“Start with the customer and work backwards” With Peter Mallouk, Chief Investment Officer of Creative Planning

Start with the customer and work backwards. I found this out early on, but I wish I figured it out on day one. It doesn’t matter how great anything is if the end user doesn’t love it. To make things more difficult, the client often doesn’t know what they want. Some restaurants go under despite a great location, wonderful atmosphere and talented chef because the chef doesn’t get this key point. Ultimately, the client decides what is of value, and the great thing about capitalism is that you find out fast what the end consumer finds is valuable.

I had the pleasure to interview Peter Mallouk. Peter recently wrote a book with Tony Robbins called Unshakeable: Your Financial Freedom Playbook. Peter is the president and chief investment officer of Creative Planning and affiliated companies. Mallouk’s companies provide clients with comprehensive wealth-management services, including investment management, financial planning, charitable planning, retirement plan consulting, and tax- and estate-planning services. Creative Planning offers wealth-management services to high-net-worth clients, manages more than $15 billion for clients in all 50 states and abroad and has been featured twice as the №1 Independent Wealth Management Firm in the U.S. by CNBC (2014 and 2015). Mallouk is featured in every eligible listing of Barron’s as one of the Top 100 Independent Financial Advisors in America and is the only advisor featured at №1 three years in a row (2013, 2014 and 2015). In every ranking since 2005, Mallouk is featured on The Robb Report’s list of the Top 100 Financial Advisors in America. Mallouk graduated from the University of Kansas in 1993 with four majors, including degrees in business administration and economics. He went on to earn a law degree and master of business administration in 1996, also at the University of Kansas. Mallouk is the founder, current executive board member and former five-year chairman of KC CAN!, an organization of volunteers dedicated to improving the quality of life of children in Kansas City. Mallouk has served on the boards of Pathway to Hope, American Stroke Foundation, St. Michael’s Finance Council, Kansas City Hospice and KC CAN. Mallouk and his wife, Veronica, have three children, Michael, John Peter and Gabrielle.


Thank you so much for joining us! Can you share a story about what brought you to this particular career path?

My dad is an immigrant and a physician. When I was a kid we would go to the same place in Colorado every year, and I became great friends with someone I would always see there. My parents got to know their parents, and were fascinated that these people didn’t work, even though they were only about 50. Very young. My dad learned they had been successful savers and investors and so able to retire early. He became fascinated with this idea and we watched him go to the library (yes, people actually used to have to do this to learn!) to absorb all he could. He ended up learning about investing and also found a financial advisor, a lawyer and an accountant. Unfortunately, he also found that, in many ways this made his life more complex. He discovered quickly that many financial advisors are just salespeople in disguise, charging a fee for “advising” a client to buy a high commission product. My father taught me that most people in America end up worse off after working with a financial advisor. Ultimately, those memories led to a passion for delivering financial advice in an honest, transparent way. Over 15 years, my firm, Creative Planning, has become the industry leader at delivering comprehensive and customized financial advice for clients all over the country. At Creative, a client can pay a fee for investment advice and financial planning, but also get tax and legal advice. At the same time, they can get a portfolio tailored specifically for them rather than a model off a shelf. There are a lot of copy cats now, which is not only the greatest form of flattery but also indicative of the fact that Americans are desperate for a service like this.

Can you share the most interesting story that occurred to you in the course of your career?

This is more tragic than interesting but I had a client that saved diligently his entire life and dreamed of gardening every day. He really wasn’t a fan of his job, and our projections showed he was financially independent. His wife kept hounding him to retire but he just wouldn’t do it. He finally did. The next day, he gathered his gardening equipment, set out to the back yard, and immediately died of a heart attack. I have several iterations of this story. We are all so programmed to work, work, work. Especially “successful” people. I am constantly reminding myself, and my clients, that once you are financially independent, you should enjoy your life and those around you as much as possible. Some people love their work — those people should keep working. My dad’s 83 and still a practicing internist. He loves helping patients all day. But if work isn’t fun and you’ve already set aside what you need, take the time to think about why you are still doing what you are doing.

Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?

Early in my career I was asked by a client to serve on a board for a special needs organization. I showed up at the local church for the first meeting, which had already started, even though I thought I was on time. This group was planning a carnival. Having organized many events, I jumped in, essentially taking over the meeting. Given this event was to support families with special needs, I shot down all sorts of ideas, including things like a dunk tank. After the meeting ended, the Chair introduced himself to me and asked me who invited me to the group. We quickly found out that I had actually sat in on the wrong meeting. I had taken over planning a carnival for the local Boy Scout troop! The special needs planning meeting had been in the next room. I’d like to say this was a one off, but I am good for something at least this silly once a year.

What are some of the most interesting or exciting projects you are working on now?

We are rolling out nationally in 2019, setting out to be the first nationally-recognized independent wealth management firm. I think we are on the brink of forcing the entire industry to deliver wealth management in a high value way. I’ve spent the last 14 years getting all the pieces in place for a first class wealth management firm. At over $35 billion in assets, it would appear to many we have arrived. But I feel like we are just setting up at the starting line, ready to take on the big brokerage houses to set the standard for how financial advice should be delivered.

Which people in history inspire you the most? Why?

I am fascinated by people that change people’s lives for the better. These aren’t necessarily the people that invented something, though I am fascinated by them too. Palm and Blackberry came before the iPhone, but Steve Jobs to me is more fascinating because he took the idea and made it accessible in a way that changed how people live. It amazes me how few people, no matter how great their idea, don’t really think about things from the end user’s point of view. Steve Jobs said “People don’t know what they want until you give it to them.” He looked at how to improve quality of life from a future customer’s perspective and worked backwards from there. I’m also fascinated when I read the biographies of these sorts of visionaries, that most had tunnel vision and focused their lives almost exclusively on their ambition at the expense of those around them from employees to family and friends, which I think is a tragic mistake. In many ways, to those that mattered most to them, they failed.

Which literature do you draw inspiration from? Why?

I love a good story, and preferably one that speaks to resilience and overcoming something. There is so much garbage on the news that it helps reset the mind to read more inspirational pieces. I read everything financial I can possibly consume as well. I used to feel guilty if I didn’t finish a book. Now I accept that some books aren’t worth reading. If I don’t enjoy the book or think I’m going to spend a few hours learning nothing, I put it away. I took me over a decade to not feel guilty doing that!

What advice would you give to someone considering entering the space like yours?

It’s a different world than when I really got Creative Planning going. There was no firm in America doing what we were doing with any scale, so it was unique. It still is but we do so much more than when we started and have one thing every client wants: experience. A large independent firm a decade ago was a firm that managed $1 billion in assets. Now I think the number is $10 billion or maybe even $25 billion. The commitment to technology is greater, the resources dedicated to compliance are greater and the search for truly talented people is harder than ever. So my first piece of advice would be to be very well financed and that means having plenty in reserves to sustain a prolonged recession.

You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be?

I think you can solve most of the country’s domestic problems with a few basic changes, and one of those would be ensuring that every kid gets access to a good education. A good education means a kid in the inner city or a poor part of town has access to the same education as a kid growing up in the suburbs or a wealthy part of the city. That just isn’t the case in America and I think it’s the greatest injustice that exists. It then expands into far greater inequities as it leads to a discrepancy in higher education, job security and wages which then impacts the individual’s health and well-being. This then goes on for generations. And society, spending less on education in these areas, pays for it with higher welfare and healthcare costs, a higher crime rate and on and on. It’s so simple, it makes me want to pull my hair out sometimes. But there is no immediate political benefit to fixing this so it doesn’t get done. Given that, I would love to help others set up scholarships to help those simply born in the wrong zip code. My wife and I have funded 150 full ride scholarships for high school kids that are showing tremendous promise that wouldn’t be able to afford college otherwise. It doesn’t put a huge dent in the system, but it definitely helps those 150 families and the generations that follow them. We live in a society where a lot of people that think they hit a home run were born on 3rd base. I know because I am one of those people. My parents immigrated to America — that’s first base. They raised us well, we lived in a middle class neighborhood and I was fortunate to be happy and healthy. That’s second base. And I grew up in an area where I got a first-rate education — that’s third base. None of that had anything to do with me. Helping others at least get to the plate to have a shot is the minimum those of us born on 3rd can do.

