Creative Planning grew this week from $390 billion to $640 billion in client assets through its acquisition of retirement business SageView. Peter Mallouk, CEO of Creating Planning, says going public may be an inevitable option for the industry’s biggest independent RIAs. Mallouk includes his own firm within this group that will face the question of remaining private or exploring public markets.
“I think we're going to see some RIAs, at some point they're going to run out of room to stay in the private markets. I think that we are one of those firms,” Mallouk said. "There's a lot of great, really big firms that fall in that camp. At some point that’s going to be an option.”
Mallouk’s comments came on stage Friday at the DeVoe M&A Succession Summit in Chicago during his keynote discussion with Rohit Mahna, head of client growth at Fidelity Investments. Giant RIAs have in the past faced market challenges going public, such as Focus Financial Partners reverting to private ownership in 2023 five years after its IPO.
“We've never seen a pure RIA, a real integrated RIA, go public yet. I know we saw Focus. There’s obviously very different models, so we don't really have the valuation set. This is going to be very fascinating. If you have an integrated RIA go public that will reset multiples for the entire industry,” Mallouk said before getting into specifics about the range of valuation multiples RIAs could see upon going public, and how institutional investor models can evolve to keep large RIAs private.
“If you go public and it's 28 [price-to-earnings ratio] like some asset managers are, then you're going to see a big reset upwards. If you go public, and it's 17 [P/E ratio], you're going to see a dramatic downshift,” Mallouk said. “I can [also] see a world where a Canadian pension fund coupled with a Middle Eastern sovereign wealth fund, coupled with an American private equity fund, just keeps it in a different kind of vehicle for a decade.”
Creative Planning received a reported $16 billion valuation in September 2024 when private equity firm TPG Capital acquired a minority equity stake in the firm. Citywire reported this week that private equity investors for $308 billion RIA Edelman Financial Engines ended their sale process, which Mallouk referenced on stage in regards to mega-RIAs not seeing the sky-high valuation multiples they aim for.
“We're starting to see it play out, where the bigger firms go to market, [...] they test the waters, then they exit,” Mallouk said. “You don't see that in the $4 billion, the $8 billion [RIAs], because at that point there's still so many platforms willing to come in and say one way or another, we can acquire some firms and double it that way. You can't do that with the big firms.”
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