Investment Coaching: Catering to the DIY Investor

One of the great  things about the investment course I’m currently taking is that from time to time, guest speakers are brought in to talk about various concepts of investing.

The most recent guest speaker was Aman Raina, an investment coach from Sage Investors.  You can follow him on twitter @sageinvestors. He delivered an engaging  presentation on capital and the balance sheet. We also went through a company’s balance sheet to determine if it was a good company to invest in.

I enjoyed the presentation so much and was very curious about investment coaching because it was the first time I had ever heard the term.  This may also be the first time you’re hearing it too! So I reached out to Aman via email and asked him if he could do an interview for my blog about investment coaching and the services his company provides.

Here are his responses to my interview questions:

1. How would you describe investment coaching and how is it different from traditional investment advice?

The traditional financial advisor provides ideas, strategies and recommendations regarding security selection for an investor. This advice is often provided by an individual that can be directly or indirectly associated with a financial services organization and as a result, any advice offered can be potentially tailored to the purchase of financial products that may or may not be appropriate for an investor’s portfolio.

A financial advisor is compensated either by charging a flat fee for specific set of services (developing a financial plan, portfolio management etc) or by taking a percentage commission based on the total assets of the portfolio.

An investment coach focuses on elevating an individual’s financial literacy and decision-making capacity through a combination of education and one-on-one real-time mentoring. An investment coach is an independent third-party resource that is not associated with a financial institution nor do they sell or promote specific financial products. An investment coach can be compensated on a flat-fee basis or on an hourly basis.

2. What made you decide to become an investment coach?

In a previous life, I used to work as an independent investment analyst and specialized in providing customized investment analysis and research using the Economic Value Added portfolio to individual portfolio managers and institutional investors. Over time, I came to a realization that this segment, which has limitless access to investment data really didn’t need much help, let alone help from me. The nature of the investment industry is that the institutions will make their money no matter what.

What I noticed over the years is that these institutions were making their money at the expense of individual investors who were essentially talked down to and treated like 3rd class citizens. I was always getting questions by people who were exasperated and confused by the lack of performance in their portfolios and the lack of support their advisors were giving them. Some of the stories were heartbreaking and frankly made me angry and I always thought there has to be a way to help these people. They are working hard and trying to the right things but the system which in its current form should be helping them was not supporting them. After a series of stock market crashes in early 2000’s, investors just became fed up with what the traditional financial advisor model was offering them and were seeking to take control of their financial decision-making.

The emergence in the last 10 years of the Do-It-Yourself class of investor, who is trying to take control of their financial destiny didn’t just happen by accident. This evolution is commendable, however what I ‘ve seen is that this class of investor still needs an avenue and ideally an objective, independent party to bounce ideas and decisions they are facing rather than having someone sell a product to them. They are also seeking a confidante that will not tell them what to do, but can give them tools and emotional support and discipline that can help them make better decisions.

I looked around and realized while there are many people and companies who are defined as “Money Coaches”, it appears the level of coaching is focussed primarily on learning to save and pay debt . There really wasn’t anyone focussing on the investing side which is a huge component in the process of building wealth over a long period.

Personally, I have always found that the concept of investing in stocks to be intuitively and mechanically simple. Buy well-managed businesses that sell products and services people want, create tangible wealth and buy those companies when they are on sale and sell them when they have reached their intrinsic value or a return we are comfortable with. We know the process. The problem is we do a lousy job of executing it because we lack the education, but more importantly the emotional discipline.

I really believe anyone can learn and develop into a successful investor without getting a CFA or an MBA. I believe it can be done with a time commitment, education, and most importantly working with someone who can instill some structure, discipline, and more importantly working with someone who genuinely wants them to succeed. This is where I feel an investment coach can offer value.

3. Could you briefly describe the services your company provides?

We offer 2 streams of investment coaching services. The first stream involves a combination of learning and coaching. We offer these in a monthly module format. For each month, we would undertake the following program.

•  1-2 hours per week of one-on-one tutorials on key investment topics and concepts that are customized to the protégé’s level of investment knowledge and experience. In a one month module, we’ll go over about 4 learning tutorials.
•  Another 1 hour per week of follow-up coaching conversations where we will drill down into realtime investment decisions the protégé is facing. The goal is to leverage the learnings from the learning modules to enhance and improve the protégé’s decision making capability.

For each monthly coaching module, we charge a flat fee. There is no fixed long-term commitment required. You can go month-to-month and come back later on. To gain maximum value out of these learning/coaching modules, a commitment to allocating the time is important. The second stream is involves just coaching conversations. We found that many people, especially the more experienced investors, just want to discuss their personal investing situation only. For this service we charge on an hourly basis.

