Advice for those wishing to enter the Investment Management business

Every year I write a related yet somewhat off topic blog near Christmas. Topics in prior years have covered the similarities between driving a stick shift and trading, the discipline necessary for successful athletics and trading, and perhaps my most controversial blog to date—last year’s scathing outlook on the consequences for the economy under the current Canadian political leadership.

This year  I’d like to offer some thoughts for some of the younger readers of this blog concerning what it takes to travel the path of entrepreneurship in any business – specifically focusing on forming a successful career in the financial industry. Obviously, I don’t know all there is to creating a successful business or career in finance, but I certainly can draw from my own path. Success is a personal definition, but I believe that, no matter how you define it, much of being “successful” in any endeavor will come from your mental attitude. With that in mind, I thought I’d draw on a bit of a history on my journey into creating ValueTrend, with its failures and wins. I hope that you will gather from this brief history that it was attitude and drive that ultimately brought me and ValueTrend to where it is today.

I really do believe that the principles of success are universal – and are readily available for anyone to follow and achieve their goals. I realized very early in life that with a floor to your income, there is also a ceiling. I’m a capitalist. I believe in the libertarian concept of individual accountability, working hard, taking risks and reaping the benefits – or bearing the consequences – of the free market. No safety nets, no entitlements. This goes hand in hand with my objections to those who feel “entitled” to take the riches away from the producers in society for redistribution to those who didn’t take the risks and employ success principles.  I hope this “biography” helps some of my younger readers find inspiration that the struggle to become successful in the financial industry (or any business, for that matter) is worth it.

A brief history of time, space, and ValueTrend – with apologies to Stephen Hawking

I’ve been an entrepreneur for most of my working life. At college I had a brief stint in Civil engineering before redirecting into Phys Ed (not finance as you might think). I was a young bodybuilder at the time (another shock for those who have seen my currently skinny cycling body ). I had no money – I rode a bicycle everywhere or took the bus.

But I read a book called “Think and Grow Rich” by Napoleon Hill, and that book convinced me that “Anything the mind could conceive and believe, it could achieve”. This mindset afforded me the courage to approach neighbors and friends to borrow money to realize my dream. I purchased a gym. The gym business changed over the early 1980s, and my little gym was left on the wayside as the big mega-gyms moved into Brampton, Ontario. The closure of my gym left me saddled with debt, and rather shocked at how harsh it can be to run a small business.

But there was a bright side – for according to Napoleon Hill’s book – every failure brings with it an equivalent, or greater benefit. The gym business had taught me to sell. Despite my debt and the failed business, I remained ambitious. So, after sadly closing the gym, I went on to work as a salesman for Titan (Costco’s predecessor). I continued to read books on business, success and motivation.  I worked harder than any other salesperson in the company. At Titan I became their top national salesman.  Titan closed, and I moved on to sell the services of credit and collection behemoth Dun & Bradstreet.

Helping companies work with their balance sheets through tough markets was different from selling $200 gym memberships – or convincing small grocery stores to buy inventory at Titan. D&B clients were sophisticated corporate Controllers and CFO’s. I was a Phys-Ed jock. But I wanted to succeed. The great thing about D&B was their wonderful sales and motivational library. I was by far their biggest user of this resource– and, as at Titan,  I became their top National Salesman for 3 years running. I was ambitious, no stranger to working hard – and willing to do what it took to move me to the top of the field.  Ironically, I started at D&B on Black Monday in 1987! Perhaps this was a sign that the investment industry was waiting for my entry. This was my introduction to the world of finance – an awakening experience that differed vastly from my experience in running a gym or dealing with the wholesale crowd.

The making of an Investment Advisor

I left D&B to briefly try my hand at running a sales and motivational material distribution business. I sold training programs by Bob Proctor, books and tapes created by Tony Robins and Brian Tracey. While running this business, I met a stockbroker (Investment Advisor) at a party in 1989. I was already investing a little, and asked him questions about the field. Before you knew it, I was in his managers office – who subsequently offered me a job as an Investment Advisor with McConnell & Co in 1990. I should point out that this position was 100% commission with no salary, benefits etc. I accepted his offer.  I’ve always believed in capitalism – and working for commission with no safety net is the purest form of the free market economy. You get paid what you are worth, and nothing more – but nothing less either.

Applying the same principals and ambition that I had exhibited in the past – I plunged into the investment business. The brokerage business is a hard one to start as a rookie. Who invests with the new guy? I was also with a small independent firm—no bank or big brokerage to feed me new clients. I worked 70-80 hours a week, spent thousands of dollars on auto expenses, new suits, educational upgrading, etc. My wife wasn’t working, and we had a new baby at home. I only made $6000 in total that first year – and spent about 5 x that in expenses. We almost lost our house – it was stressful, and my wife almost begged me to get a stable job. But I survived, and eventually I began to land clients.  Suddenly, McConnell folded! Talk about luck… I was just starting to make headway. Thankfully, Midland Walwyn took a chance to hire me and transfer my business to their firm. I began making money. What a joy to pay off my debt and avoid potential financial demise!

