Advisor Success Story–Byron Sanders

Byron Sanders offers state-of-the-art financial know-how to firms seeking cutting-edge service.

K. Ehrhart Inc. supervises a success­ful boutique turnkey asset manage­ment program (TAMP) that focuses on serving advisors who want to work with the asset-class allocation provider Dimensional Fund Advisors. The company has nearly 20 clients on board and uses wealth management as an educational resource to recruit new clients and to further the success of those already involved in the program.

As AdvisorPerspectives.com points out, “A TAMP typically provides an advisor with a platform offering a suite of functionality, including manager research and monitoring, fund analytics, asset allocation modeling, and back-office support for trade execution, rebalancing and administration.” These programs are becoming increasingly popular because money managers do not always provide reporting or rebalancing for clients—and thus a lucrative business can be made in providing such utilitarian, but vital, services. What’s more, by providing those services, TAMPs can free up advisors’ time and allow them to focus on cultivating superior relationships with their clients—which, in turn, can help generate additional referrals and more assets under management.

Of course, DKE’s business model is successful in part because Dimensional Fund Advisors is successful too. Dimensional is one of only a few large and successful fund managers that applies modern portfolio theory via asset-class investing. Modern portfolio theory itself grew out of academic research about investing in the 1950s and only really got its start as a real-world application in the 1980s and 1990s. “Our business has evolved with the industry and with money managers such as Dimensional,” explains Sanders, “and our particular profile is in part the result of our historical positioning.”

Indeed, DKE has never dealt primarily with the public. The firm traces its history to 1950, when founder Dale K. Ehrhart began a program of writing covered calls against blue-chip common stocks in individual managed accounts. That covered call program eventually was also used by other brokers on behalf of their clients. This set the stage for the interindustry positioning of DKE.

As the covered call program Journal became less of a factor in the firm’s business, DKE began to capitalize on its relationships with other personal finance firms by offering support in areas such as back-office support, research and portfolio reporting. The transition was supervised by partner Michael T. Hartley—a member of the DKE management team since 1985. Hartley also oversees the firm’s successful family wealth program, with a minimum of $50 million. On an everyday, “hands-on” basis, however, it’s Sanders who ensures that the company’s core TAMP services are in demand and on target. “We’re in the vanguard of this business with Dimensional,” he explains, “and the suite of services and support that we have created is increasingly perceived as a most valuable commodity. That’s a good space to be in.”

DKE also adds value to advisors’ practices by providing their clients with a background in the key concepts of the wealth management business model. This powerful combination of wealth management principles, asset-class allocation via Dimensional, and back-office support and reporting has built a highly credible and in-demand suite of services. “The relationship with DFA is a primary one,” Sanders explains. “But the concept of wealth management itself is also cutting edge. We were introduced to wealth management by CEG Worldwide and saw immediately how it fit into our larger business support model.” The combination has helped generate some $500 million in assets under management, with inquiries from other firms increasing as the model proves its efficacy over time. By educating its industry clients about wealth management and how it can better support their clients by aligning wealth with fundamental values, DKE believes that it allows more companies to offer their individual clients an experience that will rapidly build business via word of mouth.

With market volatility a fact of life in the 2000s, more financial advisors are seeking the client-centric edge that wealth management and asset allocation can provide, Sanders points out. But simply porting over from financial advisory services to disciplined wealth management is no easy task. It demands knowledge of numerous financial disciplines, methodologies that align wealth with values and, just as important, the ability to generate relationships with money managers and possibly asset class advisors such as DFA. The idea behind wealth management is that the financial advisor is to concentrate on one arena—client communication. Every other aspect, including investing, can be addressed by a requisite professional. By removing the professional and technical approaches to financial advisory work, the advisor frees up his or her time for the necessary purposes of client communication and overall handling of the business. ”The concept of acting as the client’s chief financial officer is especially helpful,” Sanders points out. “By seeking to provide the broadest gamut of services, our clients can gain the most control possible, which in turn puts them in a great position to implement the process.”

The DKE equation—involving both asset-class allocation and the implementation of wealth management—would seem to be a winning combination for the 2000s and beyond.

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