Christian Koch, CFP®, CPWA®, CDFA™, RICP®
VETERAN INVESTMENT MANAGER CHRISTIAN KOCH BRINGS FRESH, CUSTOMIZED STRATEGIES TO THE RETIREMENT INCOME PLANNING PROCESS
President/Owner of Atlanta Based KAM South Draws On Extensive Experience As An Equity Research Leader To A Four Step Process System Designed To Build Wealth
In December 2013, Atlanta based veteran investment manager and renowned equity research leader Christian G. Koch was prominently mentioned in a straight shooting Wall Street journal article by Kelly Green entitled “Rethink Your Retirement Income.”
In the piece, which details how many retirees can live well on less than the financial planning industry generally tells them, Koch – who launched his fast growing firm KAM South in 2011 – is cited for helping a 62 year old client, a retired school administrator in Athens, GA, figure out when he could afford to retire. Koch and his client took an unconventional approach, factoring in many “puzzle pieces” – and once they crunched the real numbers, the client was confident that they could meet all of his and his wife’s obligations.
The journalist’s decision to include Koch in an article addressing one of the most important financial issues people face is testament to his vast expertise as an investment manager running a successful and developing firm, his renown as an equity research leader with several decades of experience and a unique array of professional certifications – including being a Certified Private Wealth Advisor (CPWA®), a Certified Divorce Financial Analyst (CDFA™) and Certified Financial Planner (CFP®).
After years of high profile analyst stints with large companies like Lindner Funds, Fifth Third Bank and Trusco Capital Management, Koch began eyeing his future as the owner of his own firm by applying to Harvard Business School. Working towards completing the Advance Management Program, he gained ample skills in entrepreneurship and leadership while studying under world renowned educators in the business field such as Clay Christensen, Michael Porter and Rosabeth Moss Kanter.
Beyond Koch’s many years of experience in the industry and these certifications, however, is the investment process that Koch developed which includes customized portfolios to achieve predictable and sustainable income. Bringing his natural deep-rooted sense of Southern hospitality to make his clients feel instantly “at home,” Koch works to help them develop an investment retirement plan that supports the “de-cumulation phase,” or distribution of money after years of working to accumulate it.
To illustrate how this works, he enjoys using the metaphor of a Mt. Everest climber who spent all of his time and resources planning the climb up but no time planning his descent once he reached the top. Avoiding accidents, or financial troubles, on the “way down” requires a different approach than that of the accumulation phase.
“Our unique retirement strategy focuses on individual securities with attractive interest and dividend characteristics without over-emphasizing fixed income investments,” says Koch. “When we build a portfolio, we do it with individual stocks and bonds, building it brick by brick based on a vision that I and my clients agree upon after an in-depth analysis of their situation. It’s not a one size fits all, ‘hamburgerized’ version for every client.
“From my years of doing research analysis for many major companies, I know many of these large financial firms have these young guys in charge of a couple billion dollars, stewarding mutual funds. Typically, those are too diversified. Within a single 401(k), a person may have 300 stocks and not be aware of what they are. How could you know everything you own? I think it’s a better process to know exactly what stocks you own, which leads to more knowledgeable decision making along the way.”
Koch views the role he plays for his clients as if he is a sentinel/watchman, guarding people from making mistakes and educating them out of the usual “go to” approach of mutual funds, “holding their hands through the process where necessary.”
KAM South’s ability to live up to its branding motto “We Build Wealth” is due to the unique process system that Koch has developed, where each client works within the firm’s unique Retirement Income Planning Process. It’s a process that perfectly marries the portfolio construction research with the human dynamic of shepherding clients through the process of retirement.
Step One is “Develop A Retirement Vision.” In what he calls “The Right Fit Meeting,” Koch works with prospective clients to establish goals and objectives, identify major risk factors like longevity, inflation, rising health care costs and public policy risks. He also discusses trade-offs between investment strategies and does a thorough review of his slate of services.
Step Two is “Build The Optimal Retirement Portfolio” – also known as “Fundamental Bottoms-Up” or building the portfolio brick by brick This phase involves individual security selection (and an agreement to no mutual funds), creating active investment portfolios to exploit asset mispricings and an active management of risks.
“Everything starts with making sure they have a vision that works,” says Koch. “I can’t tell you how many times I’ll ask a husband and wife what their vision of retirement is and the wife will say she wants to be able to afford to visit their three kids each year, while the husband says he just wants to be on a beach somewhere. If their initial visions aren’t aligned, that needs to be discussed. One of the key factors in developing the vision is making sure the client understands the longevity risk. In the current economic environment, cash and bonds yield nothing. I like to use the analogy that if you’re not earning a rate of return above three percent, you’re losing altitude – i.e. you’re losing money faster than you would if you were earning on your retirement savings.
