The Compound and Friends - Live from Future Proof with Peter Mallouk

Episode Date: September 20, 2024

On episode 158 of The Compound and Friends, Michael Batnick and Downtown Josh Brown are joined by Peter Mallouk, President and CEO of Creative Planning. This episode was recorded in front of a live audience at Future Proof on 9/17/24. This episode is sponsored by Kraneshares. China Last Night powered by KraneShares is a daily note produced by the KraneShares research team led by Chief Investment Officer Brendan Ahern. Check it out at: https://chinalastnight.com/ Sign up for The Compound Newsletter and never miss out! https://www.thecompoundnews.com/subscribe Instagram: https://instagram.com/thecompoundnews Twitter: https://twitter.com/thecompoundnews LinkedIn: https://www.linkedin.com/company/the-compound-media/ Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to The Compound and Friends. All opinions expressed by Josh Brown, Michael Batnick, and their castmates are solely their own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of RID Holds Wealth Management may maintain positions in the securities discussed in this podcast. Hi guys, I'm Josh Brown. My friend Brendan Ahern is the founder of CraneShares, which also happens to be the sponsor of this week's episode and I wanted to let you know one of my favorite information sources is Brendan's very good China last night email blasts. Every night Brendan stays up till probably I'm guessing 1 2 a.m.

He's got the latest headlines coming from Asia all of the stuff that may or may not affect the next day's trading and he puts it all together into a really great, easy to read summary, all the headlines you need, the backstory behind the headlines when necessary. And he's really covering everything, whether it's Chinese ADRs or its currency stuff or its political things or trade or the US dollar, just you name it. Brandon gets it in there. He's a very good writer, very succinct, most importantly. So I would send you to Craneshares.com or Chinalastnight.com to learn more.

Thanks to Brandon. Thanks to Craneshares for sponsoring the show. Ladies and gentlemen, this is a live recording of the compound and friends. You guys have made this one of the top podcasts in all of finance. We appreciate it so much. Give yourselves a round of applause. Thank you so much. Thank you.

If I wasn't double fisted, I would be applauding you right now. You guys make the show possible. When we do live recordings, you're actually part of the show. So if we say something that sounds good, feel free to applaud. If we say something that's ridiculous, feel free to make a funny sound. If Michael is talking too long,

feel free to cut him off from the audience. I want you guys to have as much fun as possible. And we really have a truly special guest today. Someone who I think the majority of attendees at this event are familiar with, despite the fact that he does not typically attend industry events, which we're gonna get into the reason for why.

Painfully shy is my theory. I want you all to give a warm welcome to Peter Maluk, who is the president of Creative Planning. Peter was chosen as the number one independent financial advisor in America for three years straight by Barron's and was selected as one of Worth Magazine's Power 100 for two years straight. Peter was a recipient of the Ernst & Young Entrepreneur of the Year award. CNBC named his company Creative Planning the number one independent wealth management firm in the United States.

In 2017, Barron's named Creative Planning the number one independent wealth management firm in America. Peter Maluk, thank you so much for being here. All right. So we're going to start off by making you blush a little bit. Can I have my chart please? Chart on. This is what excellence as an entrepreneur in wealth management looks like, ladies and gentlemen.

This is the assets under management at Creative Planning since 2015. And as you can see, this is a very enviable blue line. I love how you just dug up ADVs. We went through, we went to your office. 37% compound annual growth for Peter's AUM. Give that a round of applause, guys. And if we went back farther, the number would be astronomical.

Astronomical, it's truly epic what you've accomplished, and I know you haven't accomplished it alone. However, you did start off in a very small shop, and largely, you've been able to accomplish something that I don't think anyone else in our industry has been able to accomplish. How do you feel sitting here today looking at that blue line, and how much higher can it possibly go? Well, I think that the industry, how much higher can it possibly go? Well, I think that the industry, I think it can go a lot higher and I think everyone here can go a lot higher because the industry is so incredibly fragmented. So if you look at

the custodians, you've got Fidelity and Schwab, it's game over now, right? Scott Trade, TD, E-Trade gone. You've got the investment banks, JP Morgan Goldman, the brokers, Morgan Merrill. In the independent space, you look at a creative planning and think it's big, but the number of employees at creative planning is less than the number of employees at the high school closest to my office. How many employees? 2,300. That's it?

