News broke early Thursday that Lockton and Creative Planning are combining forces, with the goal of creating a “best-in-class advisory offering designed to serve corporate retirement plans and the plans’ participants.”
The partnership itself will be named “Lockton Retirement Services, an Offering of Creative Planning.” Moving forward, Lockton will take an equity position in Creative Planning, meant to underscore the firms’ “mutual commitment” to “forge an aligned, tangible and differentiated partnership.”
Peter Mallouk, president and CEO of Creative Planning, took time on the morning of the announcement to explain his firm’s vision to PLANADVISER, noting that Lockton and Creative Planning will technically remain independent of one another as they pursue a shared vision for a collaborative future.
“The affinity relationship means we are going to be able to work together such that any respective weaknesses are now our strengths,” Mallouk says. “Lockton is still Lockton and Creative Planning is still Creative Planning. In practice, we will be referring our clients to Lockton in areas where it is stronger than us, and the same is true of Lockton. Together, we can work with our respective clients to create a holistic and very powerful service offering.”
Explaining this vision further, Mallouk says his firm has been performing well “with the average private wealth client, and with many smaller and larger private wealth clients.” On the 401(k) plan side, he says, the firm has a skilled group that traditionally works with small and midsized plans.
“Frankly, serving plan clients that are way up market has not been a major strength of ours, but for Lockton, that’s right down the middle,” Mallouk says. “Our joining forces represents the fact that, in today’s competitive advisory landscape, you have to be able to compete at all levels. If you look at the well-run national firms that we are increasingly competing with, this partnership between Lockton and Creative Planning allows us to match and meet their capabilities. The link with Lockton’s highly scaled insurance and brokerage capabilities is also important.”
Though he did not mention them by name, the firms Mallouk is referring to include the likes of CAPTRUST, Hub International, SageView and OneDigital, all of which have engaged in meaningful merger and acquisition (M&A) activity. While they have some nuances in their individual approaches, these firms are building business models that can support advisers working with both private wealth management and institutional clients.
Leaders at these firms say that serving retirement plans and private individuals does not mean a firm will be aggressively soliciting rollovers or engaging in other potentially problematic cross-selling behaviors barred by the Employee Retirement Income Security Act (ERISA). Instead, they say building a firm that does both private wealth and institutional retirement plan business—alongside insurance brokerage services and even health care-focused services—is about creating a holistic service ecosystem that clients want and need, especially as the defined contribution (DC) plan system matures and becomes a key component of individuals’ retirement income.
Mallouk says the battle for scale is an important factor leading to the rapid pace of M&A activity, but another key piece of the puzzle is the competition among firms for advisers and brokers.
“Getting the right group of talented and experienced advisers together under one roof is extremely important for long-term success in this industry,” Mallouk says. “In reality, it’s a pretty small pool of practitioners who are experts in this field, so talent acquisition is every bit as important as scale, from our point of view.”
Reflecting on the role that private equity (PE) investments have played for his firm, Mallouk says the minority-stake backing General Atlantic took on earlier this year is very important for his firm’s future, but it was not necessarily a big factor in the move to partner with Lockton.
“General Atlantic’s investment in Creative Planning is a passive minority stake, meaning the PE firm has not provided additional assets to make acquisitions or sought to change our firm’s goals, strategy or approach,” he explains. “It is important to understand that this is a passive ownership stake it has taken on. So we have not utilized its capital to do acquisitions.”
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