- A boom in financial industry growth in the Des Moines metro is fading
- Local and state leaders say a tight labor market, remote work and other factors are sapping the once robust growth of the city’s banking, investment and insurance companies
When Wells Fargo & Co. announced another round of cuts last fall, losing its place as Des Moines’ biggest private employer, it signaled a larger problem for the local economy.
The problem has been six years in the making, a Des Moines Register analysis and interviews with 25 executives, government officials and economists found.
After decades of strong job growth in the financial sector ― far outpacing the country overall ― the industry has shrunk in the Des Moines metro.
Since July 2017, local financial activities employers have shed a total of 2,500 jobs, according to the U.S. Bureau of Labor Statistics. The cuts mark a 4% drop in total employment over the last 6½ years.
Des Moines’ poor performance is at odds with the national trend. Across the country, financial activities employers increased payrolls by about 9% during that period. In fact, Des Moines ranks 236th of 325 U.S. metros for job growth in the sector since July 2017.
The recent trend is a far cry from the reputation Des Moines built over several decades, when employers like Wells Fargo and Nationwide Mutual Insurance Co. added thousands of employees in the metro.
The sector has been particularly important, economists say, because financial jobs have been among the highest-paying in the metro ― the fastest-growing large urban region in the Midwest through 2020. Those jobs have created wealth for thousands of families, whose spending has supported growth in other sectors like hospitality and construction.
The employment drops over the past half-decade create challenges for city leaders, who already must determine how to fill emptying downtown offices.
“It’s hard to see a path where existing insurance and financial services companies have significant growth of employees here in Iowa,” said Jason Gross, an insurance industry veteran and vice president of the venture capital firm ManchesterStory.
How Des Moines became a financial hub
The growth of Des Moines’ finance sector began with economic disaster. In the wake of the 1980s farm crisis, when Iowa’s unemployment rate peaked at 9.1%, then-Gov. Terry Branstad and other state leaders tried to diversify the state’s economy.
Branstad recently told the Register that Principal Financial Group’s success inspired him to target the finance sector for growth. Known as The Bankers Life at the time, Principal expanded in the 1980s as federal tax law changes encouraged employers to offer 401(k) plans, a boon for investment management companies.
Branstad and other leaders pitched companies on Iowa’s low cost of living ― and in turn, lower employment costs. Donald Doudna, who became the state’s first insurance economic development director in 1988, told employers that people worked harder in Iowa.
About 40% of state residents still lived on farms as of the 1970s, and that lifestyle would spill over to productive office cultures. Many former agricultural implement manufacturing hands and rural shop employees were out of work.
“We had this labor availability,” Doudna said. “Smart people. Needed a job. Willing to work hard. That’s a nice formula.”
Executives in Iowa worked with state leaders, traveling to cities across the country to recruit companies. Doudna said outside executives were surprised to see Des Moines business leaders welcoming their own competitors.
In 1988, then-Principal CEO John Taylor helped host a recruiting luncheon in the life insurance hub of Connecticut, drawing coverage from the state’s largest newspaper, the Hartford Courant. As the life insurance industry grew in Des Moines, local leaders referred to central Iowa as the “Hartford of the Midwest.”
“I’d go to New York,” Branstad recently recalled to the Register. “I’d go to Minneapolis. I’d go to Chicago. I’d go to the West Coast. And we’d call on companies.”
State officials secured some wins. Cigna Corp., American Home Shield Corp., Liberty Mutual Insurance Group and Toyota Motor Corp. opened offices around Iowa in the late 1980s and early 1990s.
But David Lyons, the state’s insurance commissioner at the time, said most of the Des Moines metro’s job growth came from companies that already had operations in Iowa. He credited Iowa regulators and legislators.
Among other changes, the Legislature passed a bill in 1988 that cut the premium tax on non-qualified annuities, a move that gave Iowa life insurance companies an edge over competitors in other states.
Lyons also created a rule that allowed Iowa insurers to offer new products faster. Previously, companies couldn’t sell a new line of business until the Iowa Insurance Division approved an application. Lyons said the process could take a year.
