Building Wealth and Rendering Value via Identifying Long Term Investment Demand Trends with KAM South front man, Christian Koch

Questions and answers with Christian Koch of KAM South in Atlanta, GA for Performance 360, a new book to be distributed by Ingram Books nationwide in early 2016.

Christian Koch of KAM South in Atlanta, GA

Christian G. Koch, President and sole owner of KAM South, is a long-time investment manager and recognized equity research industry leader. On the heels of publication of the successful best-seller, Get in the Game, Koch is interviewed here in advance of the publication of Performance 360 by Ingram Books:


PERFORMANCE 360: The branding concept and mission of your firm KAMSouth “We Build Wealth.” How did you come up with that and what does it mean for you and your clients on a day to day basis?

KOCH: What I do as an independent private wealth advisor runs counterintuitive to everything I learned in business school about modern portfolio theory, which tells you to be diversified. We do the opposite, running concentrated portfolios. A traditional equity mutual fund company may own 300 stocks in a diversified portfolio, but if 100 go up and 100 go down and 100 do nothing, you haven’t moved the needle. The way I invest for my clients provides a true alternative to mutual funds. I may own only 30 stocks, which I feel over time is the best way to build wealth – less diversification and more concentration. In the traditional investment management business, there are two distinct camps. The first is the mutual fund industry, which is kind of a Big Brother, managing all the money for 401(k)s and pension plans. The other side is the financial planning industry, where planners help individuals plan for retirement but don’t actively manage their money. They usually outsource that decision to a third party. My business strategy is focused in the middle of these two camps that usually don’t communicate with each other. I’m rendering value by actively managing concentrated portfolios and also helping individuals make optimal decisions on their retirement. Working from that sweet spot in the middle can really improve a client’s financial situation because I can offer both investment management and planning.


Do you see wealth and success just in monetary terms, or do those concepts have meaning to you (and your clients) beyond just dollars and cents?

What I’ve found in my practice is that one of the most powerful motivational factors in people’s lives is not money, but the opportunity to learn more, take on more responsibilities, contributing to the lives of others and being recognized for their achievements. That’s more important than the total in our bank accounts. For me personally, I think true wealth comes from having a clear purpose in life, getting that vision right. If you have the right purpose and vision, financial wealth will follow. A lot of people come into my office without a clear vision of what they want, just some sound bites they heard on CNBC, from Suze Orman or a book they read. They’ve implemented a little of this and that but are left with a mess – no strategy or consistency. It’s important to have a plan and consciously stick with it, because there’s a lot of uncertainty in life. My role is to help people see clearly, using financial instruments to navigate through the fog. In the chapter I wrote for the book Soul of Success, Vol. 1 called “Five Simple Rules To Sharpen Your Thinking,” I discuss my unique retirement planning process: 1) Develop a Retirement Vision; 2) Build the Optimal Retirement Portfolio; 3) Focus on Retirement Distribution Strategies; 4) Estate and Wealth Transfer Planning. That’s the framework that helps them think about key financial decisions and the various dimensions of retirement planning.


Tell me about your background and what you were doing in the years before launching KAMSouth in 2011? What led you to think you could be successful with your own firm? What did you do to ensure that would happen?

I started my career as a security analyst with Lindner Funds, a large mutual fund company in St. Louis, researching companies to purchase for the portfolios in the areas of technology, energy and banking. I later took a position as managing director for Trusco Capital Management, where I was in charge of technology research. I went on to Harvard Business School – but even before that, I had always had an interest in starting my own firm. The simple answer to why I thought I could be successful is that I don’t know how to do anything else! My experience at Harvard gave me the toolbox to implement a lot of strategies involved in setting up a business. One of the things I learned from my professor Clay Christensen, who wrote “The Innovator’s Dilemma,” was that if you want to be successful, you need to start by attacking the lowest end of the market. Atlanta is a very competitive market for financial services. Taking Christensen’s ideas to heart, I started teaching retirement classes in Athens and Newnan, Georgia, which are smaller cities east and west of Atlanta. My strategy was not to go head to head with large firms in Atlanta, but to begin in smaller areas where I built a solid clientele. Then I started “attacking” Atlanta, and I’ve been very successful.

I think my confidence comes from beginning my career in the   equity research area which is the intellectual property of the investment management business. While most advisors start as brokers or insurance salesmen, I learned how to understand what a good investment was, without ever having to learn or undo bad habits. What I’ve seen in the last 20 years I could dovetail into a specialization based on understanding and identifying long term investment trends. I ask myself, “What are some large macro trends that are good for investments in the coming years?” As an example, ten years ago, I researched power management semiconductor chips, which became the cornerstone for laptops and cell phone batteries. A lot of the companies I identified as being great long term investments were so successful that they were later acquired by larger companies. This means increased wealth for my client portfolios.


Why did you decide to focus on retirees and pre-retirees? What is it about their unique needs which meshed with your evolving life purpose?

They’re at the intersection, five or ten years from retirement, where they’re seeking out wise counsel and guidance and realizing that they’re going to need a strong financial plan for when the time comes. During pre-retirement, my goal is to get them to make choices in resource allocation while helping them reduce their tax liability. Most people don’t understand, for instance, that 401(k)s are joint bank accounts with the government. This is the perfect age to start planning flexibility and opening doors so when the time comes they can execute what we implemented back in their early 50s. On a personal level, I really enjoy teaching individuals how to think and helping them navigate the process, taking the proper actions now and charting the right course for the future.


Tell me about your focus – and the conscious decision you made not to be a generalist?