4. How do you determine what kind of coaching a person needs?

One of things I like about coaching is that each person I work with doesn’t fall into a standard cookie cutter program path. Before engaging in a coaching/learning module or individual coaching conversation, I like to meet briefly either on the phone or in person with a potential protégé to understand their background, as well to gauge their comfort level with investing, their risk tolerance, and finally what financial goals they are seeking to achieve. I also ask every protégé how much time they are willing to commit to learning to invest as ultimately their level of commitment will drive the path in how I develop their education and coaching program.

I should note that I do not automatically take on protégés. In some very rare cases after an initial conversation, I have determined that a coaching program may in fact not be beneficial to them and will suggest other more channels that could provide greater benefit.

 

5. How much of a time commitment is needed to receive investment coaching and is there a lot of homework involved?

In a typical one-month learning/coaching module, a protégé is expected to commit to about 1-2 hours week of participating in a one-on-one learning session along with about an hour per week of coaching conversations. So in a typical month, a protégé will spend roughly 12 hours engaged in learning and coaching conversations. In terms of “homework”, there is some extra research work expected but I try not to make it a chore because if it becomes a chore than it can be procrastinated upon. A lot of it is just reading the newspaper, watching the news or searching online for various investment information, tasks you can do tapping away on your smart phone/tablet while sitting in the subway or lounging at home. These are typical activities you need to do when evaluating investment opportunities.

 

6. The concept of investment coaching is still relatively new to most people and to the finance industry. Do you see it becoming a growing trend in the near future?

Investment coaching is a very new type of relationship, so I realize that a lot of people have no idea it even exists. I do believe that as more people seek to take control of their finances, they will seek to learn more about investing. I know this is true because you can just go to the book store and find endless shelves of books on investing and also on the Internet where there are numerous blogs and web sites which provide great ideas, resources, and perspectives on investing. The desire to learn is there. The problem is the quantity of information can be overwhelming. Working with an investment coach who can help them learn about how to filter that mountain of information can be invaluable, so as more people become aware, I see investment coaching gaining traction.

 

7. What do you enjoy most about investment coaching?

At the end of the day, I want to help people be successful and helping them accomplish something that is important to them. Investment coaching has provided me with a great avenue into achieving this. I’ve had the opportunity to work with people who are so committed to learning about investing and improving their financial street smarts. I’ve gained great satisfaction to working with people who come in with little understanding about investing and seeing them develop to make better more successful investment decisions. The great part is they made it happen! They own it and it is likely to stay with them. They have worked hard to develop their financial competency. It’s great to see people become more confident in their capabilities. I also enjoy the fact that because I’m not tied to any other financial company or affiliate, I can express my ideas and thoughts good or bad without fear of being shackled down. So people working with me know I am telling it like it is.

8. What requirements does one need in order to become an investment coach?

There is no registered certification for being an investment coach, however I would say a good investment coach or any type of coach should possess core competencies such as being able to listen with empathy, an ability to synthesize large volumes of information and articulate them in a matter that a protégé can understand, along with being comfortable with working with people (when you sign up as an investment coach, you’re now in the people business!) as well as being flexible and adapting the coaching/learning program as the relationship with the protégé evolves.

In addition, the investment coach should carry themselves with a high level of professionalism and transparency. Finally, an investment coach should have the obvious proficiency in investing. In my case I’ve done a fair amount of formal school training (B.Commerce, MBA, Canadian Securities Course etc) to develop my investment skillset along with thousands of hours in analyzing and evaluating companies and their stocks. In a way I feel very much like an Outlier. Malcom Gladwell would be proud of me!

9. What advice would you give to someone who is considering becoming a DIY investor and/or considering investment coaching?

The first question I ask potential protégés is how much time they are willing to commit to learning about investing. If they really don’t have the time or couldn’t be bothered with understanding the nuances of how companies create wealth and how to evaluate stocks, but they still want to have exposure to the stock market, then I would create a program that give them the fundamentals of understanding passive investing and more importantly how to be more street smart when interacting with the financial community. If they are indeed willing to put in the time to learn and understand the technical and behavioural intricacies of investing then I would create a different kind of program. Neither path is a bad road to take. The reality is everyone is in a different space when it comes to investing. That would be the first thing someone considering becoming a DIY investor needs to have. They need to have clarity in themselves before moving forward either going it alone or with a counsel like an investment coach.

Readers, what are your thoughts on this new idea of investment coaching rather than investment advising? Would you consider it? Why or why not?

Editor’s note: I have actually filled out a questionnaire and am in the process of scheduling a pre-coaching session to determine a possible coaching program for me.