Eventually, Midland Walwyn was bought by Merrill Lynch, and later again by CIBC Wood Gundy – where I became a Vice President. I got my CMT (one of the first 40 people in Canada to hold the designation) and created the ValueTrend Managed Equity Platform in 2007. I eventually left Wood Gundy – leaving behind several hundred thousand dollars in shares   – to start my own firm – ValueTrend Wealth Management. I had to leave a secure job, well over a quarter million in shares that had been part of my compensation (so long as I stayed with the firm) and convince clients to come with me to run my own business – one without a bank behind me. It was a worry that clients might not want to leave the bank, and I would fail in this endeavor. And it cost me lots of personal money to set up my own shop—not just in what I left behind at Wood Gundy. Another sacrifice, another risk with no assurance of success, more hard work and long hours. Are you starting to see a pattern here?

A capitalist despite it all

My mother and father were liberal voting, left-leaning people- as are most of my family, with the exception of my younger brother. My dad was a high school teacher. Coming from this background, one would think that I would have been influenced to seek out a “safe”, salaried position, never putting my family’s income in danger. You know—the job where you work 9am – 5 pm with a salary, and maybe get an increase periodically . Perhaps you will advance to a supervisory position. You retire after 25 or so years with a pension. Safe, and secure. Nothing wrong with that – for other people.

A couple of years ago, one of my two left wing siblings was discussing my business success with me. I was called “lucky”. As in – I hadn’t had an alcoholic father who beat me, I never lived with a single parent in a trailer park or ghetto, I had good nutrition and a stable environment, was able to finish high school and go to college.   A privileged white male coming from middle class suburbia  – that’s why I was successful. While I acknowledge my stable middle class upbringing as helpful, it doesn’t change the fact that the middle class lifestyle breeds more of the same for most of us. Not that there’s anything wrong with that – but I wanted something more. Success is dependent on taking the risks, often in starting businesses– failing – then  getting back up. Rather than going the “safe” route, I was on the path to do what I wanted in life. What I wanted out of this business would require bypassing a guaranteed salary, and working for 80 + hours a week looking for clients to give me a chance. I did this with no second income by my wife to support my family. Talk about having your back against the wall!

I took a long term vision on staying away from the lucrative business of selling mutual funds in the 1990’s when my fellow Investment Advisors were raking in the dough selling them. I needed that income badly – but I wouldn’t sell funds.  My convictions prevented me from selling them. Ayn Rand’s book “The Fountainhead” rings a bell with me for that part of my life. To understand the idea of principled convictions, read it if you haven’t already.

I committed to improvement through hours of study – courses, books, lectures, laptops, trading software and research services – when others around were selling mutual funds and playing golf in their spare time. I spent weekends away from my family to learn technical analysis, study my CMT, and write a research paper for accreditation, even making sales calls between classes! For whatever success I’ve had in this business – it was not luck that gave it to me. It’s for this reason that I have made a point of supporting political leaders who favor a free market economy and self-reliance. I do not endorse the current left wing government’s ideals of entitlement and high taxation of success. Below is a shot of me meeting Alex Nuttall (MP for Barrie, Springwater and Oro-Medonte and Barrie) and Member of Parliament Maxime Bernier.

Starting in the investment industry

If you plan on getting into this business today, you won’t have to face the hurdles I faced. These days, the banks will hire a new Advisor, give them a salary, and even feed them new leads for clients.  And I think that’s a shame. They’ll grow their book of business much easier and quicker than I did. But they won’t build something unique, they won’t hunger to improve. That’s because they won’t need to – their backs aren’t against the wall.

My advice for those who want to get into this business and to do something special– do it the hard way. Study and become an analyst through the CFA or CMT programs. Create a trading system that is unique based on a style you develop through hard study and practical application. Don’t just sell a solution made by “Big Brother”. Become the solution. Get to know people in the industry and ask them to share their knowledge. Do right by your clients, and forget about your income. Stick to your principles. Do it the hard way. It will pay off.

Read the Fountainhead and Think & Grow Rich! You may have to start off with a bank firm – and that’s OK. But to do something unique, you will have to develop a unique trading plan—and avoid their in house products or mutual funds. Don’t drink the Kool-Aid.  Eventually you have to leave the nest of the bank if you want to do something that you will be remembered for – but it’s a great place to start.

If you don’t want to do anything special – there is nothing wrong with going the traditional path of an Investment Advisor. Stay at the bank or big firm, gather their clients and put their money into the recommended list of stocks, mutual funds or their in-house managed products. Work for 25 years. Collect your employee share plan or bank shares over that career, and look forward to your pension. Retire and be another long-forgotten Investment Advisor who had nice relationships with clients, and passed their book of business on to an incoming rookie within the bank. That’s okay. But it’s not the path of the entrepreneur who wants to make a difference. I suspect that the younger readers of this blog are independently minded – that’s why you read this blog. You want to learn, and to grow. You want to trade and prosper rather than put your brain in park and buy some mutual funds.  For those considering a career in the investment business, I believe that your current study of technical analysis says something about you, and your individuality. I salute you.

To all of my readers – 

I really appreciate that you read this blog, and I love the comments and discussion that is created from it. We live, we learn, we grow together though this type of medium

All the best in 2017.

Keith on BNN’s “MarketCall Tonight” Friday Dec 30^th 6:00pm

Phone in with your questions on technical analysis for Keith during the show. CALL TOLL-FREE 1-855-326-6266. Or email your questions ahead of time (specify they are for Keith) to [email protected]