things we’ve heard from customers for a long time is that ‘I understand I have options; help me understand what I should do with those options.’”

Chris Littlefield

Principal’s advisory service is available to plan sponsors to add to the plan, and then offered as a value-add for plan participants, according to the company.

Fidelity Investments and, more recently, Empower, have for a few years offered financial adviser services to participants via their wealth divisions. Meanwhile, many retirement plan advisories— and, to a lesser extent, wealth management firms—have been building up national footprints to serve clients across both 401(k) plan advisement and individual wealth management.

Littlefield said Principal decided to invest in the personal wealth program based on client demand for advice that was not being met by the market—some 60% of participants are currently without advisement. When a plan adviser partnered with Principal is interested in working with those participants, he said, the firm will refer that customer over; when the adviser is not interested, Principal will offer its services.

“We want to partner closely with our advisers—sometimes that works and we can refer leads right over,” he said. “Other times, [the participant is] at a level of investable assets that aren’t economical for that adviser to service, and that’s where we can step in.”

Littlefield also noted that financial advisers often seek out higher-net-worth clients due in part to costs associated with client acquisition and other processes that Principal does not have.

“We’ve got the customers; now we have to figure out the right model to serve them,” he said, noting Principal’s 14 million participants within its platform. “We’ve got the digital capabilities that can serve a lot of what they need, and when they want to talk to a human, we’ve got the Principal person [who] can talk to them.”

Passive TDF

Kamal Bhatia

Kamal Bhatia, president and CEO of Principal Asset Management, announced at the investor day that the firm will introduce its first passive target-date fund in 2025. Bhatia noted that Principal was one of the first managers to offer both active TDFs and, later, hybrid TDFs combining active and passive elements. The latest venture will pit Principal against firms such as Vanguard and BlackRock Inc.

“At the larger end of the marketplace, certainly, where we play in [defined contribution investment only business], there are a lot of sponsors that are very focused on fees, and they want a passive solution,” Bhatia said.

The passive option also gives Principal the ability to offer options even more broadly across the spectrum of prices—moving from lower-priced TDFs to managed accounts and then to individual accounts, he said.

Principal representatives also discussed its new target-date fund that includes a guaranteed income annuity, slated to be offered in 2025. That product will be implemented in partnership with Advantage Retirement Solutions’ Lifetime Income Builder and will add to a suite of retirement income products that should continue to grow in coming years, according to Littlefield.

Technology to Human

Littlefield also noted that 50% of Principal’s retirement clients have more than one offering—for example, a 401(k) plan and a nonqualified plan. The advice component will add to that full spectrum of services, he said, and come via the “trusted” sources of an employer and its recordkeeper. As trained financial advisers, he noted, Principal advisers will recommend the best options to participants, including third-party solutions.

Last week, Principal CEO Dan Houston announced he will step down at the start of 2025, to be replaced by current President and Chief Operating Officer Deanna Strable.

During the investor day, Strable and Houston emphasized the firm’s opportunity in the “U.S. retirement ecosystem,” presenting that the firm estimates about $110 billion in annual profits, including recordkeeping, asset management, wealth management and income solutions.