Too Big or Not Too Big, That is the Question


September 27, 2019

Thomas Scalici CFP®, CEBS, AIF®

“When you stop growing you start dying.” I have used this William S. Burroughs quote often during my career when communicating the importance of a growth mentality to our organization. When operating with a growth mindset, people believe their unique abilities can be continuously developed and improved upon, and this creates an environment filled with intellectual curiosity, innovation, achievement, and resilience.

That said, growing strictly for the sake of growth, or “breaking even at a higher and higher level,” as my partner Skip Cowen likes to say, is not a fundamentally sound business strategy. In 2018 alone, there were more than $500 billion in assets under management that changed hands between registered investment advisors, with the 10 largest transactions accounting for almost 80% of this number[1]. Like in many industries, the big are getting bigger.

Many of these deals occur to facilitate succession planning or are motivated to achieve scale for strategic reasons, such as better technology, management, and back office support. Many transactions, however, are motivated primarily by bottom line profitability and entity value. This often means eliminating staff and automating customer service, dramatically altering the client experience. Scale often means standardization, and that stifles flexibility and creativity.

Cornerstone operates in a “sweet spot” that balances having the scale and resources to compete against large regional or national firms with being nimble enough to successfully manage change and opportunity in the marketplace. Being nimble, in our opinion, is one of the most important skills we have, and it is something we foster within our organization.

Being nimble starts with building a culture of creativity and innovation. The feedback we get from conducting thousands of meetings per year helps drive new initiatives as we ask ourselves questions like:
  • How do we enhance the services we currently provide to our clients?
  • In what other ways can we leverage our capabilities to attract new clients?
  • How do we improve our internal processes to become more efficient on the quantitative side of our business so we can focus on developing and nurturing relationships, or the qualitative side of our business?
  • How can we ensure that we respond with an appropriate sense of urgency to client requests?
  • How do we continue to differentiate ourselves in the marketplace?
As a 100% employee-owned firm, Cornerstone is committed to remaining independent. Instead of focusing on growth through transactions, we focus on long-term, sustainable growth through innovation and achievement. Our success is rooted in our dedication to client satisfaction, and as we grow, we will continue to place your experience as a Cornerstone client at the forefront. I am honored to lead an organization with this type of culture, opportunity, and mindset.
[1]Source: DeVoe & Company RIA Deal Book™ - Fourth Quarter 2018

Thomas Scalici, CFP®, CEBS, AIF® Chief Executive Officer

Tom is a co-founder of Cornerstone Advisors Asset Management, LLC and Cornerstone Institutional Investors, LLC. He began his career in financial services in 1986 and served as Cornerstone’s CEO since 2002.

Author's Linkedin Profile