Creative Planning’s big step into 401(k)s
Peter Mallouk, CEO and President of Creative Planning, reached a significant agreement in December with the world’s largest independent P&C insurer.
“It’s more than a one plus one equals two thing because each of our strengths is really filling a gap for the other,” Mallouk told ThinkAdvisor in an interview.
Called “Lockton Retirement Services, a creative planning offering,” their new entity “removes a void” Creative had in its retirement planning specialization, Mallouk says.
This means that Lockton will now send all of its new service opportunities to corporate 401(k) plans and their participants to the Lockton group of Creative Planning.
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The partnership brought Lockton’s $110 billion in assets under advisement to Creative Planning, which only said in November that it had reached $100 billion in assets under management.
Prior to the deal, Creative Planning’s 401(k) offering primarily served the small-to-medium business market. The new partnership gives ever-increasing consultative access to the wider market.
In return, Creative Planning will provide financial advisory services to the plans’ 401(k) participants. It wasn’t a feature Lockton had brought to the party so far.
The agreement gives RIA entry to more than one million participants, to whom it will provide financial and investment advice.
In the interview, Mallouk reveals that about a third of Lockton’s retirement group has already moved to Creative Planning’s headquarters in Overland Park, Kansas.
Additionally, as part of the team, both companies are working to restructure their respective offices nationwide. Lockton took a small minority stake in the board.
Over the past 17 years, Mallouk, 51, has grown RIA through referrals and acquisitions from a company with $30 million in AUM to a budding giant.
Creative Planning has now acquired 22 independent wealth management firms, most of which are RIAs that typically manage between $300 million and $600 million in client assets.
On Tuesday, it announced the acquisition, which closed Dec. 31, of La Mesa, Calif.-based Reilly Financial Advisors, which has more than $2 billion in assets under management. More deals will be announced soon, Mallouk said at the time.
Mallouk had worked as a property planner at Creative Planning for six years when in 2004 he bought the company. While there, he also worked for 100 advisers at other firms.
ThinkAdvisor recently had a phone interview with Mallouk, who was speaking from Kansas City.
Not a day goes by that he doesn’t get a call from an advisor who wants to sell his practice, he allows it.
“If 50 companies call us this month and they’re all a good fit, Creative Planning has the financial capacity to close all of those deals,” he says.
Here are the highlights of our conversation:
THINKADVISOR: Is the deal you made with Lockton substantial enough to potentially make Creative Planning an Amazon, with a capital “A”?
Pierre Mallouk: No. We are not far from being an Amazon. We don’t have the conscience in the public domain to come close to that.
But is that what you aspire to be?
I think it’s pretty clear that we’re not going to be the biggest because there’s a lot of economic incentive for a lot of companies to do certain deals and scale them up – and that’s not our driver .
We aspire to be, and have the opportunity to be, a nationally recognized company that people equate with top-notch advice in a variety of fields. [services] related to wealth management.
But I don’t think we’ll end up being the biggest in this space for a lot of different reasons.
You said the Lockton deal “could be transformational for our business and our customers.” Please specify.
This gives us access to hundreds of thousands, if not more than a million, of participants with whom we can share our financial education.
How would you define “financial education”?
Help someone understand what they are trying to do [with their assets]; how we can help them get from here to there; help them get out of a debt problem or restructure a debt; determine what investments they should be in so that they are not too conservative or too aggressive.
These are all financial tips.
Why did you mainly want to partner with Lockton?
We had a pretty robust 401(k) offering, but that was primarily in the small to medium business market. It opened up a big market for us, which was the only void we had in retirement planning.
It also allows us to advise you on many types of plans that we have not been able to [work with] before. So that [lets] expand our retirement planning services.
Virtually overnight, we were able to do everything our customers could need in this space.
Do you have another reason to partner with Lockton?
We have acquired a group of people who have been very, very successful in the area of large pension plans.
But they did not provide financial education to participants. And of course, that’s where the market is moving. It is our strength.
So it’s really transformative in that sense. We should have much more success together than before.
It’s more than a one plus one equals two thing because each of our strengths really fills a gap for the other.