Creative Planning picks up Lockton’s U.S. retirement business

The deal expands Creative Planning’s presence in the retirement plan business by about $110 billion and gives it access to the large-plan segment of the 401(k) market.

Creative Planning is making a massive leap into the retirement plan business, agreeing to take on Lockton’s $110 billion unit in a deal that includes an equity stake in the acquiring firm.

The companies, which announced the agreement this morning, will rename that business Lockton Retirement Services, an Offering of Creative Planning.

The deal greatly expands Creative Planning’s presence in the retirement plan business. Currently, the registered investment adviser has about $14 billion in assets under advisement in that segment, with more than 100 plan clients, primarily midsize retirement plans, Creative Planning CEO Peter Mallouk said.

“Together, we’re not just more competitive in the 401(k) space, but now we both have best-in-class solutions for our clients,” Mallouk said. “We have so much more talent under our roof — we are very enthusiastic about what this means. It could be transformational for our firm and our clients.”

The U.S. retirement business represents only about 3% of Lockton’s revenue, according to a spokesperson. The broader firm has more than 8,000 employees globally and is a giant in the insurance and benefits market.

Roughly 100 Lockton employees are part of the unit being merged with Creative Planning. Terms of that deal were not disclosed, and the company expects to finalize the merger Jan. 1, Mallouk said. Lockton is located in Kansas City, Missouri.

Once the deal is complete, Creative Planning will advise on roughly $210 billion in assets, according to the firm.

The deal will also put Creative Planning into a new segment of the 401(k) business, the large-plan market, or plans with more than $100 million in assets. Lockton started in the U.S. retirement business in 2000 and has about 1,500 clients.

“Lockton is a force to be reckoned with in that market,” Mallouk said. “It opens up this space for us.”

The merger reflects the trend of the expansion of wealth management into the retirement plan business.

“This alliance is something only our two firms together could do,” Lockton CEO Peter Clune said in the announcement. “Each firm brings a complementary best-in-class service offering to create an end-to-end solution for companies seeking to provide deeper resources to their people. This approach accelerates the speed to market of our differentiated offering and will fuel growth for each firm, creating immediate value for our mutual clients.”

Over the past five years, mergers and acquisitions in the retirement RIA business have been occurring rapidly. Wise Rhino Group, which consults on those deals, estimates that the biggest 15 aggregators have about $2.3 trillion in assets under advisement among 20 million retirement plan participants.

That trend has also been attracting private equity money. Recent examples of that include GTCR’s 25% stake in Captrust and Aquiline Capital Partners’ majority investment in SageView.

It’s notable that in 2020, General Atlantic took a minority stake in Creative Planning.

“This trend reflects that these firms clearly understand that the power in financial services will continue to shift toward the firms who control the client relationships — the plan sponsor and the participant,” Dick Darian, partner at Wise Rhino, said in an email. “In addition to the emergence of these mega firms, the retirement advisory segment is also shifting toward the need to drive revenue by engaging (advice) and monetizing (wealth advisory) the plan participant. For a number of the insurance brokerage players, these dynamics will certainly test their strategic will around both continuing to grow their retirement stacks and building or buying a competitive wealth business.”

Wise Rhino consulted with Lockton months ago, ahead of a potential deal for its U.S. retirement business, Darian said. An important consideration for the firm was keeping some affiliation with that unit, in order to help support its larger U.S. benefits and property and casualty business, he said. A majority of the retirement plan clients are also Lockton’s insurance customers, he noted.

“They can’t just sell it and walk away,” he said. “We suggested that they keep a stake.”