That's it. Okay. How many of them are here today? Zero. Okay. Peter, I'm not like a big mentality guy and mindset. I don't care what you have for breakfast, but I'm curious. When you started, or even 10 years ago, at the inception of this line, are you a big thinker?

Does this shock you? Are you like, how did I do this? Or is it just been compounding and compounding? Well, I think anybody that's had success in this space that doesn't go, I don't know how the hell this happened, I got here, is not being honest. Right? And you know, you're shaking up. I mean, there's been a lot of cooperation, right?

People are moving from brokers to independents. I had nothing to do with that. You guys had nothing to do with that. They're becoming wiser about where their money is. Madoff in 2008 really helped people start to think about it. People said, I'm not gonna just go with my buddy. I'm gonna go with somebody who I think is adding more value. You know, we had nothing to do with that.

And of course the markets really helped, right? So there's a lot of things that have helped. I'm not saying that's obviously not everything, but it gets me to a point where, yeah, of course, I'm like, what the hell just happened, right? And a big part of it is all of these big macro forces that are beyond our control that are helping. Now there's a lot of separation in this space.

You guys are good at things that create separation. There's a lot of people here that are good at things that create separation. I think creative planning is good at things that create separation, but it doesn't hurt to be sailing in very favorable seas. So the tailwinds remain in place. Is creative planning going to be the first trillion dollar RIA?

I would hope so. I mean that's the mission that we're on is to... All you need is Apple to go up another 50%. You should be good. Nvidia, Apple, anything that can go up another thousand. Do you have that number in your head though? One trillion? I don't at all. I really, I think that that that's I know we use that a lot in the industry and I think though people that have any success know that AUM isn't really the business, it's clients and it's the difference you're making for them and it's revenues and it's earnings and all of those things matter more than the actual AUM number but it's clearly a way that

we can all quickly go well how, how's the place doing? And if you go from four billion to five billion, I know what you're doing is resonating. So I always tell people at Creative, we should not be shy about wanting to go to the next level because it's proof that the marketplace likes what you're doing. If your AUM in a flat market goes down a billion dollars,

the market's telling you you're not doing well, right? You're doing something wrong. And so I'm much more focused, but the one thing I look at the most above all else is flows. Like, if the market, if our portfolios went up 50% next year and Arroyo went up $150 billion, but we had negative 1 billion in flows, it'd be the worst year we've ever had. Is that the first stat you asked for? The first stat.

Okay. Really, the sometimes the only stat I look at. Is that the first stat you asked for? The first stat. Okay. Really, sometimes the only stat I look at. Like in the morning, it's the most... So net flows. Net flows. Okay. Literally the only thing I look at in the morning and every quarter we look at more things.

But it's really flows. Flows is telling you, are you delivering something of value to the marketplace? Okay. How sustainable are these flows? I mean, it seems like the pie is ever expanding. Where are the flows coming from? Well, I think there's a stat out. I can't remember if it was Schwab or who put it out that something like 90% of the new

business is going to the 100% largest firms. So when you say where it's coming from, I think that's really interesting because in the beginning, you know, people would just come to my office and we're 30 million dollar firm. We've got two hundred million dollar moving accounts from mutual funds it was just ridiculously easy right and that was the mid 2000s and then you get to the 2010s and I nine out of ten accounts were coming from Merrill and Morgan in places like that now Frankly, we're competing with each other You know I'd say 80% of the new accounts that come at Creative Planning are coming from another RIA.

Is that right? The reality of it, yeah. And people are moving to larger firms. And I'm not going to comment on whether it's fair or not. It's just a perception in the marketplace that, hey, there's more cybersecurity, there's more due diligence, there's more protocol. And one interesting thing about Creative

is, of our large accounts, so we have about 1,600 accounts that average 25 million. It's a very big part of our business. 90% of that showed up in the last five or six years. And I think that group is basically, wasn't comfortable with us when we were smaller. They just go, I'm either gonna be the biggest person here

or whatever the logic may be. But you're seeing now that movement too, as people go, well, I don't want the broker because they're not a fiduciary. I want the fiduciary, but maybe they're not big enough for me to feel comfortable. And you get that sweet spot where the multi-billion, don't have to be hundreds of billions,

but the multi-billion dollar RIA can give some of that comfort. So scale begets scale. And a lot of people in the audience are trying to be entrepreneurial and break away and start their own thing. You've been there and you've done that. What words of caution or advice would you have for people that are thinking about getting