He changed the rule, telling executives they could assume the state approved of a new product if regulators hadn’t objected within 30 days of receiving a company’s application.
“That’s a little scary, from a regulatory standpoint,” Lyons said. “But it worked out really well.”
As companies grew in Iowa, some of the world’s biggest businesses bought their way into the Des Moines market. In 1997, Netherlands-based ING Group bought Equitable of Iowa Cos. from the Hubbell family for $2.2 billion. A year later, Nationwide Mutual Insurance Co. bought Allied Group for $1.5 billion.
Mortgage industry takes root in Des Moines
On the banking side, the industry grew because of the actions of a small group of executives.
In 1982, Minneapolis-based Norwest acquired Des Moines-based Dial Finance Corp. Richard “Dick” Levitt, Dial’s third-generation owner, took over Norwest’s mortgage business in the Twin Cities, where the company was headquartered.
At the time, according to Register archives, the unit had about $200 million in write-offs from bad loans. Executives considered exiting the mortgage business. Levitt asked some of his former Dial employees to salvage the division.
With stricter oversight, the business recovered. At Levitt’s insistence, Norwest opened a 25-employee mortgage office in Des Moines. Mark Oman, a Levitt protégé, became the division’s CEO.
By the time Norwest merged with San Francisco’s Wells Fargo nine years later, Oman’s division had grown into one of the country’s top mortgage lenders. Leaders at the combined bank, which kept the Wells Fargo name, agreed to expand in Des Moines because of the strength of the mortgage division, hiring about 14,500 local employees by 2017.
“(The expansion) happened because that’s where it got started,” Harry Lynn Horak, former Wells Fargo Bank Iowa CEO, recently told the Register. “That’s where sort of the nucleus of building the company and growing the company was.”
“Except for a guy like Mark Oman, Wells Fargo might not even be in the mortgage business,” Levitt told the Register in 2004.
“(Levitt) was the driving force in moving Norwest from the Twin Cities to Des Moines,” Oman told the paper in 2017, upon Levitt’s death.
Wells Fargo scandal, executive change hurt Iowa employment
While Wells Fargo was the biggest driver of Des Moines’ job growth over the last two decades, the bank has more recently become the biggest cause of the city’s finance industry slump.
Since 2017, according to layoff notices provided to Iowa Workforce Development, Wells Fargo has cut about 1,400 jobs ― more than any other company in the state.
Wells Fargo began laying off workers in the wake of a fake accounts scandal in 2016, when regulators accused employees of opening accounts without customers’ consent or knowledge to meet corporate sales goals. The scandal brought extra scrutiny ― resulting in more accusations of impropriety.
In 2021, the Office of the U.S. Comptroller of the Currency fined Wells Fargo $250 million for failing to develop a program to help customers who may have been victims of predatory lending avoid losing their homes.
A year later, Wells Fargo paid a $3.7 billion settlement as part of a Consumer Financial Protection Bureau investigation into a range of accusations, including allegations that the bank illegally assessed fees and interest rates on mortgages. The CFPB also alleged that Wells Fargo made errors in home loan modifications.
Charlie Scharf, who became Wells Fargo’s CEO in October 2019, has cut costs since taking over. From June 2020 through last December, the bank has shed about 50,000 ― or 18% ― of its total jobs.
The company announced in January 2023 that it would scale back its home mortgage division. Among other changes, executives said they would exit the correspondent business, in which the company acquired mortgages from other lenders. The business accounted for about half of Wells Fargo’s mortgage business at the time.
The company also put its downtown Des Moines properties on the market, and executives said they planned to move all local workers to an office complex on Jordan Creek Parkway in West Des Moines. Company representatives have declined to tell the Register ― or Des Moines city officials ― how many workers are leaving downtown as a result. And the company has stopped sharing its total employment figures in the metro.
In December, Wells Fargo also sold a six-story West Des Moines building at 7001 Westown Parkway, which once was the home of its mortgage division.
During a call with analysts in January, CFO Mike Santomassimo signaled the company will make more cuts this year. He said Wells Fargo set aside $969 million in late 2023 for more “planned actions on the efficiency side.” He added that Wells Fargo will automate more work and unload more real estate.
