Pinnacle grows assets 189 percent in six years

SYRACUSE — On May 22, Pinnacle Investments, LLC, announced that James A. Mirabito of Binghamton had moved his wealth-management practice to Pinnacle. “The plan is to open a Binghamton office by the third quarter of this year,” says Michael R. Gagliardi, a senior vice president for branch management with the firm. “Binghamton will be our sixth location, joining offices in Syracuse, Fayetteville, Auburn, Albany, and Buffalo. Our goal in Binghamton is to have two to four brokers and the [appropriate] support staff.”

“I was born in Norwich,” says Mirabito. “I received a B.A. from Syracuse University in 1981 and an MFA from RIT (Rochester Institute of Technology) in 1983. I earned an MBA degree from SUNY Binghamton in 1993 and have lived in Binghamton now for 29 years … I worked at a full-service brokerage house for 20 years, but found a growing conflict between my ability to represent my clients and the company’s focus on its own profits … The ‘agnostic’ model here at Pinnacle lets me work with different vendors who can best serve my clients. There is also a team approach to helping each other rather than the competitive culture at the wire houses.”

Mirabito’s move is reflective of an industry in turmoil. A decade ago, the common perception among clients and brokers was that brokers had to be affiliated with national or large, regional firms. Independent brokers were considered second-class citizens who were sellers or re-packagers of financial products, without access to original research. The financial crisis of 2007/2008 changed everything as some major firms collapsed or were scooped up by banks. Brokers now find a level playing field, and large numbers are moving to smaller firms.

“Pinnacle has benefited greatly from the ongoing turmoil in financial markets,” Gregg A. Kidd said in a Business Journal interview in November 2011. Kidd is the CEO and chairman of Pinnacle Holding Company, LLC and a founder, along with Daniel F. Raite, of the company in 1995. “The financial upheaval of recent years … has driven clients and financial professionals to smaller companies. Pinnacle has been able to hire a number of employees away from larger financial firms … and these people bring their clients with them.”

“Reps [in national firms] have really taken a beating,” says Gagliardi, who began his brokerage career in 1990 and is currently responsible for Pinnacle’s branch development and expansion. “They have to constantly defend themselves to their clients, their firms keep showing up [in unflattering articles] on the front page of the Wall Street Journal, and the big firms are not only cutting their reps’ compensation but also their support staff … [Furthermore,] the big firms are ‘lawyered up’ so that brokers have no flexibility in [areas such as] advertising or writing articles [for publication]. There is little flexibility in what a rep can do. [As a result,] … we are always talking to 25 or 30 reps or teams who are considering leaving their firms and joining us.”

“The industry turmoil fits in well with our plan to be a powerhouse in the Northeast,” says Eric D. Krouse, the CEO of Pinnacle Investments. “It has helped to [propel] our growth in 2006 from $450 million in assets to $1.3 billion today … We now have 3,500 clients served by a staff of 50, including 30 financial advisors.” The Business Journal projects Pinnacle’s 2013 consolidated revenue at $12 million.

Pinnacle’s growth has also been accelerated by a strategic, private financial investment in 2012 from Thomas Smach and Michael Marks. The two investors were instrumental in growing Flextronics Corp. in just 13 years from annual revenue of $93 million to a $36 billion behemoth, with operations in 35 countries and more than 200,000 employees. Subsequently, Smach and Marks joined four other investors to create Riverwood Capital, a private-equity firm based in Menlo Park, Calif. Smach joined the Pinnacle board in 2011. Terms of the investment in Pinnacle were not released.

Growth has not come without a few bumps in the road. In 2010, Pinnacle filed a $1 million claim against multiple parties for fraud, defamation, interference with business relations, violation of FINRA rules, and civil conspiracy. The arbitration panel dismissed the accusations and instead ordered Pinnacle, the claimant, to pay $460,000 for loss of income, interest, compensatory damages, and lawyers’ fees. “Unfortunately, Pinnacle is mandated to settle disputes through the arbitration system where emotion rules, rather than the legal court system where facts actually matter,” responds Krouse. “Sadly, as in other industries, it has been our experience that these arbitration panels see us as the party with the deep pockets. That’s what happened in this case, where the … decision by the panel clearly shows they got it 100 percent wrong on the facts … [Unfortunately,] the decision … [cannot be appealed].”

Pinnacle is organized as the holding company and four other corporate entities: Pinnacle Capital Management, LLC handles asset management, with Joseph Masella and Steven Fauer as CEO and chief investment officer respectively; Pinnacle Investments, LLC functions as a broker/dealer, with Krouse as CEO and Keith Zanders as chief compliance officer; Pinnacle Solutions (Confidential Planning Corp.) is a general-insurance agency with Daniel P. Mody as CEO; and Confidential Planning I, LLC, led by Krouse as CEO, handles retirement plans for schools and nonprofit corporations. Kidd, Raite, and Smach are principals in the holding company.

“Our growth is not limited geographically,” says Krouse. “While we focus on the Northeast, we have clients across the country. Gregg [Kidd] and Dan [Raite] have always had a vision that this could be a national company without losing our focus on what’s best for the clients. It’s critical that we maintain our [corporate] culture where we work together as a team to develop long-term relationships with our clients.”

Pinnacle was recently recognized by Syracuse–based BizEventz, Inc. as being the “Best Place to Work” in its category.

Contact Poltenson at npoltenson@cnybj.com