A GOOD PARTNER IS KEY TO SUCCESS
Principal Financial Group aims to help Chinese people invest for the long term What opportunities for the United States do you see from the Belt and Road Initiative?
Dan Houston, chairman and CEO of global financial investment management company Principal Financial Group, believes a good leader should always be present rather than become a presider. Therefore, he spends a lot of time every year traveling around the world to work directly with his international teams.
PFG started businesses in China in 2005, setting up a joint venture asset management company with China Construction Bank. CCB Principal Asset Management Co Ltd is now the sixth biggest fund management company in the country.
The Iowa-based company signed a strategic cooperation agreement last year with CCB for a potential pension partnership in China, considering a second joint venture with CCB Pension Management Co Ltd, a subsidiary of CCB.
“We have great confidence in the nation’s huge pension market, and we remain optimistic that we can evolve the memorandum of understanding into a more meaningful long-term relationship,” Houston said.
He added that PFG and CCB are truly trying to get a generation of Chinese individuals prepared for old age to live a good life in retirement.
He said the challenges for the company in developing its business in China include persuading employers to adopt enterprise annuities and making Chinese people comfortable about using the sector’s products to invest for the long term.
In an interview with China Daily, Houston talked about the company’s business prospects in China, his management philosophy and personal life.
How do you assess the prospects for your business in China?
Quite positively. I believe the success that we’ve enjoyed since 2005 speaks for itself. We think there are a couple of things that are critical components. The first is having a good partner and we have a terrific partner — China Construction Bank. The second is that we have a shared commitment to do the right things for customers. The third is results. If you look at results in terms of the investment performance and the results we’ve been able to deliver to the customers, they’ve been quite good. So I think those for me are key elements of the strategy.
What do you think of the prospects for the Chinese economy?
The first thing I would say is that China’s economy is so big — and it is still growing at six or seven percent. I am very positive about China’s trade friendliness, policies and procedures. I think the Chinese government is already doing some very smart things relative to credit, regulation and pension policy. I have no question in my mind that the Chinese people will be successful navigating this economy for literally centuries to come.
What are the biggest challenges for PFG in China?
I think one of those challenges is the ability for us to work with employers to encourage the adoption of enterprise annuity. China’s three-pillar pension system (the first pillar is the basic pension led by the government, the second pillar involves enterprise annuities and the third pillar is commercial endowment insurance) works extremely well and in this particular instance, there’s already a sense of burden on the part of employers.
Number two: In China, we will have to make people comfortable with investing for the long term. This is not a shortterm investment period, so we try to reduce the speculative nature of the investment mindset of Chinese workers.
And another one is that we need to have good collaborations with the regulators, foreign companies and domestic companies to promote and support new products and services that can help Chinese people.
What is your secret for making PFG successful in China?
I think the secret for all successful companies is having very committed employees. We have 15,000 employees around the globe committed to do the right things for customers. What do the customers need? How do they benefit from the products and services we offer? And that’s what we try to emphasize every single day. We refer to it as “One Principle”.
What is your biggest achievement as the chairman and CEO of the company?
The achievement of the chairman and the CEO of the company is just the collective success of the organization. We continue to add the number of clients that we are serving, which is important. We continue to adopt best practices around leveraging the use
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of technology to help our customers. I would also say that we have done a good job for our shareholders in leveraging our capital, to make sure that the shareholders are appropriately rewarded for investing in the company.
I’m the 15th CEO of a company that has been around for (more than) 138 years. And I would tell you there is a great deal of burden and responsibility that comes, not only ensuring that we have success for our customers, but also to think about what happens in the next five, 10, 15 and 20 years.
What is your management philosophy?
My management philosophy is around servant leadership. My job is to make sure that we take our resources, whether it’s our talent or capital, and move them into the hands of our senior management team to make good decisions for growing our businesses.
I always admire China’s way of framing their opportunities and who would have thought that 2,000 years later, the same Silk Road that brought so much prosperity to Chinese people is still here today? As a global society, it will be critical that we have durable and equally balanced trade relationships. I have no doubts that the US and China will be long-term trade partners for centuries to come because they have to be.
How do you assess the role of PFG’s China business in your global strategy?
It is among the top initiatives that we have in the organization. We meet with our board five times a year and we always have conversations about the importance of China. So, China is a very important part of our overall strategy and I see it getting even more important in the future.
How do you see the competition with your counterparts in China?
Competition is an interesting word, because I don’t think today’s competitors are going to be the competitors that we face in 20 years, nor are the competitors we face today the same as were those 20 years ago. So we have to be very fluid and agile and focus on providing the best value for the customers and staying ahead of the competition.
My view is that if you are willing to disrupt yourself before you get disrupted from a different party, then that’s long-term beneficial for our organization. And I think it’s in our DNA to be willing to be disruptive to ourselves. The other important part is that if we are going to do something successful in China, we need to have a good domestic partner.
What are your hobbies away from work?
I do a lot of reading. I have two grandchildren: one is 14 years old and the other is 4 years old. I used to do some woodworking, but I don’t get a chance to do that so much anymore. I do try to do exercises as well.
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