Creative Planning Sells Minority Stake to TPG

Private equity’s hunger for wealth management is insatiable.

The massive registered investment advisor Creative Planning announced a PE investment from the buyout firm TPG that could value the Kansas-based wealth manager at a reported $15 billion. Although terms were not disclosed, the deal could be worth as much as $2 billion, according to Reuters. CEO Peter Mallouk will continue to lead the advisory firm and maintain majority ownership.

“We are excited to partner with a trusted investor like TPG … who shares our vision of leveraging our planning-led approach and people-first culture,” Mallouk said in a statement.

Come On In

This isn’t the first PE deal for Creative Planning, which is one of the largest independent advisors in the country and sits on about $375 billion in assets under management. The company sold a minority stake to General Atlantic in 2020. It’s also not TPG’s first foray into wealth management, either: The PE firm took a minority stake in the RIA Homrich Berg last week.

PE firms are often seen as the barbarians at the gates, but in the world of wealth management, it’s getting complicated. In fact, private equity backed all of the wealth management M&A transactions in August, Fidelity reported. Other research has found:

• In the second quarter, PE firms made 12 direct investments in the wealth management space, Echelon Partners reported. 
• Some of the largest deals included Fisher Investments selling a minority stake to Advent International and others for upwards of $3 billion and GTCR taking the turnkey asset management provider AssetMark private.

Don’t Worry, Be Happy: There are some concerns that PE players in wealth management don’t understand the industry. They do, however, understand the industry’s ability for growth. By 2020, the client retention rate among North American firms had reached an all-time high of almost 95%, according to McKinsey & Company. And when those clients stick around, they pay plenty of advisor fees. 

To be sure, many advisors welcome buyouts and say the more investments in the industry, the better. Such deals can also help professionalize a firm, enhance governance, and provide more capital for scaling.