into the knife fight? Well, I think that the scale begets scale is a big deal. I think getting attached- I'm sorry. I've heard you say this is a business of compounding advantage. That's right. Once you have an advantage, you're going to have more advantage as time goes on. So look, you guys know, and I think everybody here that's successful knows, that people make decisions about money two ways. They're aspirational. They go, I want to be with

the best firm. I want the best advisor. I want the best platform, all of that stuff. Or they're fear-based. They're going, I don't want to lose my money. I don't want anyone to steal my money and so on. I was actually going to do masters in business with my friend Barry. And my son was shadowing me. We're walking down the street in Manhattan.

There's five food trucks next to each other. We got five minutes. And my son who's 18 points at the food truck that says number one on TripAdvisor. Right? And so to me that's- It's like social proof. Social proof.

Yeah. And so if you're looking for that restaurant in town, you know what I did last night is I went on TripAdvisor and said, you know, where's the, what's a highly ranked place? If you're aspirational, you're going to get a great meal probably. And if you're fear-based you're probably not gonna throw up, right? That's social proof and that translates into financial advice not not like a little bit. I think 90% of people

This is how they make their decision. So I have noticed this with our practice We've actually had people say to us I was thinking about bringing money to you and Barry had people say to us, I was thinking about bringing money to you and Barry, but I wanted to see, I wanted to give it time or, all right, now that you're X dollars under management, I'm not going to be your biggest client. And we've absolutely heard that. What you're saying is you're only hearing it from a fraction of the people. It's a much bigger phenomenon.

They just keep it to themselves. You don't know what you don't get, right? It's like when Vanguard came along and said, oh, it didn't affect me, it didn't affect me. Well, it definitely affected creative planning. We had record inflows. We just would have had bigger flows. We didn't get them because of Vanguard. You your organization is probably the single biggest example of social proof in the industry.

Right. You're you're the same guy you were 10 years ago. You couldn't have done this festival 10 years ago. No. Right. This is the power of you should have seen the shit I you were 10 years ago. You couldn't have done this festival 10 years ago. This is the power of social. You should have seen the shit I was doing 10 years ago. But now you can get away with it. Yeah. You got the social group.

Peter, has it gotten more expensive to run your business just in terms of thinking about, all right, I'm going to break away. I've got $50 million. I'm going to spin up an RA, hang a shingle. It's expensive to run a business. So yes, it is. I think we're still so fragmented, there's a home for everybody at any size. And it's a profitable business, right? So you can make it work no matter what. You have to have some advantage. You have to be faster or better or deliver more value. But you

can build a couple hundred million dollar practice just knowing a lot of people and being the country club guy or girl. I mean there's no question you can still do that in today's space, but if you want to get to that multi-billion dollar, you're going to have to make institutional level investments, right, in technology and everything else. And so you see a lot of people go, well screw it, I'm just not going to do it. I'm just going to get to this level and I'm going to just stop. Do you have a theory for why so many of the mega RIAs, of which I would count you guys as a mega RIA, why are you guys all in fucking Kansas? What is that about?

Or Nebraska? What is it? What am I? This is my East Coast bias talking, but what am I missing? I think it's just a total complete fluke. It's a hell... That's it? What am I? This is my East Coast bias talking, but what am I missing? I think it's just a total complete fluke. It's a... That's it? It's...

It... That is it. That is it. It's just an absolute fluke. And we know each other and I think we're pretty friendly. Is there like cross-town rivalry in Kansas City? You know, not... I would say it's probably more national than in Kansas City.

Most of our... I mean, the huge majority of our clients are outside of Kansas City. And so it's more of a national. Okay. Peter, as advisors build their business and offer more services, we've spoken about, it's not fee compression, it's margin compression. Advise clients are expecting you to do more for them.

And so as an advisor grows and scales, what are some of the first services that you would think about adding to compliment what they're doing on the planning side? Yeah, you know, it's interesting services that you would think about adding to complement what they're doing on the planning side? Yeah, you know, it's interesting because if you look at the last 10 years, the marketplace has just really benefited from the stock market just soaring. So people don't notice that the fee compression is happening because the markets delivered

abnormal returns, the clients are getting higher than normal returns, and so the profits are higher than ever. People go, oh my god, I feel no margin compression. But you do in a normalized market because to compete today, you've got to invest in technology and you're eventually going to have to deliver services. And you're going to have to deliver them at scale. And so like, for example, we don't just do legal, we do real estate law and tax law and business law and special needs planning and elder law and all of those things. You were a lawyer. That's right. So did you ever think that you... state law and tax law and business law and special needs planning and elder law and all of those things.

