Wealth Management had the opportunity to interview Mike Gill, Portfolio Manager, and the investment committee of Cornerstone Advisory.

Wealth Management: What do you see as the key themes in today’s wealth management business?

Mike Gill: At Cornerstone Advisory, we see three major themes taking place in the wealth management business:

  1. The Rise of Passive Investing

Customers in our business have never been smarter or more cognizant of their investment options. As evidenced by the enormous increase in assets under management at firms such as Vanguard and Blackrock, investors are looking for different avenues to invest in the stock market.

  2.  The need for ‘something different’

Many investors believe that the stock market is expensive, and income generating investments such as CDs and government treasuries do not pay nearly enough in income to be a meaningful portion of a portfolio. However, most investors also do not know how to generate a return outside of traditional investment vehicles.

  3.  The Fiduciary Rule

A fiduciary has the legal obligation to do what is in their client’s best interest at all times. That may sound simple, but it is far from it, and the outcome of the fiduciary ruling will have major ripple effects in our industry.

Cornerstone Advisory was founded in 2006, and since that time we have utilized passive equity investments, devoted a significant portion of client portfolios to alternative strategies, and acted as a fiduciary for all of our clients. We think the wealth management business is moving to a place where we have always been, and we’re well equipped moving forward.

WM: How would you describe the current investment environment?

MG: The current market environment underscores the importance of diversification. The S&P 500 has returned double digits on annualized basis over the last five years. It is hard to see how that trend will continue in an environment where we have low economic growth, stocks are at all-time highs, and the Federal Reserve is slowly raising interest rates.

International stocks, both in developed and emerging economies, have rebounded this year. If the global economy continues to improve, the ability to generate positive equity returns outside of the United States should be in place.

Just because stocks might be expensive does not mean bonds are cheap. As interest rates continue to rise, the price of bonds will fall. For the majority of investors, this will be an entirely new phenomenon. As interest rates fell to zero over the past 35 years, bond returns have been lucrative. We believe this tailwind is likely over.

WM: If stocks and bonds are expensive, where is the best place to invest?

MG: Having the ability to invest beyond traditional stocks and bonds has never been more relevant. Historically, only large institutional investors were able to access alternative investments such as reinsurance securities, private real estate, and farmland and timberland. Today, with the current size and scale of Cornerstone Advisory, we have the ability to use these strategies in all of our client portfolios.

The benefit of these investments is that they have close to zero correlation to the stock market. By that, we mean that the return of these strategies is not predicated on the stock market.

In addition to the alternative investments previously mentioned, we have the ability to embed downside protection into client portfolios as a compliment to traditional equity investing. Doing so allows us to participate in positive market environments, while significantly limiting our downside as markets lose value.

WM: How does the new Fiduciary Rule from the Department of Labor affect your business?

MG: Cornerstone Advisory was founded on the idea that clients deserve the best financial advice possible. That means, when we construct a financial plan or design an investment portfolio, the client’s needs and objectives always come first.

From an execution standpoint, nothing changes for us should the rule pass. We are observing a lot of unease in the industry as the Department of Labor defends itself in court against the U.S. Chamber of Commerce, the Financial Services Institute and the Securities Industry and Financial Markets Association. The industry does not want the government to require it live up to a fiduciary standard. We believe it is the best way to do business.

Cornerstone Advisory is a boutique wealth management firm headquartered in Baltimore with over $1 billion in assets. Recently listed by Financial Advisor Magazine as the #3 Fastest Growing Investment Advisory firm in the United States, we specialize in helping high-net worth individuals, families and institutions build customized investment portfolios focused on diversification and risk management.

Article by: Wealth Management Practice

Womble Carlyle
Sandridge & Rice, PLLC

Copyright © 2017 Womble Carlyle Sandridge & Rice, PLLC. All Rights Reserved.

As always, if you have any questions or would like to have a conversation, please reach out to us or your portfolio manager.


The Cornerstone Team



Disclosure: Cornerstone Advisory, LLC, is registered as an investment adviser with the SEC. The firm only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. Registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability. Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that the future performance of any specific investment or strategy will be profitable or equal to past performance levels. All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals, and economic conditions may materially alter the performance of your portfolio.