One afternoon in 1984 while lying on his couch and flipping through a newspaper, Ken Solow saw a job advertisement from a major financial firm that claimed employees could earn $50,000 a year. Skeptical, he called the number. “Can you really make that much?” he asked. When the man on the other end of the line confirmed it, Ken was intrigued. “If you’re looking for an expert in finance and investing, keep looking. But if you want someone who knows how to sell, I’m your guy,” he said. He was hired shortly thereafter.
It was a surprising turn for the young man. While he had majored in marketing and finance at Towson State College (now Towson University), his passion had always been for jazz. “I was a musician. I played drums — if drummers can be called musicians.” His hobby had taken him to gigs throughout his native New Jersey, and he earned money along the way to pay for school. Most of his friends chose to attend Towson, because it had a renowned jazz ensemble, and so Ken did the same. However, his practically-minded mother wouldn’t let him major in music. “And that’s how I ended up in finance,” he laughs.
He was indeed able to make a nice living at the large financial company, and discovered that he enjoyed the field. He also made two important connections among his coworkers — Dwight Mikulis, the firm’s planning manager, and John Hill, a fellow financial planner. “When I showed up at the office for my first interview, they walked me down the hall to meet this geeky-looking guy with Coke-bottle glasses. That was Dwight. A couple years later, this other guy who was a manager at a carpet company came in to interview for a job. That was John.”
The three young men connected immediately, and often met after work to talk shop. “We would go to this local restaurant called the Sea Galley, where we traded war stories and drank too much. We were completely obsessed with the business.”
Over time, they also shared their growing concerns about the company they worked for. “There were clear conflicts of interest with the way things were run. We felt pressured to do things that we didn’t think were always in the best interest of our clients, and that didn’t sit well with us.” John wanted to leave the company and start his own financial advisory — one based on fees and not commissions. Ken agreed, and so they struck out on their own. A year later, Dwight joined them, and in 1993, Pinnacle Advisory Group was born.
The early days of Pinnacle were challenging, particularly when it came to money. “When you get paid in commissions, you can make a lot if you close a sale. But if you get paid through fees, you have to build up an entire book of clients before seeing any significant return. It was a little intimidating when we left the old model. But once we had a client base built, we experienced this incredible freedom. We no longer had to sell, we just needed to focus on serving our clients. That’s what we had wanted.”
The business grew steadily through the rest of the decade, but by 2000, Ken was growing disenchanted with establishment investment methods. The old strategy of Buy and Hold investing worked when the market was in a long-term bull market, , but failed utterly during long periods of decline. The market crash of 2000-2002 sealed it for him. “We had the crushing realization that diversification wasn’t the only thing you need to manage risk. The Efficient Market Hypothesis was clearly wrong.”
After a great deal of research, debate, and soul searching, Pinnacle left Buy And Hold investing behind, and shifted over to Tactical Asset Allocation as a more effective means of managing client portfolio risk. At the time, it was not a popular move in the industry. “When we turned Tactical, there were no resources and no-one to encourage us. The industry was stuck, and anyone tempted toward Tactical Asset Allocation was derided as a ‘Market Timer.’”
When the market collapsed in 2008, Pinnacle’s new strategy paid off, and client portfolios were protected from most of the carnage. Knowing that his own experience would be beneficial to other advisors, Ken decided to write a book explaining both Pinnacle’s reasons for embracing Tactical Asset Allocation and the firm’s method for staying ahead of the market. “I didn’t know how to type, so I took Mavis Bacon’s online typing course for a few weeks. When that was finished, I started writing, and worked on the book from 10pm to 2am every night.” The result — Buy and Hold is Dead (Again): The Case for Active Portfolio Management in Dangerous Markets — was published in May 2009.
Since then, the popularity of Tactical Asset Allocation has grown, along with dissatisfaction over the investment establishment’s Buy And Hold approach, and Ken is happy to have played a significant role in that ongoing paradigm shift. These days, when he’s not speaking or writing, he spends his time with Chief Investment Officer Rick Vollaro and Pinnacle’s Investment Team as they continue to guide client portfolios through the tumultuous market. “I experience huge satisfaction in watching the investment team,” he says. “I remember when they were finding their way as newcomers in the business. Now, they’re as good as it gets. They could go up against any analyst in the country.”