Life insurer Principal expands small business offering with new financial planning tool

Last modified October 16, 2020. Published October 16, 2020.
Principal Financial Group CEO Daniel J. Houston participates in the Yahoo Finance All Markets Summit at Union West on Thursday, Oct. 10, 2019, in New York. (Photo by Evan Agostini/Invision/AP)

Principal Financial Group CEO Daniel J. Houston participates in the Yahoo Finance All Markets Summit at Union West on Thursday, Oct. 10, 2019, in New York. (Photo by Evan Agostini/Invision/AP)

Group on Friday launched a new digital tool designed to help small to midsize business owners plan their retirement, as banks, insurers and asset managers increasingly cater to this segment.

Named the Principal Business Needs Assessment, the free service weighs a business’s financial health through an online questionnaire, after which it offers financial tips and connects them to Principal’s premium financial planning tools.

The assessment complements a retirement product Principal launched in August, which it said would simplify the process for small businesses setting up retirement plans for their employees and to fund the owner’s retirement.

“Despite the recent economic slowdown, business owners are optimistic about the future,” said Amy Friedrich, president of U.S. insurance solutions at Principal, citing the company’s recent research. “As small businesses return to focusing on growth, they’re returning to long-term planning.”

The assessment, offered through the firm’s website, is geared toward providing business owners an overview of the financial wellbeing of their company and serves as a stepping stone toward using other financial planning products through Principal. It provides “personalized results” based on user inputs, Principal said.

It is broken up into two major segments: business needs and employee protection needs. Users can select from a list of top priorities that shape the kinds of tips and products that are offered to them, such as employee benefits, tax exposure and exiting the business. 

The questionnaire, which can last up to five minutes, asks a number of general questions from the number of businesses owned to estimated income. Once completed, users are presented with a brief analysis of the business’s health and options to improve its financial planning.

For example, the tool might offer an informal business valuation from Principal if the user indicated that they have not already had it valued as part of their exit strategy.

The assessment "meets business owners and leaders where they are today. It encourages them to chart their journey and provides helpful steps they can use for the financial well-being of their business, their employees and their lifestyle,” said Mark West, a national vice president of business solutions at Principal.

The Des Moines, Iowa-based carrier, one of the largest U.S. life insurers by premium, found in its quarterly Financial Well-Being Index report this month that U.S. small businesses are “slowly starting to show signs of recovery” from the COVID-19 pandemic.

Principal said 42% of businesses with fewer than 500 employees indicated that they are expanding their operations, up from 34% in June. About 44% of the businesses said they are confident about the economic outlook over the next year and 83% said they do not expect to file bankruptcy due to the shocks from the pandemic. 

“Despite the outlook for growth, some concerns remain,” the company said in the report. “While cash flow is steady, businesses are continuing to react to the economic impacts of COVID-19 by looking for ways to cut budget, reducing investments in the business, and in some instances using their personal finances to support the company.”

Principal launched Simply Retirement in late August, a new 401(k) offering for businesses with fewer than 100 employees or financial professionals whose clients fit that criteria. The program charges a $500 setup fee, $150 monthly recordkeeping fee and $6 a month per participating employee.

The company said in an earlier survey accompanying the reveal that 87% of companies with fewer than 499 employees said their businesses were either stable or growing financially despite strains caused by lockdown measures and business restrictions. 

On Thursday, JPMorgan Chase launched its own new 401(k) product focused on small and midsize business owners, citing signs that the retirement sector as a whole has recovered partially from the initial shocks of the pandemic in March. Everyday 401(k) by J.P. Morgan offers plans starting at $75 a month and $5 a month per participant. 

The New York-based bank found in its research that about a third of small business owners indicated they plan to set up a 401(k) plan sometime over the next year, while 48% already offer the plans to their employees. 

Late last month, Lloyd’s of London debuted a “first-of-its-kind” business interruption policy that will trigger automatic payouts to small and midsize firms if critical information technology infrastructures and services are disrupted. 

The policy, led by Tokio Marine Kiln and backed by RenaissanceRe, uses parametric trigger to facilitate faster, automatic payouts instead of a traditional indemnity trigger that covers actual losses incurred.

The U.S. retirement industry shed more than $3.6 billion in value to $28.7 trillion in total assets in the first quarter, before partially rebounding to $31.9 trillion in the second quarter, according to the Investment Company Institute, a global trade group for funds. 

--Additional reporting by Allie Ciaramella