You were a lawyer. That's right. So did you ever think that you would... Still technically, yeah. Still technically. But so, but you were a practicing attorney before you were a financial planner. That's right. But now you're basically building a law firm under the umbrella of a wealth management

firm. Did you ever think that would happen? Well, that's, that was the premise of, that's the only thing I thought would happen. That was the premise of Creative was, hey, let's put in one place. I was basically a consultant to other advisors. I would go to Wells Fargo at 8 in the morning and Northwestern at 10. I had 100 clients like this. I would give tax advice or legal advice or help them construct portfolios for outlier

clients. The idea was, have one firm that customizes portfolios, pulls all these services under one roof, and there might be a market for it. I knew I was gonna do that. I didn't know how it would be received, but I knew it was gonna do it. You've been buying accounting firms lately.

Could you tell us what the strategy is behind bringing CPA work in-house? So we've got one firm. The firm was, the primary purpose here was the business owner services, of which one was taxed. But they do audit, managed IT, bill pay, outsourced business accounting, outsourced CFO, payroll, all of those things as well. And the idea is if you look at people who have net worth of 25 million and up, 91% of them are business owners or were business owners, when they walk through the front

door, they don't go, well, I'm a person here and I've got a business owner there. They're a business owner person, right? So if you're solving their individual problems, hey, I've got a trust company for you. I'm going to do your legal, I'm going to do your tax and so on. And also I'm going to help you with your growing. So I'm going to get you some consulting. Wealthy people don't want to take 10 meetings in a week to do all this stuff. No, this is what's interesting about it is the more specialized you are, the more appealing it is to that very high net worth client because they value their time. They want to pay for it. They want to pay for advice. They're far more willing to pay for advice. They understand markets better.

They're far less likely. The retention rate is much, much higher with that group. The growth rate is higher with that group at Creative Planning than any other group. And they want, like you said, Josh, they want all of that stuff coordinated. They don't want you to tell them, go to these 10 different people to do this. They want somebody who's already at the 10 yard line to go, well, I've already know all this stuff.

Let me pull in these extra pieces to finish this up for you. Peter, you once told me that when your clients think about a question related to money, anything investing property and casualty, what mortgage they call you, is there a line that you won't cross that you said, okay, we'll do this, but this is just, we're not doing that. Yeah. We're definitely. So I, you know, I tell my team, like if, if, if somebody buys a house or buys a car

or sells a business and they have not talked to you in advance, they don't value you. You are not their primary advisor. Or they don't even think it's worth spending five minutes talking to you about it. So you have to be that. You have to be at a level where they know you know things enough that you may add value,

even if it's just a second check. We do all kinds of things. I'm not into things that remove us from a dollar sign, right? So all the things that we do, they're related to finance. But there are a lot of family office services outside of that that we don't do. Like we're not gonna walk your dog or get you, we're not doing the concierge services.

Okay, I've seen two things change about the way that you operate in the post pandemic period. And I want you to take them separately. The first is you become much more public personally and you've become much more proactive from a firm standpoint in your marketing. You're very well-hidden secret, your success. And then one day you just said, hey, I'm on Twitter.

It's true. Okay. A lot of people did that during the pandemic. The second thing though is you've begun working with private equity firms. So I want to hear about the first one first. Why did you start talking publicly? Why did you start to become a more public person? And are you happy about the decision since you've made it? So you know it's an interesting observation because I remember getting a call.

I watch you very closely. From afar. I got a call from RABiz a long time ago and they're going to do this story and it was like the third time I go I'm not. Shout to Brooks Southall. Yeah I go I'm not going to participate and they said well you know we're going to do this story no matter what. That sounds right. And my headline, well, we're going to do the story no matter what. That sounds right.

And my headline was outing a reluctant start. I think that was the first time I'd done an interview. And it wasn't that long ago. But we had one negative thing happen. And I was sitting in my office with a client who's in PR. And I go, oh, god, this sucks. It's like, you do all these wonderful things, and then this one thing happens.

