Creative Planning's Journey to $100 Billion of Assets Under Management

Creative Planning LLC President and CEO Peter Mallouk told the story of his company’s path to managing roughly $100 billion in assets at the ACG  monthly meeting on March 4.

He told a story about David Lee Roth, the rock band Van Halen’s former lead singer. Roth said in an interview that the band’s touring contract in the 1980s had a rider stipulating that bowls of M&Ms backstage must have no brown M&Ms. If brown ones made an appearance, then the promoter would forfeit its full fee for the show. “This was touted wildly and widely as simple rock star misdemeanor excess and being abusive of others simply because we could,” Roth said.

But the truth was that Van Halen had elaborate stage productions that many older arenas weren’t well-equipped to handle, creating possible safety risks, Roth said. The M&Ms clause buried in the middle of a long contract served as a warning to the band. Brown M&Ms backstage told Roth the promoter hadn’t read the contract rider, “and we had to do a serious line check.”

Mallouk said the story illustrated that “everyone is looking for those clues that they can trust you, and that you’re going to do the right thing for them, and that they’re in better hands with you than with someone else, and you have to deliver every single time.”

Mallouk started his career as an estate and tax attorney after studying finance and law at the University of Kansas. Someone who worked in insurance referred some clients to him, which gave him “this amazing crash course on wealth management.” He saw how insurance agents, accountants, lawyers, financial planners, money managers, brokers and independents worked, and he developed his practice to provide “all of this stuff in one place.”

Creative Planning was founded in 1983 and was one of Mallouk’s financial planning and money management clients from 1998 to 2004, the year he took over the company. Creative works on the independent side of the industry. Mallouk made it impossible for Creative to sell a product to a client so that Creative would have no financial interest in the advice it gave.

When he hired his first employee Molly Rothove, now the company’s vice president, Creative was the only firm in the country that did estate planning, tax planning, trust services and money management in one place, he said.

“The main reason people come to us is the way that we build portfolios or access to different types of alternative investments,” Mallouk said. “Normally in our industry, to get those things you’d be at a Goldman Sachs or a J.P. Morgan, which are amazing companies with a lot of access to things. But they have their own products, too, and so a lot of high net worth folks like to go to a place that can go get all those things but doesn’t have their own products, so the advice is always unbiased...We’re not getting revenue-sharing. We don’t own it. It’s not owned by somebody down the hall. That’s a big attraction to people, whether they’ve got $500,000 or $500 million.”

Mallouk cited an example of a philanthropic client who wants to give $1 million to charities in the next 10 years. The worst way to give is in cash. Call a financial planner to learn how much you can give without compromising your lifestyle, and pick the things with the lowest basis.

A lawyer can create a private foundation or a donor advised fund. Make a gift to the foundation, and then it gives money yearly for the next 20 years. Creative also has people who work with qualified business appraisals if the gift involves a business interest.

“Most of our clients keep their CPAs and lawyers, but they like that we know all these aspects,” he said. “We have the largest estate planning law firm in the country as part of our company. We have a large tax practice and a qualified business group.”

But Creative has had some “weak links.” Mallouk told another story: He went to New York City to see a prospective client about seven years ago. When he travels to another city, he visits his employees. He went to dinner with a group of them. They wanted to go to a steakhouse.

He said, “Hey, look, you can go wherever you want. Just don’t pick a steakhouse or a barbecue place. They said, ‘This place is amazing.’ I said, I’m not like this whole defend Kansas City, but we have the best steaks. Just pick something else.”

He went to the steak restaurant with them. The server displayed the steaks at their table — a filet, a porterhouse “and here’s the strip … and it just flew in from Kansas City last night.”

“You’ve got to be known for something,” Mallouk said.