Beginnings
Enter Savant.
The firm was founded in 1986 by Muldowney, an insurance salesman suffering a bit of cognitive dissonance over the stuff he was selling and the real advice he wanted to be giving. The second-to-last child in an Irish family of seven kids, Muldowney had been a biology major in school with his sights on an M.D., working his way through school. (At one manufacturing job, he was involved with the “smart hinge” for the tailgates of station wagons.) During his internship in Swedish American Hospital in Rockford, however, Muldowney found himself running to the bathroom with dry heaves at the sight of blood, he says. He switched to finance and entered the workforce in 1974, just as the economy laid an egg. The warm embrace of the insurance world opened to him.
Muldowney recalls of the insurance recruiters: “They told me I was charming, that I was articulate, that I was handsome, that I was smart, that I would be a leader in the industry and lead agencies and be a revolutionary change to the world and that I would be tall,” he says.
He thrived at it, but when it came to selling insurance products, he came to the nagging realization clients didn’t keep them, and maybe that was a sign the selling culture had gone too far. His mentors said this about fiduciary scruple in the insurance world, “Do as I say, not as I do.”
He started a soft launch of Savant in 1986; the original model was to sell unbiased financial plans but not implement them, at least until he teamed up with Brent Brodeski in 1993.
The young, ambitious Brodeski had come out of academia with an MBA wanting to spread the gospel of asset allocation (for too much zeal, Brodeski had found himself fired from his previous job). These were the years just after Harry Markowitz won the Nobel prize for economics for contributing to modern portfolio theory. Like many advisors in the early 1990s, Brodeski wanted to get investors out of the trading (i.e., gambling) habit and into the new religion.
“We really kind of looked at what was going on in the institutional world,” says Brodeski. “Asset allocation was kind of a strange concept. It had just won the Nobel prize, but really practitioners weren’t using it.”
Brodeski and Muldowney rebooted Savant as an investment firm that would implement plans, not just write unused prescriptions, as Brodeski put it. The firm remained a boutique shop for a good number of years, Brodeski says. He was the analytical numbers guy. Muldowney was the larger-than-life storyteller—the charismatic client magnet. They were later joined by third principal Dick Bennett, a veteran of the trust world.
Around the year 2000, they decided to grow beyond the boutique into a “Mayo Clinic,” model—using teams of specialists and experts rather than one “doctor” for each client. The approach allowed the team to grow to just over a couple billion dollars in 10 years, he says.
That would be impressive enough if it weren’t for the fact they were doing it in Rockford, a city not on the grow—a place that has in fact been ranked on Forbes’ most miserable cities list after manufacturing left it to years of decline.
“We took lemons and turned them into lemonade,” says Brodeski of Rockford. “The competition primarily collected clients on the golf course, did not do financial planning, charged excessive fees, ignored taxes and failed to serve clients in a fiduciary capacity. We responded by delivering a far more robust value proposition that included comprehensive advice, eliminated conflicts of interest, focused on an evidence-based investing strategy, recognized the importance of minimizing taxes, eliminated unneeded speculation and approached marketing different.”
That reputation preceded them as they moved on to clients in Chicago, Madison and Milwaukee and eventually set up satellite offices, he says, building relationships across the client spectrum, though they concentrated somewhat on physicians, business owners and retirees.
Sink or Swim
It wasn’t enough for the future, though. A few years ago, Brodeski says he attended a seminar of professional services firms. One lecturer said that if a business wasn’t growing at 15% a year, it was dying. His own team had hit 15% annual targets easily, but there was no way they could keep it up, he realized.
“As we got bigger, 15% growth became a bigger number, [also] we were getting busier and busier managing our team and managing existing relationships.”
The three guys just bringing in people wasn’t going to work anymore, not to put too fine a point on it. The firm was going to go gray. Mergers became part of the calculus, and that’s when the Monitor Group came over the horizon. Both Savant and the Virginia firm were part of the Zero Alpha Group, an industry study group made up of like-minded, fee-only firms focused on passive investing, co-founded by Brodeski. Kautt joined, and after talking for years with Savant, they all realized their visions and cultures were similar.
“Our firms were almost mirror images,” Kautt says.
McLean, Va., Monitor’s home, was only about an hour away by plane and would serve the purposes of a disciplined hub-and-spoke model for Savant.