clients. It was tough, he recalls, but working with Temby helped him learn how to
delegate — something Yahnke now says
has been critical to the firm’s success.
KEEPING COSTS LO W
Dowling & Yahnke’s AUM grew 70%
during the market collapse of 2000-02,
reaching the $1 billion mark in 2006 and
passing $2 billion in 2012, Yahnke says.
Of the company’s five partners, Yahnke
now has major ownership; Dowling, who
works four days a week, is gradually selling his stake to the junior members.
Yahnke attributes much of the com-
pany’s growth to his efforts to keep cli-
ent fees low. One piece of that is what
he calls situational financial planning.
He argues that comprehensive financial
He also keeps costs low through pas-
sive investing. There’s plenty of research
to show it is very difficult to beat a broad
market index over time, Yahnke says. He
began using DFA and Vanguard funds in
the early 1990s. He says he does include
individual securities within the large-
cap portion of client portfolios, however,
both for tax management purposes and
for ease of gifting appreciated assets to
charity, since mutual funds are more
difficult to transfer.
A typical client portfolio would be 55%
stocks and 45% bonds, he says, with the
equity portion including some REITs.
Yahnke puts a premium on liquidity
and therefore avoids illiquid (and costly)
and buying bonds.” Yahnke says he
also continued to rebalance and buy
equities through the 2007-08 market meltdown.
In addition to delegation skills,
Yahnke says he’s had to learn better
ways to hire and train new employees. He acknowledges that, years ago,
he didn’t do a good enough job of
training new hires. The firm’s training
program now includes off-site team
exercises and an extensive on-board-ing schedule, with new employees
shadowing more experienced members of the firm.
In hiring, he says, he just looks for the
smartest people he can find, in addition
to people who have worked in teams
— an athletic team, a debate team, what-
‘I’ve always thought that people charged too much money in this
planning is expensive, requiring broad
expertise — and it’s oversold. Most clients actually just need answers to specific issues, he adds. So one way his firm
keeps client fees low is by focusing staff
energy and staying efficient.
“We don’t do property and casualty
insurance; we don’t do tax returns,” he
says. “We don’t draft legal documents.
If a client has a good attorney, we don’t
dwell on estate planning.” Yahnke works
closely with numerous client advisors,
outsourcing what he can to CPAs and
lawyers. The firm spends much of its own
time on retirement analysis, he says.
Another way to minimize client
costs: Charge lower investment fees.
Yahnke’s fees for clients are 85 basis
points on the first $2 million in assets
under management, 70 basis points on
the third $1 million, and 50 basis points
on anything exceeding that. “I’ve
always thought that people charged too
much money in this industry,” he says.
assets like hedge funds and private
equity. He’s also wary of precious metals: “When my relatives call and ask me
about gold, I know it’s time to stay out of
that market,” he says.
The equity portion of a client portfolio is normally two-thirds domestic
and one-third foreign, he says, with
the domestic portion being 70% large-cap and 30% mid- and small-cap companies. Foreign exposure is generally
85% developed countries and 15%
emerging markets, with developed
countries following the same capitalization percentages as domestic
equities. And in the bond portion of
portfolios, he uses individual munis
as well as bond funds for tax-free fixed
income, and bond funds for taxable
Yahnke says he is a disciplined
rebalancer: “I got fired in 1999 more
than any other year in business
because I continued selling stocks
ever. “I look for people who have worked
in a team atmosphere, who are client-
centric, have integrity and are competi-
tive by nature,” he says.
Jim Grote, CFP, is a Financial Planning
contributing writer in Louisville, Ky.