CNY Business Journal Spotlights Pinnacle's Remarkable Growth

August 02, 2013


On May 22, PinnacleInvestments, 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-servicebrokerage house for 20 years, but founda growing conflict between my ability torepresent my clients and the company’sfocus on its own profits ... The ‘agnostic’model here at Pinnacle lets me work withdifferent vendors who can best serve myclients. There is also a team approach tohelping each other rather than the competitive culture at the wire houses.”


Mirabito’s move is reflective of anindustry in turmoil. A decade ago, thecommon perception among clients andbrokers was that brokers had to be affiliated with national or large, regional firms.Independent brokers were consideredsecond-class citizens who were sellers orre-packagers of financial products, withoutaccess to original research. The financialcrisis of 2007/2008 changed everythingas some major firms collapsed or werescooped up by banks. Brokers now find alevel playing field, and large numbers aremoving to smaller firms.


“Pinnacle has benefited greatly fromthe ongoing turmoil in financial markets,”Gregg A. Kidd said in a Business Journalinterview in November 2011. Kidd is theCEO and chairman of Pinnacle HoldingCompany, LLC and a founder, along withDaniel F. Raite, of the company in 1995.“The financial upheaval of recent years... has driven clients and financial professionals to smaller companies. Pinnaclehas been able to hire a number of employees away from larger financial firms ...and these people bring their clients withthem.”


“Reps [in national firms] have reallytaken a beating,” says Gagliardi, whobegan his brokerage career in 1990 andis currently responsible for Pinnacle’sbranch development and expansion.“They have to constantly defend themselves to their clients, their firms keepshowing up [in unflattering articles] onthe front page of theWall Street Journal, and the big firms are not only cutting theirreps’ compensation but also their support staff ... [Furthermore,] the big firms are‘lawyered up’ so that brokers have noflexibility in [areas such as] advertisingor writing articles [for publication]. Thereis little flexibility in what a rep can do. [Asa result,] ... we are always talking to 25or 30 reps or teams who are consideringleaving their firms and joining us.”


“The industry turmoil fits in wellwith our plan to be a powerhouse in theNortheast,” says Eric D. Krouse, the CEOof Pinnacle Investments. “It has helpedto [propel] our growth in 2006 from $450million in assets to $1.3 billion today ... Wenow have 3,500 clients served by a staff of50, including 30 financial advisors.”The Business Journalprojects Pinnacle’s 2013consolidated revenue at $12 million.


Pinnacle’s growth has also been accelerated by a strategic, private financial investment in 2012 from Thomas Smach andMichael Marks. The two investors wereinstrumental in growing Flextronics just 13 years from annual revenue of$93 million to a $36 billion behemoth, withoperations in 35 countries and more than200,000 employees. Subsequently, Smachand Marks joined four other investors tocreate Riverwood Capital, a private-equityfirm based in Menlo Park, Calif. Smachjoined the Pinnacle board in 2011. Termsof the investment in Pinnacle were notreleased.


Growth has not come without a fewbumps in the road. In 2010, Pinnacle fileda $1 million claim against multiple partiesfor fraud, defamation, interference withbusiness relations, violation of FINRArules, and civil conspiracy. The arbitration panel dismissed the accusations andinstead 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 arbitrationsystem where emotion rules, rather than the legal court system where facts actually matter,” responds Krouse. “Sadly, asin other industries, it has been our experience that these arbitration panels see usas the party with the deep pockets. That’swhat happened in this case, where the ...decision by the panel clearly shows theygot it 100 percent wrong on the facts ...[Unfortunately,] the decision ... [cannotbe appealed].”


Pinnacle is organized as the holdingcompany and four other corporate entities:Pinnacle Capital Management, LLC handlesasset management, with Joseph Masella andSteven Fauer as CEO and chief investmentofficer respectively; Pinnacle Investments,LLC functions as a broker/dealer, withKrouse as CEO and Keith Zanders as chiefcompliance officer; Pinnacle Solutions(Confidential Planning Corp.) is a general-insurance agency with Daniel P. Mody asCEO; and Confidential Planning I, LLC, ledby Krouse as CEO, handles retirement plansfor 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 onthe Northeast, we have clients across thecountry. Gregg [Kidd] and Dan [Raite]have always had a vision that this couldbe a national company without losing ourfocus on what’s best for the clients. It’scritical that we maintain our [corporate]culture where we work together as a teamto develop long-term relationships withour clients.”


Pinnacle was recently recognizedby Syracuse–based BizEventz, Inc. asbeing the “Best Place to Work” in itscategory.


Contact Poltenson at [email protected]


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