“A lot of individuals are what I call ‘risk adverse,” he adds. “They come in with their money in cash and bonds and don’t understand the negative long term implications of those. Wives tend to be more risk adverse, but the husbands often have pensions that provide stable income, so why not eliminate the longevity risk and increase exposure to stocks? A lot depends on their risk capacity vs. risk tolerance. Risk tolerance is the amount of risk an investor is comfortable taking, or the degree of uncertainty an investor is able to handle. Risk capacity on the other hand is the amount of risk investors must take in order to reach their financial goals. Together, the two help determine the amount of risk that should be taken.”
Step Three in Koch’s process is “Retirement Distribution Strategies,” which involved focusing on “decumulation issues” in retirement planning; asset location; adding value to client accounts using the tax code; and tax efficient withdrawal strategies in retirement.
“One of the keys to creating the perfect distribution strategy is having a plan on how to move your money from say, a 401(k), which is technically a joint account with the government, out to a tax free zone,” says Koch. “The question is, how do you distribute income in a tax effective manner. Most of my clients are pre-retirees and retirees ages 50-70. That age group lends itself to most optimal financial planning strategies, including ROTH conversions, with a lot of flexibility. Once you hit 70 and a half, you have to take a required minimum distribution, so your flexibility becomes more limited. So I really try to work with clients in pre-retirement age so I can help them set up a solid and flexible path. This really moves the needle for them and opens them up to possibilities they had never considered.”
Step Four is “Estate & Wealth Transfer Planning,” involving various considerations connected to this aspect of their financial outlook. For clients who need this, Koch helps them evaluate the income tax, estate issues and other risks to the retirement plan. He also monitors and adjusts steps 1-4 as needed.
“Wealth transfer has to do with setting up different types of trust entities, including revocable and irrevocable trusts,” Koch says. “We work with an estate planning attorney specialist on the development of these. From a transfer perspective, it’s important to determine things like how you own your home. I’m working now with a surgeon who has four homes in different states, each co-owned with a different family member. I’m helping him put all these homes into a revocable trust, so that he’ll have everything in a single vessel, or trust, which is advantageous from a wealth transfer perspective. It’s a way to simplify someone’s financial life while protecting them.”
Estate issues are a personal passion of Koch’s because as an only child growing up in an affluent family, he observed the challenges and complexities his parents faced with their own estate. Another aspect of his professional background that is unique is that he took the entrepreneurial plunge into the financial planning field after many years in research and analysis. He feels this provided him with a more solid foundation in the industry than starting out as a broker for a huge firm selling specific products. He likes to say that he’s glad he learned so much from his early sophomoric mistakes, so that he wouldn’t make them now, so many years later.
“When you have your own firm,” he adds, “you really can’t afford to learn by trial and error. One of the most important things I offer my clients is my seasoned judgment and instinctive ability to avoid torpedoes. That’s what I bring to the party.”
After completing his BBA at Stetson University (where he also played Division I baseball), Koch was hired as a stock analyst at The Lindner Funds, a four billion dollar mutual fund company – where he researched companies (including prominent energy and bank holding companies) to see if they were a good fit for client portfolios. He learned volumes about the stock industry talking to CEOs and CFOs on a daily basis.
Koch was then recruited as an equity analyst in the bank trust department at Fifth Third Bank, where his job involved traveling across the U.S. to deal with businesses ranging from the oil service industry to technology companies like Intel and Oracle. In these years, he began to learn the valuable difference between a “good company” and a “good stock” – and about the dynamic of expectations that go into that analysis. From Fifth Third Bank, he moved to Trusco Capital Management, a subsidiary of Sun Trust Bank, where he was a security analyst for over five years. He was head of their tech research department and dealt with pension funds and endowments.
“I had great opportunities to work as an equity research analyst for top institutional money management firms that gave me the knowledge and confidence in my ability to create individualized personal portfolios to the benefit of my clients at KAM South,” says Koch. “The decision to shift gears and pursue my AMP from Harvard Business School had to do with my realizing that I had learned so much about creating wealth. I thought, if I can put my own money to work and do this well, I could certainly apply what I know to help other people achieve the same. The real intellectual property of the financial industry is on the research side and knowing how to find solid investment ideas year after year. If you start as an insurance agent, broker or banker, and you’re just selling products, you don’t learn enough about “how the sausage gets made” to understand how to create wealth by building diverse portfolios.
“One of the things my clients like is that I’m very approachable an am the genuine article when it comes to being responsible for their financial security as they grow older,” he adds. “My goal is not to become a massive firm but to provide a service to people I truly like working with. I don’t base my success on how big KAM South gets but on how happy my clients are with my services. At Harvard, I learned that there are three kinds of growth, hyper, steady and slow, and by choosing the slow growth method, I am on a consistent, stable trajectory that allows me to bring personal service and value to each client while growing the business in a healthy, productive way.”