And she goes, well, you deserve it. And I go, what? And she goes, well, you're not telling your I go, what? And she goes, well, you're not, you're not telling your story. So someone else is going to tell it. That day, I mean that I left that meeting and that day it was when I started everything. I got online, we got a team together internally and started to say, you know what? We don't have a single person in marketing here. We don't have a single person in PR here.

I'm not talking and we're too big to ignore it now. So let's just embrace it and move on. So it's an interesting observation. The TV commercials are great. They run on my network CNBC. What was the decision process behind starting to advertise on television? I think that the, I think you obviously you have,

everyone's aware of Fisher and how incredible they've been at branding, but I don't think you really have a wealth management firm, a firm that does something outside of money management that's a brand name. Like if you left this room and you went a mile into town you asked a hundred people who's creative planning, somewhere between 99 and 100 would say I don't know who creative planning is, right? So I think that door is open and I think we're on a mission to kick that door down. You know really really try to make that push of what we think the industry standard should be and we're very you know we're on a mission to kick that door down, really try to make that push

of what we think the industry standard should be. And we're proud of what we do and we want to lead in this space. And I think a big part of it's gonna be getting that message again. I also see you doing some content marketing. You've got some people on your team who are active on social producing charts.

Is that something that you see your firm doing more of and are you aware that that's my turf? I'll let Charlie Bulello know. He's joined us. He's incredible. Just the guy is absolutely amazing. Is that fun for you guys? Do you like the feedback that you got? I absolutely love it. I'm surprised at how much I enjoy working with him. He's so bright and the charts he puts together are epic. And so he's made it fun.

And I've been doing a podcast with Jonathan Clements a long time and he's an incredible person too. So I've really enjoyed that piece of all of it. Okay. Private equity. So obviously you went a very long period of time as the sole shareholder of Creative Planning. It became a gigantic company. You're of a certain age, very young, but still.

I'm guessing, this is my guess, maybe 20% is let me take a little bit of risk off the table finally, but then 80% is, oh my God, this opportunity is so big, what if I'm under investing in it? Do I have those percentages right? Or they flip-flopped? No, I think that like, I think once you get, I think a long time ago I really became not concerned about the monetary aspect of it and taking risk off the table. Must be nice. Yeah, I'm sure you're there too.

I'm not too worried. That was not a motivation at all. I think what basically happened is we got to a size where it was I clearly wanted to bring in our team right so now we've got 400 or so employees as partners and that's been fantastic you know having everyone participate in this run. But the other piece of it is we needed to institutionalize the capital stack. I mean, regulators don't love seeing a firm that is the size of creative planning

and just having one dude there, right? So we got to a certain size where we're like, you know what, my friend that's an accountant, you're wonderful, but we're gonna have to have Ernst and Young in here. We've got to have KPMG do our audits. We're gonna have an institutional CFO and we're going to bring in-

What size were you at when you said we need to bring in public company accounting? I think we were about, I want to say about 500 million in revenue or something like that. Okay, so everyone here is going to the breakthrough tent. And they're taking meetings and some of those meetings are private equity providers trying to meet with entrepreneurs in the space. How did you go about choosing your private equity partner?

I'm sure you could have worked with anyone in America. And what advice do you have for the audience about making a decision like that? Well, I mean, what's interesting is when I did it, I had a lot of... I personally see clients and a lot of them are very high net worth and some of them have sold their businesses and I'd experienced a lot of private equity firms firsthand helping negotiate. And so I just made some calls and wound up doing it. I would say that was like absolutely idiotic, right? That's not the way, you know, that's not the way to do it. You really want to have a process and you want to more look at the landscape and really make sure you wind up in a place that that matches your needs and it's the biggest decision

you're going to make and it probably helps to get advice while you're doing that. So I think that as we raise money now we look at it very differently. Do you think the financialization of our industry via private equity money is that a good thing for the industry? It's it's good for the for the sellers? Is it good for the is it good for the buyers? Is it good for the buyers? Is it good for the clients? Like what's your overall take on what's happening? So I really, I think it's all of the above depending on where you're sitting and who you're working with. So if you think about a typical firm that's selling to private equity is a firm that's maybe a couple billion dollars and the private

