INDEPENDENT INSIGHTS Market insights from an independent perspective


January 8, 2019

Kevin Karpuk CFA

“If words of command are not clear and distinct, if orders are not thoroughly understood, then the general is to blame.” - Sun Tzu
But who is to blame in the case of multiple generals – or no leadership at all? Investors splitting their assets amongst different advisory firms is a behavior long observed with high net worth individuals, but it is becoming more prevalent in institutional accounts. Nobel Prizes have been awarded for research into the benefit of diversifying investments but hiring different firms to compete with one another inside the same pool of assets can be counterproductive.

We have long heard private clients say that they can manage assets spread across different investment houses by using their “gut”. There are no legal repercussions to this, but how often can it produce an efficient allocation of resources? Those with responsibility for managing the assets of institutions face a higher hurdle than individuals managing their own assets. Fiduciary canon does not mention the concept of making the right decisions; instead, the law requires fiduciaries to make informed decisions with personal liability owned by those who fail to do so. Without a central reporting hub, how can someone make knowledgeable decisions?

The list of drawbacks to a portfolio lacking cohesive leadership include deficiencies in the following areas[1]:

The chart above does not account for one of the direst consequences of having multiple consultants: competition with one another. Whether consciously or not, the consultants understand that you are measuring their performance against one another. Their motivation, which otherwise would be to act solely in your interest, is now split and outperforming the other firm becomes a secondary concern. While competition sounds good in theory, it can lead to risk taking that is not aligned with your best interests.

We advocate for a robust search process for investment consulting services. Partnering with a firm that is aligned with your investment philosophy can lead to a successful relationship. If your process leads you to retaining multiple consultants, remember that even the greatest leaders in history have had an aide de camp whose role it is to gather & synthesize information and serve as trusted counsel. Unless you are an investment professional, it is difficult to ascertain your situation independently with any level of confidence.

As always, thank you for taking the time to read this piece. If you would like to see our quarterly infographic on the markets, it can be found here. We wish you all the best in 2019 and look forward to speaking with you soon.

[1] For the sake of brevity, we make a supposition that the reader can infer the importance of these deficiencies; however, if you would like more detail, feel free to contact us directly.


Kevin Karpuk, CFA Chief Investment Officer

Kevin is Cornerstone’s Chief Investment Officer and is involved with the firm’s Investment Policy and Strategic Planning committees. Kevin joined the company in 2000 after graduating from Lehigh University with a B.S. and M.S. in Economics and earned his CFA charter in 2005. Kevin and his wife Kat support many charitable causes and have established a donor advised fund to propagate their philanthropic interests. They live in Bethlehem with their two cats: Zola and Charlyne, enjoy woodworking, gardening, reading and travel. Kevin is the proud uncle to many nieces and nephews and loves spending time with and spoiling them.

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