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Creative Planning Acquires Its Third Firm

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Creative Planning, a $45 billion RIA based in Overland, Kansas, has just announced its third-ever acquisition, which is also its third for this year. Moreover, it expects to announce even more before year-end.

Creative Planning is acquiring OptiFour Integrated Wealth Management, a $400 million RIA based in Reston, Virginia, near Washington. Terms of the deal were not disclosed.

“Our other RIA acquisition, out of Minneapolis went well, which raised our profile,” explained Peter Mallouk, CEO of Creative Planning, referring to its acquisition of The Johnston Group, an RIA with $500 million in assets under management, in February. (Creative Planning also acquired America’s Best 401K in September.)

(Related: Creative Planning Acquires America’s Best 401k)

“More acquisitions are on the way, around year-end … Firms are reaching out to us,” said Mallouk, who grew the firm from $30 million in AUM in 2004.

He explained that Creative Planning looks for advisory firms that share its investment philosophy, which focuses largely on passive investing but embraces certain alternatives such as private equity, lending and real estate for high-net-worth clients, and on a financial planning approach. An affinity with the owner’s core values and with key employees is also important, according to Mallouk.

“We buy the entire firm but the owners stay on board, hopefully for a long, long time.”

In the case of OptiFour, its principal, Mark Cohen, is an estate planning attorney like Mallouk and the firm, like Creative Planning, offers investment, tax and estate planning services.

“We are ready to become part of this first-class organization that shares our commitment to holistic wealth management as well as a fiduciary commitment to putting our clients’ interest first,” said Cohen in a statement.

Despite its recent spate of acquisitions, Creative Planning does not have an acquisition team. “The owner calls and we meet,” said Mallouk.

Creative Planning stands out from other acquiring firms in other ways as well:

  • It doesn’t use private equity to finance growth, including acquisitions
  • It doesn’t let acquired firms operate under their own philosophy but rather Creative Planning. “True integration” is key, says Mallouk.
  • It hasn’t been the high bidder in any of its acquisitions, according to Mallouk

“The people that are coming to us care about serving their clients, not about extracting every last dime,” says Mallouk. “Owners of firms selling to us are quite confident their clients will be served.”

David DeVoe, who advised OptiFour on the latest deal and says he’s involved in more potential deals with Creative Planning, said advisors like selling to firms like Creative Planning where “the founders sit in the same chair” and “the genesis of the firm is an RIA.”

The primary driver of many sellers today, said DeVoe, is not succession planning but scale. By joining a bigger firm, they can achieve the scale to grow their assets and better serve clients.

Indeed, Wes Burnett, co-principal of OptiFour, said in a statement, “We knew it was time to align with a national firm that could best help us support the needs of our clients. Creative Planning was unmatched in its ability to deliver experience and scale when it comes to offering family office services to high-net-worth individuals.”

DeVoe expects another record year for M&A activity in the financial advisory space with strong valuations. Several deals involving firms with $1 billion or more in AUM have had valuations, based on multiples of cash flow, reaching double digits, eclipsing record highs set 10 years ago, according to DeVoe. “In many cases those valuations are now justifiable.”

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