Principal Securities
A subsidiary of Principal Financial Group, Principal Securities, Inc. is a large financial advisor firm. Although it primarily acts as a broker-dealer, it offers investment advice to individual and institutional clients. Customers that do not receive this advice are not considered advisory clients.
Principal Securities is a fee-based firm. This means that on top of receiving client-paid fees, the firm receives commissions from the sale of insurance and securities. This model is markedly different from that of a fee-only firm, whose staffers are only compensated from advisory fees that clients pay - not commissions on product sales.
Principal Securities Background
Principal Securities is part of the Principal Financial Group family of companies. It began operations in 1968 as the financial planning and advisory arm of Principal Financial Group. Today, the firm is technically a subsidiary of Principal Financial Services, Inc., which is in turn a subsidiary of Principal Financial Group. Principal Securities is led by CEO, President and Chairman Dan Houston.
The firm employs advisors who hold a wide variety of certifications, such as chartered financial analyst (CFA), certified investment management analyst (CIMA), certified financial planner (CFP), accredited investment fiduciary (AIF) and more.
Principal Securities Client Types and Minimum Account Sizes
Principal Securities works primarily with individual clients, including high-net-worth individuals. It also manages accounts for pension plans, profit-sharing plans, charities, corporations and government entities. However, 95% of the firm's clients are individuals without a high net worth.
The minimum account size for clients of Principal Securities varies by account type, from $10,000 to $1,000,000.
Services Offered by Principal Securities
Principal Securities mainly provides portfolio and investment management programs to its clients through a few different programs. Here's a breakdown of each:
- Managed Portfolio: This Morningstar-created program features discretionary accounts that allocate assets using various mutual funds and exchange-traded funds (ETFs).
- Managed Account: This offers investment advice to sponsors of self-directed defined contribution plans.
- Advisory Select Portfolios: These typically non-discretionary accounts are administered on a wrap fee basis and helps clients develop and maintain a strategic investment strategy.
- Principal Strategy Select Portfolios: This wrap fee asset allocation program focuses on the creation and maintenance of portfolios comprised of mutual funds and ETFs.
- Principal Separately Managed Accounts Program: This discretionary wrap fee asset allocation program typically features portfolio built using ETFs, stocks, bonds and more.
- Principal Unified Managed Account Select Portfolios: This program essentially combines parts of the other programs Principal offers.
- Financial planning and consulting: These services are provided on an "as needed" basis depending on the client's individual needs.
Principal Securities also offers programs sponsored by unaffiliated advisors. These advisor firms include Brinker Capital, Inc.; Symmetry Partners, LLC; Lindner Capital Advisors, Inc.; The Standard; SEI Investment Management; Manning and Napier; AssetMark; and Morningstar Investment Services, Inc.
Principal Securities Investment Philosophy
Principal Securities adheres to a different approach for each of its advisory programs. The Managed Portfolio program utilizes a valuation-driven strategy. According to the firm's Form ADV, this style takes into account the following factors:
- Markets are inefficient over the short to medium term
- Mean reversion strongly influences capital markets over the long term
- Reward for risk varies and is closely linked to valuation
- Investor sentiment drives markets to extremes
- Drawdown is the preferred measure of risk
- Positive skewed risk-reward opportunities improve risk-adjusted returns
The Managed Account program uses a more quantitative approach to drive results, using software and research to make calculated investment decisions. The Advisory Select Portfolios program primarily takes into account each client's risk tolerance, time horizon and objectives so that the firm can recommend a specific strategy. These may utilize several different asset classes, as well as long and short positions.
Fees Under Principal Securities
Principal Securities charges an annual fee based on each client's AUM. These fees vary by program and account type, though they are all charged on a quarterly basis, in advance. For context, a 2018 study completed by RIA in a Box showed that the average annual advisory fee is approximately 0.95% of AUM.
Fees can range from 1.10% to 1.75%.
What to Watch Out For
Principal has several disclosures listed on its Form ADV. These stem from violations like inadequate email program monitoring, failure to create a system of oversight to ensure its advisors are registered in various clients' states of residence, failure to identify and apply certain mutual fund sales charge waivers and more. The majority of these disclosures resulted in fines and censures from various regulatory authorities.
Principal Securities is a fee-based financial advisor firm, meaning it receives commissions for the sale of certain insurance and financial products. This creates the potential for a conflict of interest. However, the firm is bound by fiduciary duty and is legally obligated to act with each client's best interest in mind at all times.
Opening an Account With Principal Securities
If you're interested in opening an account with Principal Securities, you can go online to the firm's website and submit a form. You can also call (800) 986-3343.
Principal Securities is headquartered in Des Moines, Iowa at 655 9th Street. The firm has many other locations around the U.S. and the world, though.
All information is accurate as of the writing of this article.
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