5 Top Thoughts From Principal's Benefits Boss

Principal Financial Group Inc. sent Amy Friedrich, its new president of U.S. insurance solutions to New York, this week, to meet with stakeholders.

One of her goals is to get more Americans in general, and more American small business owners in particular, talking to insurance or other financial advisors of some kind.

"We've just got to find a way to make financial planning something more people trust," and actually do, Friedrich said Monday, in an interview in ThinkAdvisor Life/Health's offices.

Principal Financial

Principal — a Des Moines, Iowa-based insurer — has gone through a dramatic change in the past decade. The core life insurance company was founded in 1879. It still had a major medical insurance operation as recently as a decade ago. It had an old school mortgage lending operation.

But Principal's executives seem to have had a better-than-average crystal ball. They sold the mortgage lending operation to Citigroup Inc. in 2004, three years before the mortgage lending market started to implode.

The company sold its major medical business to UnitedHealth Group Inc. in September 2010, when insurance company executives were still hoping the Affordable Care Act might be a great way to add profitable revenue quickly.

Principal has now grown international asset management and wealth management operations to the point that many casual observers are unaware that the company has its roots in the life insurance sector.

But the company still has significant non-major-medical employee benefits and executive compensation operations. It offers products such as group disability insurance, group life insurance, dental insurance, vision insurance, critical illness insurance and accident insurance.

Amy Friedrich

Friedrich began working for Principal in 2000, in the corporate strategic development unit. She became vice president of specialty benefits in 2008, and senior vice president of specialty benefits in 2015. The company named her to succeed Deanna Strable-Soethout as the head of U.S. insurance solutions in May, when Strable-Soethout took over as Principal's chief financial officer.

Here's a look at five of Friedrich's ideas about the executive comp and benefits markets, based on her experience in the specialty benefits unit and her new role as head of all of Principal's U.S. insurance operations.

Radar (Image: Bram Janssens/Hemera)

(Image: Bram Janssens/Hemera)

1. She's really interested in the tax reform negotiations in Washington.

Friedrich declined to say anything, at all, about the specifics in H.R. 1, the House Republicans' Tax Cuts and Jobs Act bill, or possible alternatives, except to say that Principal is reading everything very carefully.

Executive compensation advisors may have used life insurance from Principal in corporate-owned life insurance (COLI) arrangements inside executive deferred compensation plans. They could have used Principal mutual funds in those plans, or use Principal mutual funds or annuities to fill in any gaps that appear if new tax rules eliminate old executive comp strategies.

Whatever happens to the tax rules, Friedrich says she believes having thoughtful executive comp and deferred comp rules and strategies is important for everyone involved.

In a healthy economy, when highly skilled executives are deciding where to go, "someone's going to find a way to pay someone for their skill sets," Friedrich said.

Compensation arrangements that provide the right level of pay, and also get executives to think hard about the long-term performance of an organization, not just quarterly results, can be good for the organizations, the employees, the customers and the community as a whole, Friedrich said.

2. She thinks all advisor silos are opaque.

In her new role, Friedrich talks to people who started out in insurance, people who started out in securities, and people who started out focusing on employee health benefits.

She said many of the strongest advisory firms appear to be adopting a team approach that brings in advisors who came up from each of those three sectors.

Financial professionals with roots in insurance may feel as if no one else in the other silos really understands insurance, but Friedrich said she believes advisors who come from any of the three silos tend to have the same kinds of problems understanding the perspectives who come up from the other two silos.

3. She thinks the benefits buyers at small groups tend to be a lot different from the buyers at large employers.

Especially at the smallest employers, the owner is often the true benefits decisionmaker, Friedrich said.

"It's not a spreadsheet that wins," Friedrich said.

Those small employers may choose vision benefits or dental benefits based on what they think will help with recruiting and retention, but they tend to choose life and disability benefits for more personal reasons, Friedrich said.

"They get really passionate about what they think makes sense for their employees to have," she said.

4. She thinks true employer-paid small-group coverage is still alive.

Friedrich sees many employers adding voluntary, employee-paid benefits, but she said Principal's typical benefits customer still combines employee-paid options with at least one employer-paid option.

5. She thinks getting professional financial advice is critical.

Principal conducts annual surveys of owners of small businesses

The surveys show that fewer owners report using professional advisors, but the latest survey results show that the owners who do use advisors are more likely to report having surplus capital, more likely to have added staff and more likely to be optimistic about the future.

It's possible that the owners who use financial advisors are more successful because of their personal characteristics, or that more successful owners are more likely to seek out professional financial advice.

But Friedrich said she thinks that the advice helps make the owners more successful, and that encouraging wider use of financial planning could increase the overall well-being of small businesses and their owners.

—Read Benefitfocus Hopes ACA Stability Will Thaw Employer Decisionmaking on ThinkAdvisor.

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5 Top Thoughts From Principal's Benefits Boss

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