Creative Planning has announced the acquisition of America’s Best 401k, a technology driven retirement plan provider focusing on a high-transparency, low-fee model.
America’s Best 401k Founder and President Tom Zgainer will remain in his current role. The financial terms of the deal are not being disclosed.
In a number of conversations with PLANADVISER held over the last few years, the leadership at America’s Best 401k have emphasized their intention to “disrupt” the traditional retirement plan recordkeeping model. Now, speaking about his firm’s goals in acquiring America’s Best 401k, Peter Mallouk, CEO of Creative Planning, says the “disruptor” mindset will continue. He says Creative Planning has long embraced the same principles driving America’s Best 401k, and in fact the firms already work together extensively behind the scenes.
“As the current 3(38) investment fiduciary and registered investment adviser for America’s Best 401k, Creative Planning has in-depth knowledge of the firm’s clients,” Mallouk says. “We became the fiduciary for all of their plans a few years ago, and we have taken on the role of picking their investments and handling the fiduciary services for their clients. So in that respect, this deal has been some time coming.”
Mallouk notes that Creative Planning already has a well-established 401(k) offering, but it tends to be best for large, established plans that have millions of dollars and lots of participants, and which are seeking in-person education services. America’s Best 401k, on the other hand, has specialized in efficiently serving start-up plans and smaller entities with a digital-first footprint.
“They have built an incredibly efficient and technology driven platform,” Mallouk says. “We expect to be able to leverage their digital onboarding and client service model, which makes high quality plans accessible even for startups and smaller employers. Their capabilities will round out our recordkeeping offering completely, and of course there is a good cultural fit. They have focused on the same things we have from the start—full fiduciary services and highly transparent, indexed-based fund lineups.”
Echoing the leadership’s language at America’s Best 401k, Mallouk says the retirement plan industry is “laden with conflicts of interest and very high fees relative to service levels.” Investment lineups continue to exist for the wrong reasons, he suggests, but increasingly plan sponsor clients are pushing back.
“What’s happening broadly is that providers have to do more for the same fee,” Mallouk says. “From that perspective, it is very helpful to be a fiduciary these days, and to have a low-cost fund lineup. On top of this, things continue to get even move competitive from a value-for-fee perspective. You really have to have strong technology and established economies of scale to be able to be competitive in this type of recordkeeping marketplace. That’s why you will see more and more consolidation.”
Mallouk expects the integration of America’s Best 401k to be fairly rapid, given the extent of the existing collaboration.
“Part of the excitement for us is that we have already been fulfilling a big part of their offering for years now,” he adds. “For us, this deal is ultimately about being able to say ‘Yes’ to more Creative Planning clients, and to do so in a seamless way, rather than maintaining and explaining two separate brands. The other component is being able to integrate their powerful technology within our current platform. That’s the integration we are working on now.”