equity comes in and they will force institutionalization on that firm, which is good for the client. The client needs to have cybersecurity in place and independent financials and all of this stuff. That's definitely good for a client. You're far less likely to have a disaster. So I think from that perspective, it's good. But the private equity firm does not give a shit about the client. They have a fiduciary duty to their

investors. So their duty is to come in and make sure they extract as much earnings out of your company as possible. In a finite period of time. In a finite period of time. Now there are funds that are longer, you know, so but yes, it very much depends on who you're dealing with. Are they growth equity? Are they buyout equity? What's their timeline? All of those things. But it can be good for everybody

if it's executed perfectly. I had a conversation with Michael Kitsys yesterday and we were talking about some people who have had, I wouldn't call them exits, but maybe minority investments from private equity. And Michael very succinctly put it, in year one, you talk to these people, they say, oh, I still run my own show.

In year two, if they're not growing, they're sort of still running their own show. In year three, they're replaced. This is the risk of taking minority equity from a private equity firm and putting new voices at the table and putting effectively new oversight of the growth. And if the growth isn't there, you could very quickly find yourself out. Is that something that you think this audience thinks enough about when they're taking these meetings

or what would you say to people who are in that position? Well, I think that everyone wants to talk about the price they got. And there's a thing in this business that everyone knows. You tell me the price, I'll tell you the terms, right? And you see this even in the large cap space. And I truly believe that some people don't understand the deals that they're entering in, even people that run very,

very large RIAs. So typically, what you see is a private equity firm will come in if they're a minority and it sounds like well the majority person is going to control everything but the minority will come in and say well we're gonna give you this price but we want an 8% preferred. So if your business you know earns zero for five years their returns going up 8% a year at the expense of not just you but the shareholders you had with you like your

employees and I see this happen again and again and again in the space. Now year at the expense of not just you, but the shareholders you had with you, like your employees. And I see this happen again and again and again in this space. Now everyone's generally gotten away with it because the market's gone up. But if we have a period of time where the market's flat for a while, I think there's a lot of people that own units or stock in their company that would get screwed that don't realize it. You've also seen in the mega cap space where a minority might come in and say, hey, we're going to be a minority investor, but you've promised all these things. If you don't

hit these targets, you're out. And so you don't really see that how someone wound up out in the headlines, but that's usually what's happened, is that they've had this clause and they go, well, the last five years I've done this, of course I can do it going forward and they hit a bump and then they're gone. Would you ever consider the aggregator model, which seems to be very popular now, where by firms, you preserve their autonomy and you let them operate as creative planning,

but maybe with their own DBA, or maybe you call them like Creative Planning Alliance, or is that something that you don't have an interest in based on other versions of that that you've seen in the industry? So I have below zero interest. About 10 years ago, I hired somebody, she's incredible, she does something else for us now to do just this.

And she put two or three people in front of me, and all three, we said no, I said no, it's not a good fit, not a good fit. And she's like, well, I mean, this is the model. This is the whole model. And if you're not, and she said, what's the problem? Like, I just can't have the creative planning logo on this person's business card.

That's right. And that was it, we shut the whole thing down. This is a people business, and nothing is more important in determining your success or failure of your company than the people that you work with. You very famously, not famously, I don't know, that's a weird word to put it, but you still interview or praise everybody that comes into creative planning.

How has your process evolved? What are some tips and lessons that you've learned for our audience? So I mean, I think I am definitely not a believer that people are interchangeable. I mean, I absolutely do not believe that. And I think the difference between, you can even see it, you see creative planning's performance in some of our peers.

A big difference is the people. Yes, we have other things that we're doing. But even within creative, and within any company, you see dramatic performance difference between an A player and a B minus player, very substantive difference. So I'm looking for, obviously you want the stars, but the other big piece of this is

how do you keep the weeds out of the garden, right? How do you keep the cancer out of the body? Because one person can really derail you. I'm gonna see people shaking their heads out there. Everybody has, everyone here has a story. Some of them are the person and they don't know it What's up, Chris? But the idea is to you know, keep it out if it finds its way in You know get it out as quickly as possible. This is something by the way, I'm very bad

I'm good at keeping it out. But when it gets in I'm very bad bad at getting it out very fast. I'm trying to get, I'll probably figure it out the day I'm finally, you know, done 20 years down the road. But I think that a problem person in a wealth management firm where it's all about people and the firms are generally smaller is extremely negative. And so I'm, you know, if you've got a department, they're trying to hire somebody and there's a tremendous need, you need, the leader will stretch a little bit. And so you need somebody. I like trying to really identify, is this person the right person? Are they going to be in the right role?