Within the financial planning industry, I would say that 90 percent of financial planners are generalists, meaning they do it all – financial planning, planning for college education, budgeting and investments, insurance, estate planning, etc. I think trying to do everything is an ineffective strategy. I realized early on that if I could focus on the sectors I knew better than most, which were banking, energy and technology, and could offer an total return investment strategy tied to helping individuals with retirement – that focus was my best bet.


Let’s talk about Specialization. You use a two part strategy that involves 1) understanding long term investment demand trends and 2) unique retirement planning, helping others with tax efficient withdrawal strategies for retirement.

I’m on the line and responsible for these individuals and families. What I try to do is think about long term trends I can take advantage of – not the short term “hot stock” of the day. I map that out and invest accordingly. Right now, I’m looking at Brazil. In the short term, even with the Summer Olympics in 2016, there are a lot of negative issues and a declining economy. But over the next ten years, I see Brazil’s economy as a huge growth engine and driver for the world. I’m researching what companies look attractive and what investments are available. I just started researching Embraer SA, a small jet manufacturer. The company appears to have a sustainable competitive advantage because there are only a few companies in the world that can manufacture commercial jet aircraft. This goes back to the confidence it took to starting my firm. I’ve always been comfortable having a unique perspective, and enjoy explaining to people why investments out of favor now may be part of an upward trend ten years out. I put people’s capital to work not based on this year or next year, but what the growth outlook should be in ten years. I put the macro ten year trends together with the micro, which is the client coming to me before retirement age and helping them with their present investment allocations. I work with various dimensions of their micro details, helping them improve their financial position. I realize that I have an interesting opportunity to offer both macro and micro services to client so they can benefit from that powerful combination and perspective. As for intangibles, good old fashioned Southern hospitality comes naturally to me, and it helps my clients feel at home very quickly. In the Deep South, that goes a long way towards building relationships with them.


Let’s get back to the concept of Rendering Value, i.e. offering a service of value or adding value.

My goal is to meet the client where they are in that moment and help them understand everything from, say Roth IRA conversions to positioning their retirement portfolio for long-term wealth creation by focusing on risk adjusted returns. Value comes from building a relationship and overtime moving them into the most optimal retirement position. A lot of that involves baby steps. Year One could be a small Roth conversion or a modest retirement portfolio re-allocation. Year Two, we can be bolder. It’s about walking them through the process over time. I feel I render value based on very personalized service. Most financial planners give you a 30 page report with pretty charts and graphs, without realizing that as soon as that planning report is complete it is out dated. I don’t do those, but I am committed to the process, helping them ask penetrating questions and think about various dimensions of their retirement – and to genuinely move the needle and set them up for success. One way I am hoping to render value beyond my practice is authoring chapters in business books. My first was in Get In The Game (2015), with a chapter I titled “Follow The Leader: The Ideal Investment Strategy.”


What was a defining moment to you when you realized that KAM South was a success?

I see my own success as a direct extension of my clients’ success. I genuinely like every single one of them and love to see them fulfilled from a financial and gratitude standpoint. These deep personal relationships I have are very fulfilling. I started this business from my home, so the defining moment for me was when I leased my office space in this Class A building in Atlanta right near the new Braves baseball stadium. Having the confidence to sign that five year lease was a huge step. I’ve tried to create a peaceful, quite research type of environment.


When people talk about success, they usually don’t mention the word “Failure.” But you’ve said that it’s a critical element on the road to success.

I think failure is the single most important element to achieving success. To become a Certified Financial Planner, you have to pass a grueling ten hour exam. The first time I took it in 2009, I failed. It was one of the hardest things I ever had to do, redoubling my studying efforts and dedicating another 200 hours so that I could pass it in 2011. Failing it was a galvanizing factor and ensured that I knew the details of retirement planning better than most that pass on the first try. That’s what comes from a total of 500 hours of total studying. That contributed to the confidence in the financial planning strategies I could help create with clients. All that information became a solidified database in my mind. This also became a stepping stone for two other financial designations, Certified Private Wealth Advisor® and Certified Divorce Financial Analyst™ which I completed. So, out of failure comes great success. Out of failure comes the realization of your purpose and a new vision. Then it’s up to you – and only you – to implement it and find the character to move forward towards success.


What about that other “F” word, Fear?

From an investment perspective, I love fear and uncertainty. They create opportunity and entry points to invest. . Fear equals uncertainty in the market. If I’m using my financial tools to navigate…in terms of building portfolios, that translates to being able to buy a stock at a lower price when everything is going down. I like to use a San Francisco metaphor. Whether you’re dealing with a clear day or a foggy day, nothing has changed except that you have to navigate through the fog. Uncertainty creates opportunity for investment.


To what do you attribute your drive and ambition to be successful on your own terms?

I think I am genuinely a student of the game. I genuinely love the world of investing and work tirelessly to identify these ten year trends. If a certain company fits my profile and hits all the things I’m looking for, I get excited because I know that will help me grow and progress while helping my clients do the same.


If you couldn’t pass along anything of monetary value to your wife and five children, but only “success tips,” what would they be?

Find your passion in life, but more importantly, find your purpose. Don’t be afraid to choose a path that is currently out of favor but will pay dividends in the long-term. For example, during the banking crisis in 2011, I started offering an investment strategy focused only on financial stocks that took advantage of the dislocation in prices. That strategy has done quite well for my clients and is paying great dividends now. I struggle all the time with the best way to pass along my values to my children. I’ve accumulated all this knowledge, but how do you pass on the values to your heirs? My biggest concern is about ensuring that my guidance can help them find their purpose in life. My recommendation would be to take the road less traveled. This makes life’s journey all the more rewarding and progressive.


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