This week, my class participants were discussing investment groups.
Many people are members of investment groups, which started out with the very noble intention of creating wealth for the individual members but somewhere along the way, things changed.
Many groups now have to deal with irregular contributions, lack of quorum at meetings, lack of communication, no leadership, no execution, and so on.
What makes one investment group really successful where three others (with people of the same financial capacity) fail or simply do not make any progress?
One of the keys to that answer lies in the difference between reporting to work and going for a party.
When you report to the office, you know what your job is about.
You realise that there are expectations and a certain way you must perform your job.
You know there will be consequences for not performing your role to a particular standard.
You are compensated for performing at your job.
When you go for a party, the expectations are different.
You are there to have fun and socialise.
There are no dire consequences if you decide not to turn up at the party.
There is no financial compensation for coming to the party.
The fundamental reason many groups do not work is because they have not decided whether they are at the office or at a party.
You cannot have both a social and business agenda.
One of them must take priority and structures set up to support that agenda.
Many groups want to arrive at a business-related destination (e.g. creation of wealth) but have set up social structures.
They want to get to the office through a party.
THE PARTY ATMOSPHERE
As we get into the Christmas season, many organisations will hold staff parties.
However, in January, none of them will have internal meetings to start planning the next Christmas party.
This is because the Christmas party is a bonus event and not the main business of the company.
The mistake many investment groups make is to spend significant time, money, and effort in social activities when the main agenda should be investment.
I met a group that was adamant about supporting its group members with school fees.
The problem is they started using money (contributions) that would have otherwise gone into investments to pay school fees.
This was obviously compromising their returns.
The school fees agenda is what the group focused on in meetings, leaving investments as a secondary topic.
This was starting to cause a rift between those who joined this group to create wealth and those who wanted to continue paying fees through this vehicle.
They now have to decide which agenda is going to be prioritised and forge forward even if it means losing some of the members.
If you find your group is keen to stay together simply for social reasons, that is also alright — as long as you are aware you are a social club and not an investment group.
If you want to invest through a group, you can look for another alternative.
An investment group must clarify where it is going.
There must be a single vision that unites everyone.
What do you want this group to do for you?
Do the others want the same thing?
This will determine how the group will operate and even what investments will be made.
There must be that single objective that everyone buys into and a plan to make it happen.
This is what is known as the strategic plan, and this is the process that everyone should be involved in.
Next, this plan has to be executed.
Say you had some shares in one of the companies on the stock exchange.
When they want to do something different e.g. open in other countries, do they consult you and every other shareholder?
I would think not. Nothing would ever happen this way.
When you bought the share, you also bought into the vision and management.
Not everybody in the investment group needs to be in agreement for the group to move forward on a decision.
You do not all have to agree on what share to buy.
A business cannot move forward with 15 CEOs.
Your group (investment company) should have a board that is mandated to execute day-to-day decisions in line with the overall vision of the company.
This board can be elected every year by the shareholders of the company i.e. the group members.
Just as you would not like to see the board of the company you have bought into having its meetings at social venues, neither should yours.
Many investment groups have their meetings in social venues or in homes; the business is discussed for 10 minutes and is then promptly forgotten in favour of the party.
Have your meetings in places that are conducive to concrete business discussions.
Last but not least, the name you give the company should speak to a business agenda as well.
You are an investment company and one day another investor could buy that company, or you may apply for a loan to pursue bigger ventures.
Name the company accordingly.
Many have made the mistake of naming the company out of social/personal preferences rather than what is an appropriate name, given the agenda of the company.
Given the above factors, evaluate whether your group is set up for success in wealth creation or for social success.
CAROLINE MUTOKO CENTONOMY OPEN DAY 2013
Waceke Nduati is the founder and director of Centonomy. She is the Lead Consultant at Centonomy and is led by her passion for the financial planning industry as well as helping individuals achieve financial well being, Waceke has over 10 years experience in the investment industry internationally as well as locally. Institutions she has worked for include Balmain NB (Australia), Dyer and Blair Investment Bank, African Alliance Investment Bank, CFC Stanbic and CCS Financial Solutions. Her work experience has covered diverse areas such as IPO Transaction Advisory, Unit Trust Fund Management, Retirement Fund Management, Stock Brokerage and, Investment Research Analysis.
She is also a founder and director of Origins Investment Group Advisors Ltd which works with Investment Groups. She also sits on the board of the Kenya Private Sector Alliance (KEPSA) – Gender Committee. S. Waceke holds Masters Degrees in Banking & Finance, Professional Accounting and is currently studying to become a Certified Financial Planner.
Waceke runs a programme on personal financial management. Find her at email@example.com| twitter @centonomy