Maybe they're a wonderful person, but this role, based on my experience, isn't going to match up with them. I find this to be an incredibly good use of my time. I can't imagine giving it up. I wanted to ask you about a little adventure you went on last year. So the United Capital business at Goldman came up for sale. And from the outside looking in, and I haven't spoken with you about this before, but it seemed that you were really aggressively pursuing this. You really wanted this. And Michael and I looked at each other like, what does he need this shit for?

But you succeeded. And I know it required like a lot face-to-face and a lot of like, hey, I'm not what just happened. I'm the solution. Tell us how, first of all, what made you want to do that and rescue those advisors effectively and maybe give us an update. How's that going? So it's interesting that there was no process. there was no deck, there was no timeline. I got a call. I was in a hospital with a family member and I got a call that said someone

was buying this and they're out and we need out of this thing in 48 hours. Wow. And so this conversation happened around, basically around terms of, well, I'm not going to see anybody. I don't have any time here. So we'll do this based on what comes over in over 45 days or something like that. So we did the deal, waited the 45 days, the people that weren't a fit left. Because you did have people jumping the gun and trying to get themselves out prior to

you even being involved. So it was very rapidly. That's right. That's right. There were people already heard about already on their way out. We wound up with a great group of people, have a great leadership team. It's been economically, you know, for creative planning shareholders, it's been a home run. But I think that the bigger piece is I think we've got these folks in a wonderful place, right? Where they come to work, they're in an independent world, and they're doing the right thing for the client all the time, and no one's trying to tell them to do anything different.

And we've seen stability and we're starting to grow, and it's been very positive. Congratulations. I don't think that there are many people in our industry who could have done that. I think it had to be somebody who had sort of universal approval amongst the ex-United Capital people. Like, I think they trusted you, is what I'm trying to say. Do you feel that that was the key to making that successful? I think definitely the people that came over,

definitely do, the people, there were people even pre-deal that were jumping ship that had just been so emotionally scarred from their previous five years. But I think it helped to have a long history. Does that stop the wirehouses or the large banks from attempting to buy independent wealth management firms in the future? Will that now be the cautionary tale and they all say, you know what, that ain't going to work?

Or do you think they'll try again? I definitely think an investment bank doing it is not gonna happen. I mean, cause when you take two regulatory bodies and you put them together, the more punitive regulatory body rules. So FINRA, SEC? Yeah, and so whatever banking stuff

is on top of all of that, right? So these RIAs wound up following investment banking rules, and it made it just very burdensome for them to do anything. So I think that's a very, very difficult environment. I think there were a lot of issues way beyond that for another day. We got six minutes left.

Why don't we let the audience get involved and ask Peter a question or two? We got some up on the board. Michael, do you wanna take one? Don't ask the first one, please. Where is it? Okay, Peter, hold on. Let me just? Don't ask the first one, please. Where is it? OK. Peter, hold on.

Let me just make sure that I'm asking the right question. OK. The first question. I'll skip that one. All right. If you could go back to one stage of creative planning, when would that be? Your first day, you took command?

Or when was creative planning the most fun? I guess is what I would add to that question. You know, it's, that's really an interesting one because I think creative planning has never been the same. Every three years it's a completely different company. So it feels like a new beginning. So I mean, right now or year one, you know, year one was amazing. It was just me and one other advisor, or not even advisor, young lady out of college.

And I remember 2008 was a blast because the market was collapsing and we were growing like crazy. But, you know, every three years, you know, someone's like, well, do you ever want to do something different? I said every three years is different. It's a completely different enterprise. All the technology changes. You're evolving with what's happening. Everything is different and we don't really have someone go, okay, they did this, we're

going to do that. We have to invent it and find our way and make the missteps. So I love every minute of it. I think anybody in this business that doesn't think it's an incredible blessing, I mean, doesn't understand how fortunate we are. This is an incredible business. Ask the tax question. That's a good one. No, I'm going to ask a different one. Great. Thank you. All right. What would your advisor say has been the largest factor in their individual success? How do you track their performance over time and help them grow? So how do we track their performance? I mean I think that I think the advisors at creative you know that most of them are partners or if they're

with us reasonable amount of time they're partners so they're participating in a lot of different ways in the success of creative planning. I think they would say you know that clients come to creative is very helpful they don't have to you know our number one source of clients is a client referring another client and so that's really good. There's a feeling of abundance. If we've got an advisor in Cincinnati and they get a referral to somebody in San Francisco, they just send the client to somebody else.

