Skip navigation
Peter Mallouk Photo by Jason Dailey
Creative Planning President Peter Mallouk

Peter Mallouk Adds a $400M "Leaf" to His Largely Organic $43B Tree, Creative Planning

Peter Mallouk of Creative Planning, after years of growing organically, makes his third purchase so far this year, but says the firm will avoid going down the private-equity funded, roll-up path that other national RIAs are pursuing.

Creating Planning of Overland Park, Kansas, continues to build out its $43 billion nationally branded financial planning firm, announcing that it has acquired $400 million AUM OptiFour in McLean, Va., a Washington, D.C. suburb.

This marks Creative Planning’s third acquisition this year alone, and is part of a three-pronged strategy to combine organic growth, a handful of acquisitions and a nationwide television marketing campaign aimed at both prospective clients—as well as make the firm known to RIA firms looking to sell.

The company’s CEO, Peter Mallouk, told Friday that doesn't mean the firm intends to become a patchwork amalgamator of many different small firms haphazardly lumped together by an acquirer, repackaged and sold to the highest bigger—taking aim at some of the other large RIA rollups that sell to private equity investors. “People go buy a tiny firm… and then they just go buy a whole bunch of other firms and then sell them to another private equity firm that's in that space. And then they go buy a bunch of firms and sell to another one in that space,” he explains. “A lot of the big players, they're really just 25 little firms put together. I don't think that's good for the culture. I don't think it's good for the clients. You end up with different people doing different things in different markets.”

Unlike other players, he said, Creative “we are in no hurry because we are growing organically. If we bump into a firm where we have a good connection and it’s a cultural match, we will engage in the conversation. That makes us different from a lot of firms where basically anything that’s even remotely” attractive fits. “If it has feathers, it’s good enough,” he says.

What’s more, he said, smaller firms looking to be acquired “haven’t had a firm to go to that has proven it can grow organically, that is has a successful model and isn’t just an amalgamation of a bunch of firms thrown together.”

Creative wants to be that firm. It's plan is to expand further in key markets like Washington, D.C., and will do so by acquisition if it makes sense. “We have a strong trunk to the tree and strong branches – we’ve got branches all over the country. What we’re now doing is adding leaves to the tree. We might be managing $500 million plus in the DC metro area, but this acquisition gets us closer to a billion.” The firm’s goal, he said, is to “become more competitive locally, to find firms that are like-minded, where we have” synergies.

Even though Creative Planning may be the largest single retail facing RIA in the country, and the only one that has taken a stab at a national marketing campaign, Mallouk said "that to really emerge as a recognized brand, you have got to be substantially larger than we are today.” To that end, Creative, which specializes in serving the $1 million household, or the “millionaire next door,” Mallouk says, wants to double in size to $80 billion or more in AUM and double its 30,000 individual clients to “60,000 to 100,000” over the next 5 to 10 years.

But is there that much organic growth in the market to be had? Dan Seivert, head of Manhattan Beach, Calif.’s Echelon Partners, which has consulted with the firm, says Creative Planning has a good chance of pulling it off. “If they were to double in 10 years, that’s 7.2% growth,” which is doable. “The first reason is, the industry standard growth is around 10% - half of that is from the market and half in new sales – and they are one of the industry’s leading firms, having grown at closer to 20% a year. 12% or 14% is totally within their reach, comparing the industry’s average growth with their average growth.”

John Langston, founder and managing director of Houston-based Republic Capital Partners, who advised Creative on the deal, said that he continues to advise the firm and that it has more acquisitions in store for the remainder of the year. He said “I would not be surprised to see them achieve significant growth: they have a good track record and Peter and his team can execute quickly. It might require some larger transactions but there is nothing to suggest that they couldn’t be successful in that arena.” He added that 5 or 6 years ago, a claim like wanting to double a firm’s size to $80 billion might “cause some eyebrows to go up,” but in today’s hot market, anything is possible. 

Mallouk says that Creative isn’t looking to compete with the major brokerages with branches of financial advisors all over the country, like Schwab or TD Ameritrade, but needs to be bigger to take advantage of scale. “To stay competitive in this space, you're going to have to have some significant scale where you'll still be tiny, tiny, tiny compared to a brokerage house, these trillion dollar places. You don't have to be like that, but you definitely have to be bigger than we are today and be able to give the client more value at a lower cost. We want to be the leader to pull that off.”
To that end, Creative spent at least $10 million earlier in the year to expand brand awareness—including via a television advertising campaign—both to prospects and potential acquirees in the Northeast and South, which Mallouk said helped the company get on OptiFour’s radar screen.

Mallouk said that while the consumer brand marketing “worked, we just found it was not as efficient and frankly not as enjoyable a process." The firm will still do marketing and focus on acquisitions, he said, they probably won't do another national consumer-facing campaign for awhile.

OptiFour, like the Johnston Group, a $500 million AUM in Minneapolis that Creative Planning acquired in February, will use the latter’s technology stack. Mallouk declined to divulge what technology the firm was using, but said that the services it offered were all built from the ground up.  

The 30-year old firm, he says, has gradually built up an institutional business, a trust company, and law and tax practices. "It’s not 10 things we bought and coupled together. We started our law firm 20 years ago. We started our tax department over a decade ago. Our terust company, we started that over five or six year ago. It’s a congruent offering and I don’t think that exists other than at Creative Planning,” he said.

Creative Planning acquired America’s Best 401k, a retirement plan provider, in September, which Mallouk said at the time was a way to increase the company’s offering to employee retirement plans.

Another of the company’s distinguishing features, he added, is the level of customization it can give to client portfolios, with almost 50 traders “who do nothing but monitor our clients’ accounts full time. That’s not really typical of an independent wealth management firm. Most of our larger competitors have their clients, and certain different models, and the trade all of those models at the same time. Or they don’t do a lot of trading at all.”

DeVoe & Company, the San Francisco-based investment bank and research outfit, represented OptiFour in the sale.

"Our clients will benefit from the power of a broader platform, while receiving the same level of intensive service we have always provided. 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," said Wes Burnett, principal of OptiFour, in a statement announcing the sale.

TAGS: People
Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.