“There’s more to do,” Santomassimo said, “and 2024 is just another year in the journey.”
Wells Fargo declined the Register’s request for an interview.
In a statement, company spokesman Mike Slusark said, “We are investing in building improvements at our Jordan Creek campus in West Des Moines, and Iowa continues to be an important center of employment for Wells Fargo.”
Insurance firms automate, sell off office space
In the last five years, Nationwide executives have made a couple of key decisions.
In 2019, the company cut 191 jobs in Des Moines. The layoffs were part of a broader efficiency initiative throughout Nationwide that company spokesperson Joe Case told the Register targeted its IT, marketing, insurance and banking divisions.
A year later, Nationwide was the first major downtown Des Moines employer to shift to a remote-work policy because of the COVID-19 pandemic. Today, while most of its employees work fully from home, others work fully in the office and some work hybrid schedules.
“We give leaders and employees the ability to choose the right mix of days in the office and from home that works best for the business,” spokesperson Ryan Ankrom told the Register in January.
The company, which received $43.6 million in state tax incentives in the early 2000s to open two downtown Des Moines offices, reached a tentative agreement to sell its 1200 Locust St. space to the city, closing on the deal in December 2023. Nationwide employees who choose to work in the office occupy about two-thirds of the company’s 1100 Locust St. office, while executives try to lease seven floors of the building’s west wing.
Ankrom said the company’s remote work policy has not impacted local employment. Nationwide’s payroll included about 3,000 central Iowa workers before and after the change.
Even so, the company’s total local headcount is about 700 shy of where it stood in 2019, before the company began cutting jobs.
Michel Leonard, an Insurance Information Institute economist, said the shifts at Nationwide are indicative of trends throughout the industry.
He said the insurance industry has shifted to remote work policies more frequently than companies in other parts of the financial sector. Compared to other businesses, insurance companies rarely see customers in their offices. Most interactions occur over the phone or via email.
Leonard also said big insurance companies have cut jobs as technology has improved.
Customers can file claims through apps instead of talking to claims representatives. Data analytics software helps companies identify potential new customers. Artificial intelligence and satellite systems can automatically estimate customer premiums.
At EMC Insurance Cos., Executive Vice President Beth Nigut said direct written premiums have increased by about 50% over the last decade. In the past, headcount would have increased in step with revenue increases. But since 2014, she said, EMC’s employment has remained “relatively flat,” with about 1,000 local employees.
Nigut said the company transitioned away from support roles for underwriters because of technology advancements. She said the company has avoided mass layoffs by retraining workers for other jobs like application development and data analytics. (EMC did cut 65 jobs in November 2022 after exiting a reinsurance line of business.)
Like Nationwide, Nigut said, EMC allows employees to work remotely. The company canceled plans to expand its downtown office footprint in 2021. But Nigut said workers are remaining in Des Moines.
“We’re not seeing an exodus,” she said.
West Des Moines-based IMT Insurance also allows employees to work remotely. Human Resource and Shared Services Vice President Marsha Aldridge said about 85 of the company’s 400 employees are full-time remote, including a new underwriter in Omaha, Nebraska.
About 180 more employees are splitting time between their homes and the office. Aldridge said the company has continued to grow since the pandemic, adding underwriters and IT positions. Executives have not noticed a problem with remote employees.
“It’s working,” Aldridge said. “Our productivity is there.”
IMT allows remote workers in 11 states ― those with employment laws similar to Iowa’s. Aldridge said the company doesn’t have a big enough human resources team to abide by all the requirements in different states, such as different rules about why employees can take paid leave.
Leonard, the economist, said remote workers in insurance are generally not moving far from their employers’ headquarters.
Like IMT, which offers property and casualty coverage in Iowa and surrounding states, most insurance companies maintain a tight footprint of business. They want underwriters who already know the local agents and brokers. They also want employees who understand which parts of the state are more expensive to cover, due to geographic vulnerabilities like flooding.
But some major employers may not have those same restrictions.
Jason Gross, an investor with ManchesterStory and former vice president of innovation at EMC, said some former co-workers have left town.