They're not trying to keep it and fly across the country. They love all of the services that are available to the client that they can say, yes, we can do this, yes, we can do that. And I think they love that they're never told to sell a product or fill a bucket ever about anything, and they have incredible autonomy. And I think that that takes a certain personality to thrive in that environment where, hey, you've got all these tools and we're going to let you reach whatever limit you want. We don't have any cap on number of clients or how long you're going to work prospects.

It's whatever you can do, you can do. And I think that people that fit that mold really, really thrive. When you acquire a firm, do you worry about whether or not the advisors will integrate well with your existing culture and how your existing advisors will feel about the incoming and who are these people and what gives them the right to... I guess

that's something that everyone has to deal with at a certain point. How do you manage that or do you worry about it or has it not been a factor? Well, I don't worry about it. It's been incredible. To me, acquiring is much like interviewing. So, this is a great example of going back to private equity. If you're a majority owned by private equity, private equity is going to do an acquisition by plugging numbers in a equity is going to do an acquisition by plugging numbers in a spreadsheet and going, does this work? Just like they'll do with a built,

a real estate fund would do with a building. If you're not majority owned by private equity, you're saying, well, what's the culture, the right question, which is what you're asking, which is what's the culture going to be like? Is everyone going to get along? Is it going to be one plus one makes three? That's what we're focused on because we're trying to win this multi-decade battle.

We're not trying to exit in three years. And to win the multi-decade battle, everybody has to win. So if we do an acquisition, we usually are able to go, okay, this is a tertiary market we now have advisors in, or we go, well, in Cincinnati, we only had a couple of people. Now we've got a couple of people that are like them. They're planning-led, similar investment approach, want to utilize these services. And now the profile has been raised, so everyone becomes more competitive.

And I think that's more how it's viewed at Creative and how we screen. All right, somebody has a question on tax. A firm's not quite creative size. Is it better to start your own tax department, which we did, shout out to Bill Arts if he's here, or wait until you're big enough to acquire an accounting firm. I think the issue with tax is, I think it depends on your client base.

If they're all retired and it's very simple, you could probably hire a couple people. But if you've got business owners or you've got higher net worth people or maybe you have an athlete or an entertainer, or people that live in multi-state. Taxes become so specialized, if you want to piss a client off, screw up their tax return. So if you run a retirement projection wrong, they don't even notice. But if you mess up their tax return, it can be over. Buy by wealth management fees. It can be over. So I would probably be engaged with a trusted partner until I had some scale.

I think let's get one more. We have a minute left. Okay. Can you... What should a 30-year-old advisor do in today's environment? YouTube. Yeah I think a 30-year-old advisor, if you're not a CFP and you're running a planning-led approach, become a CFP. But my advice to 30 and under would be focus on

where you are more than anything else. I think if you look at the number one sign of success, it's proximity to what you want to emulate. So if you're an engineer, you go work at Amazon because Amazon is run by engineers. In Kansas City, there's a great property and casualty firm called Lockton. They do a bunch of different things, but if my kid was there, I'd say only go there if you want to be in property and casualty

because it's run by people that succeeded there. You want to be in a place where the leaders are doing what you wanna do, and you wanna be around the people that are successful. So even if you got a job at an office as a 30-year-old, and you can make less money, but you're gonna work with a group that's more successful at accomplishing things you wanna accomplish,

and you appreciate that they're high integrity, and you like their style and their approach, that's who you should be around, because you eventually become what you're around, right? Your number one indicator of what your outcome is going to be is who you're around day to day. Peter, I want to tell you on behalf of everyone here, when I think of what's an example to follow or when I think of what's the definition of success in the independent wealth management

space, you're the first name that I think of. You have inspired so many people here, including Michael, myself, Barry. So on behalf of all of us, thank you so much for sharing your thoughts with us today. Big round of applause for Peter. Nobody leave, nobody leave. Nobody leave, we have a special treat.

Rob, come on out. I am going to now take someone's eye out with a T-shirt cannon. you