Peter Mallouk, president of Creative Planning, is an RIA in a hurry.
Growing his firm organically at a rapid clip wasn’t fast enough for the certified financial planner, who bought it 16 years ago when its assets under management were $30 million. Now, on the heels of sensational growth, he has embarked on an acquisition strategy that as of last month, helped boost AUM to about $56 billion.
Since the start of this year, Creative has bought nine RIAs, bringing the total number of acquisitions to 13.
“We can’t take another 10 years to get into the Top 3 [RIAs] in the major markets,” where we already are, he says. “We need to move — and move quicker — to become even more competitive,” Mallouk explains, revealing his supplemental expansion strategy, in an interview with ThinkAdvisor.
Creative Planning now has about 28 offices (versus 17 in 2017) and some 350 advisors (versus 150 in 2017).
Named consistently the country’s No. 1 Independent Wealth Management Firm by Barron’s, CP had grown AUM by 30% or more annually since Mallouk bought the firm after a five-year stint as an estate planner there. In 2017, The New York Times singled out Kansas-based Creative, in a headline, as “…Spurring Big Change on Wall Street.”
CP serves the ultra-high net worth and emerging-wealth segments, but its main target client remains “the millionaire next door,” as Mallouk calls that demographic.
The firm’s FAs comprise CFPs, “lead advisors” and “secondary advisors,” says Mallouk, who seeks no breakaway wirehouse brokers, as they fail to fit the firm’s M.O. and culture.
In his new book, “The Path: Accelerating Your Journey to Financial Freedom” (Post Hill-Oct. 2020), which is written for consumers and is an unabashed plug for his firm, Mallouk generously bashes FAs (“There are so many ways to be deceived by a financial advisor that it’s shocking”) and dismisses economists as inept forecasters.
Overall, however, the book is a friendly guide to investment tools, asset allocation, portfolio-building and what to look for in a financial advisor.
It was written with coach and entrepreneur Tony Robbins, at whose events Mallouk is a sometime-speaker and with whom he co-wrote the earlier “Unshakeable: Your Financial Freedom Playbook.” Robbins used to be CP’s director of investor psychology, but that economic relationship has terminated.
ThinkAdvisor interviewed Mallouk on Oct. 15. Speaking from Leawood, Kansas — near CP’s Overland Park headquarters — the RIA talked about how the coronavirus pandemic “completely changed investing,” presumed that a bear market isn’t far off and opined that former Vice President Joe Biden, if elected president, might not implement tax increases or other campaign promises till 2022 — or, even, “not do them at all.”
Here are excerpts from our conversation:
THINKADVISOR: Creative Planning made 13 acquisitions 2019-2020, thus far — the most recent one, last month. What’s behind them all?
PETER MALLOUK: We’d achieved a decent presence in all the major markets; but in the increasingly competitive landscape, we can’t take another 10 years to get into the Top 3 in those markets. We really need to move — and move quicker.
Was making acquisitions in your long-term plan?
Our strategy has always mainly been organic — adding one client at a time, and we’re still on that page. But now we’re supplementing that with acquisitions. The idea is that we’re already in all the major markets, and now we’re trying to have a more substantive, more competitive presence there. We’re trying to accelerate in those cities across the country where we already have a presence to get even more competitive.
How did you find the firms you’ve acquired?
So far, 95% of them found us. They called us; and if [everything] made sense, we moved ahead.
Did the firms retire their names, or did they just add the Creative Planning brand to them?
It’s total integration: name change, planning the way we do it. We’re buying only firms that match our philosophy: They’re already doing planning like us, already managing money the way we do.
What sort of hierarchical structure do you have for running your company?
With 700 employees, we needed a management infrastructure and have had one for a couple of years. We have a lot of [department] leaders and managing directors that run different regions of the country.
The principals of the firms you acquired were running their own show. Now they’re not. That must be a big adjustment for them.
I think part of why [these advisors] are selling is that they don’t want to have to run their own shows. They want to work with their team and see their clients; but they don’t want to deal with HR, compliance or renegotiate leases. That’s part of the motivation of some folks.
You told me in our interview in July 2017 that you had no interest in hiring wirehouse breakaway brokers. Is that still the case?
Yes. It isn’t only that we think they’re not a fit for us; when they learn about us, they think the same thing. We want to hire people and then have them grow within the Creative Planning model. The breakaway broker doesn’t fit our model culturally.
It’s a different approach and way of looking at things. We don’t want to transform the way people think. We want people who already have the same general philosophy as we do so that they’re more likely to fit the way we do things.
Who’s your target client?