Can you share your “5 things I wish someone told me before I became President and CIO”?

  1. The same general rules apply. The stakes are just higher.

People have this idea that when you reach a certain level, people are smarter and think differently. That’s not really the case. It’s still a place where about 10% of the people are capable of creating real progress and value. No matter what level you get to, try to find those people and make sure you deserve to work with them and that they have every reason to work with you. Without them you can buy things and you can copy others but you can’t run an organization that is a true leader in its space. Once you find that 10%, they can take your organization anywhere. Their skills can be put to use where their contributions are magnified many times over. Everyone wins. The organization continues to lead, and the team members know their contributions make a bigger difference.

2. Start with the customer and work backwards.

I found this out early on, but I wish I figured it out on day one. It doesn’t matter how great anything is if the end user doesn’t love it. To make things more difficult, the client often doesn’t know what they want. Some restaurants go under despite a great location, wonderful atmosphere and talented chef because the chef doesn’t get this key point. Ultimately, the client decides what is of value, and the great thing about capitalism is that you find out fast what the end consumer finds is valuable.

3. When hiring, do all you can to get the best and don’t compromise.

My first hires turned out to be so overwhelmingly wonderful, I just assumed it was easy to hire great people. Having hired over 600 people, I consider myself fortunate to have hired wonderful people 99% of the time. But 1% of the time, someone unethical, dishonest or flat out crazy gets through. That 1% can then end up taking 10% of your attention. An owner of a firm that has been around a lot longer than mine once told me that his main goal in hiring is to keep the bad tail of the social curve away from his firm. Spot on. If you focus on trying to hire the top 10%, not just in terms of ability but of character, you run a much better chance of avoiding the wrong end of the spectrum. Try to never compromise, no matter how badly a role needs to be filled.

4. Focus on people’s strengths rather than shoring up their weaknesses.

All basketball players need to be able to dribble, but there is no sense in trying to turn a 7 footer into an incredible ball handler. Spend your practice time playing to each team member’s strengths. They will be happier and the team will be better off for it.

5. When you change an industry don’t look for cheers from your peers.

By definition, if you are disrupting a space, you are usually doing so at the expense of your competitors. In the independent wealth management space, nearly all the large firms got there by starting with a big pot of money and writing checks to buy other firms. Everyone is happy. At Creative Planning, most of our 30,000 or so clients fired another firm to come to us. That makes for a lot of unhappy competitors. The ultimate compliment though is that while they are complaining, they are changing their offering to more resemble ours, which is ultimately great for consumers. Charles Schwab’s legacy isn’t Charles Schwab, but that there are now many discount brokerages that make it easy for clients to avoid the big expensive brokerage houses. John Bogle’s legacy isn’t really Vanguard. It’s that low cost investing is available everywhere. So while their competitors complained about how they changed the space, ultimately, to survive, they did their best to mimic them. Aristotle said “There is only one way to avoid criticism: say nothing, do nothing and be nothing.” Smart dude.

Some of the biggest names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US whom you would love to have a private breakfast or lunch with, and why?

I’d pick LeBron James and let my boys go in my place, or Taylor Swift and let my daughter go in my place. I’d be the coolest dad for basically forever.

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LinkedIn: https://www.linkedin.com/in/peter-mallouk/