Case Study
Private Wealth

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Situation: When partnering with a professional to manage your assets, you should understand whether you are working with a brokerage firm or an advisory firm. A broker is merely required to recommend based on what is suitable for you at the time of the transaction, whereas an advisor is held to a higher legal standard and is required to do what is right for you on a continuous basis. At Cornerstone, we are an advisor with a fiduciary duty to you, meaning we make your best interests our priority.

One recent situation that highlights the importance of this distinction is a family with a net worth approaching $10 million. Their assets were spread among more than a dozen complex products, each with different fee schedules, all placed by the same brokerage agent. The family had an inkling that something was not right with the situation, but they knew they were not experts in managing investments or creating their own efficiencies. They turned to Cornerstone to help them clearly evaluate and remediate the situation.

Solution: The unnecessary complexity of this family’s investment program created reams of paper seemingly large enough to stop a team of horses. It also challenged our portfolio analysis and design specialists because there was no apparent legitimate planning, tax, or other reason for the prior design. Once Cornerstone’s team was able to dig into the complexities of the myriad of products, they formulated a game plan to move forward.

Cornerstone’s strategy was to consolidate the accounts, reallocate the assets as a household to decrease the tax drag on the portfolio, and negotiate more reasonable fees. Because tax considerations did not allow this transition to happen instantaneously, the lead consultant on the account, along with Cornerstone’s operations team and analysts, continue to have ongoing conversations with the family and their tax advisors.

Results: Since hiring Cornerstone, the family has been able to view their assets more efficiently, have enjoyed cost savings at both the advisory and asset level, and can rest assured that Cornerstone is in regular contact with their attorneys and accountants to maximize efficiency in their investment solution.

By “householding” the accounts rather than managing them all individually, Cornerstone has positioned the portfolio with a focus on after-tax returns. The family now has a better idea of their assets’ performance compared to benchmarks and peer groups, allowing them to discern the value being added through their relationship with Cornerstone. As we do in all aspects of our practice, we leveraged our deep experience in managing an institutional investment process and applied it to this family’s portfolio because it was morally and legally the correct thing to do.