No Finance Experience? No Problem

Principal Financial Group's CFO, on the job less than a year, had spent her career running businesses rather than finance teams.
David McCannJanuary 2, 2018

Can someone land a job as CFO of a Fortune 500 company without much finance experience? Sure.

Deanna Strable

Deanna Strable

Last February, Principal Financial Group — which ranked 227th on the iconic list in 2017— elevated to the top finance role Deanna Strable, an employee of the firm since 1990. Her previous post was president, U.S. insurance solutions. She hadn’t had a role that was primarily financial in nature since 1995, when she was an actuary for the firm.

Far from seeing her non-financial background as limiting, Strable considers it a plus. She talked about that in a recent, wide-ranging discussion with CFO that also featured her thoughts on everything from politics and taxes to retirement readiness and how to deal with fast-changing customer expectations. An edited transcript of the conversation follows.

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Why have you stayed so long with one firm?

Looking across our management team, there are a lot of  long-tenured people. A lot of it is the culture. We move people around. I’ve had nine roles during my time at Principal. I’ve had opportunities abroad and in a number of our businesses. Before becoming the CFO I spent 18 years in different business leadership roles [across] our four segments.

How would you rate the value of getting to know a company so well by staying for a long time, as opposed to gaining diverse perspectives from working at different companies?

I think you can get diversity of experience in different ways, but yes, when we hire people from outside they do bring different perspectives.

I don’t have the luxury of bringing that to my role. But I do have the luxury of not growing up in the finance ranks.

I was an actuary, so I do have some technical aptitude. But really my career has been about running businesses. Our board and CEO looked externally as well as internally [to fill the CFO post]. But they really wanted the role to be a strategic partner to the executive team, and they felt that leadership diversity could really bring that.

Now that you’re in charge of finance at a financial services firm, to what degree are you actually involved with shaping the company’s products?

Obviously the products we sell and serve can have varying financial ramifications, and I do get involved. The chief actuary of the company reports to me. But where I’m getting most involved is from a risk perspective.

What are the risk elements of the products we’re selling? How do those translate into different financial scenarios? How do we ensure we are growing in a profitable way? Those elements come into play in other industries, but in financial services some of the risks [are unique]. We can sell a life insurance product today that will stay on the books for 30 years, influencing our financial and capital results over that entire time period.

What level of risk is posed by the seemingly endless political and societal unrest over financial services industry practices?

The financial crisis was so catastrophic to the jobs and incomes of people in every walk of like, and certain aspects of financial services — mortgage lending and some of the complex securitizations — played into that. Even though that was isolated by [sector] and company, it’s not surprising that it has cast a shadow over the entire industry. We’re focused on making sure we’re doing what we need to do to maintain our positive reputation.

Turning to the regulatory environment, the Trump administration doesn’t seem to be making as much noise about deregulation as it was early last year. How are you reading things?

I still think we’re seeing positive signs. The pendulum really swung after the crisis toward enhanced regulation. Financial services companies have always been heavily regulated. There are aspects of that that are appropriate, and it’s a part of our business model. But if the pendulum swings too significantly, it can stifle creativity and growth, and increase costs, without a lot of benefits.

We’re fine operating in the environment we’re in today, but we would welcome the pendulum moving back more toward middle ground. And I still think that will happen during this administration.

What are your views on the new tax law? [Editor’s note: this interview took place on Dec. 20, two days before President Trump signed Congress’s tax bill.]

Our interest throughout the whole tax reform discussion has been that we welcome simplification. We also support anything that ultimately allows and incentivizes growth by small businesses, as a target market for us in the United States is employers covering fewer than 100 lives.

We are opposed to anything that would significantly disincentivize individuals from saving for retirement. Early on there were some proposals around “rossification” of retirement accounts [i.e., replacing 401(k) plans with a system that, like Roth IRAs, taxes contributions up front rather than upon withdrawal of funds]. We felt that would disincentivize individuals from saving for retirement. We’re very pleased with where the law is landing relative to that.

But the law also will serve to take a huge chunk out of Medicare, which should be of interest to anyone saving for retirement. Besides, many studies show that Roth investments generate greater returns in the long run.

We do need to understand the impact on Medicare and how much people need to save to be prepared for retirement. But we felt moving to a full Roth system would have been even more detrimental. While maybe we could have changed the education and the conversation, we had research showing it would take a heavy lift.

What are the impacts for Principal from an internal point of view? For example, does the firm have foreign cash that it will be repatriating?

We have a little bit, though nothing to the extent of what many companies in other industries have. The good news for us is that we have the ability to deploy that cash. We’ve made a number of acquisitions outside the U.S. and used some of that capital to fund them.

Even leaving repatriation aside, with a lower tax rate companies of all kinds stand to accumulate a lot more cash. What is Principal going to do with it?

We’re sorting that out. But in the insurance industry, we pay taxes over the lifetime of products, which are long-term in nature. The tax bill moves those payments earlier. So while we may have a lower tax rate on our financial statement, and over time the impact will be cash-positive, over the next 6 to 10 years it will actually be neutral or even slightly cash-negative.

With respect to retirement readiness, it’s no secret that there’s a fairly poor savings rate nationwide. Do you have any wisdom, broadly speaking, for what could help change that?

You are correct that we still have a retirement gap and we need to continue to figure out ways to move the needle on that. Having said that, the United States is actually in a better position than most if not all other countries in the world.

I wish there were a silver bullet. It’s really going to take education and making it simpler for employees to decide how much to save and how to change that as they go forward. What’s most helpful are plan-design features such as auto-enrollment and auto-escalation.

But we’re encouraged by the savings we’re seeing by the younger segment of the population. In addition to plan design, that’s about interacting with them in the way they want to be interacted with, with mobile technology.

What are Principal’s strategic priorities going forward, say in the next one to three years?

One is making sure that how we are relating to our current and potential customers and keeping up with their expectations. As you might imagine, those are changing at a rapid pace. And even if we have a competitive advantage relative to peers, customers aren’t comparing us as much to those peers as to the experience they’re used to on Amazon and in other industries.

So we’ve announced an elevated spend on technology, focused on customer experience, digital advice and sales, and modernizing our investment research platform within our asset management business. Throughout 2017 we analyzed how much investment would make sense and the ultimate benefits we thought would come out of it.

How much guesswork is involved in making those determinations?

It’s obviously not an exact science, and what customers expect is a moving target. Also, as a public company, we have to weigh short-term versus long-term impact on financials. But we also know that some of what’s driving our financial performance today is investments we made 5 to 10 years ago, and we have to continue to do that to position us for long-term growth.

This is going to be an evolving spend. I can’t sit here today and say what we’ll actually be doing relative to this in 18 months. We have to allow for feedback from our customers to influence what gets spent.