“They’ve moved out of Iowa,” he said. “They live in warmer climates, work remotely.”
Nick Gerhart, a former state insurance commissioner and current executive vice president of Homesteaders Life Co. in West Des Moines, said about 10 of his business’s 300 employees work remotely. A couple of actuaries left the state because their husbands started medical residencies elsewhere.
Gerhart said he would not have made such accommodations before the COVID-19 pandemic, when employees got used to working from home.
“I’d rather keep them than not,” he said.
In November, Principal began to require employees within 30 miles of the Des Moines campus to return to the office at least three days a week. But Gerhart said two friends at the company left town and work remotely from Chicago and Nashville, Tennessee. He said other companies are seeing employees work away from Des Moines.
“That’s going to be a significant drag on Iowa,” he said.
Executives see promise in startup investments
Iowa leaders face a different challenge today than in the wake of the farm crisis.
Instead of a high rate of unemployment, Iowa struggles with a tight labor market after decades of slow population growth. The state’s unemployment rate sat at 3.2% in December.
“We’ve got the exact opposite problem as we had when I first came in as governor,” said Branstad, who took office in 1983.
Former Principal CEO Larry Zimpleman said the company used to increase its ranks in Iowa by drawing people from smaller communities like Marshalltown, Osceola and Grinnell.
“We were making a bigger circle of people we were recruiting from,” he said. “That worked for a while. But that only goes so far.”
He said Des Moines’ financial sector stopped growing because of the state’s slow population growth. Companies have turned to other cities where they can hire more employees.
“That source of human capital has pretty much been exhausted,” said Doudna, the former economic development director. “People have left the smaller rural towns. Now Des Moines isn’t competing with Sac City. It isn’t competing with Sioux City. It’s competing with New York City. And that’s probably a bit tougher.”
Local leaders have tried to lure more entrepreneurs to Des Moines, hoping they can find success and recruit a wave of young employees.
About a decade ago, the Greater Des Moines Partnership and several local companies funded the Global Insurance Accelerator, a program aimed at supporting the growth of InsurTech companies. Waukee-based Holmes Murphy, meanwhile, helped form Broker Tech Ventures, a similar accelerator for insurance-focused companies.
“The key is startups,” Branstad said. “That’s where a lot of the growth ends up being.”
Cowbell, a cyber insurance firm, is one of the Global Insurance Accelerator’s successes. After participating in the program and receiving early funding from ManchesterStory and Holmes Murphy, the company raised about $125 million last year.
But of the California-based company’s 10 U.S. offices, none is in Iowa. Cowbell’s founder, Jack Kudale, declined an interview request.
Global Insurance Accelerator Managing Director Dan Israel argued that Cowbell’s success still helps Des Moines, even though the company didn’t open an office there.
Local investors will earn a healthy profit from the company, giving them more funds to invest in other startups. Eventually, startups will come up with ideas that help Des Moines companies grow – perhaps reversing the trend of cuts.
“You can’t always do more with less,” Israel said. “The goal is, ‘How do we find the right ways to make more investments?’”
Is immigration a potential solution?
Still, plenty of executives in town are worried that Iowa simply can’t get enough people.
Leonard, the economist, said the industry grows with the population. More people in a state means more homes, cars and apartments ― and more insurance policies to cover them.
Nigut, the EMC executive, said local leaders need to focus on the “livability and desirability of Des Moines” to draw more people. She touted projects like the ICON Water Trails development that would animate the Des Moines River with rafting and surfing.
Zimpleman, meanwhile, said executives have told state officials for two decades that Iowa needs more immigrants to boost the local economy. He concedes that this request comes with a “tough political argument.”
But he doesn’t see another good option.
“How are you going to grow the state’s population?” he said. “Really, there’s only one way to do it. It’s not like you’re going to draw people from Florida to Iowa. That’s not going to happen.”
Tyler Jett is an investigative reporter for the Des Moines Register. Reach him at email@example.com, 515-284-8215, or on Twitter at @LetsJett. He also accepts encrypted messages at firstname.lastname@example.org.