As a part of my series about “Investing During The Pandemic”, I had the pleasure of interviewing Norm Champ.
Norm Champ is the former Director of the Division of Investment Management at the Securities and Exchange Commission (SEC). Under his leadership, the SEC adopted a new rule in July 2014 to reform money market mutual funds. Champ is also author of his latest book, Mastering Money: How to Beat Debt, Build Wealth and Be Prepared for Any Financial Crisis, which was published in November 2019 and is designed for the everyday American to help demystify personal finances and help educate on financial literacy. His previous book, Going Public: My Adventures Inside the SEC and How to Prevent the Next Devasting Crisis, chronicles his experience at the agency and how they shed light on the regulatory process and government policy making.
Champ is a senior partner in the Investment Funds Group at Kirkland & Ellis LLP and is a lecturer on investment management law at Harvard Law School. Norm received an A.B., summa cum laude in History from Princeton University; an M.A. in War Studies from King’s College London, where he was a Fulbright Scholar; and a J.D., cum laude, from Harvard Law School.
Thank you for doing this with us! Before we dig in, our readers would like to learn a bit more about you. Can you tell us the “backstory” about what brought you to the finance industry?
As a young lawyer coming to New York City after law school, I joined a law firm that primarily represented financial services firms such as private equity funds and banks. After several years in private practice of law, I became a partner in an investment firm that managed hedge funds. It was during that time that I really began to focus on investing and finance, particularly personal finance. After the 2008 financial crisis, it felt natural to join the Securities and Exchange Commission to start to play a role in US financial services policymaking.
Can you share with our readers the most interesting or amusing story that occurred to you in your career so far? Can you share the lesson or take away you took out of that story?
I was once working on a proxy fight involving a public company. We were having a meeting with shareholders and had prepared a binder of materials. On the morning of the meeting I startled awake and realized that the materials had a blank proxy in them which the SEC’s rules prohibit distributing. I literally ran to the meeting and other lawyers and I ripped the proxies out of the binders in the back of the room right until the meeting started and then handed them out. The partner running the deal stayed so calm in any situation like that and just sought to solve any problem that arose. I’ve tried to do the same. See problems and solve them.
Are you working on any exciting new projects now? How do you think that will help people?
I published my latest book, Mastering Money: How to Beat Debt, Build Wealth and Be Prepared for Any Financial Crisis in November 2019 — right before COVID-19 devastated the entire world. Since then and during this economic crisis with unemployment being at an all-time high in the U.S., personal finances are top-of-mind for many Americans. Mastering Money is an in-depth primer on the fundamentals of money management offering a way to get your finances in order — from outlining how to identify government policies that work against your financial future; reduce spending and eliminate debt; develop a smart, low-risk investment portfolio; avoid paying unnecessary taxes; sidestep all financial landmines; and build savings that will provide safety and security — even with the economy tanks. My goal is to offer readers a tactical path to ensure financial peace of mind now and into the future.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?
My uncle, Joe Champ, helped me all along the way as my parents divorced when I was 9 and there was a lot of chaos in my life. He was always there for me when I needed anything, including paying for my college and law school tuition when my parents wouldn’t. I think of him often.
Let’s shift a bit to what is happening today in the broader world. Many people have become anxious from the dramatic jolts of the news cycle. The fears related to the coronavirus pandemic have understandably heightened a sense of uncertainty and loneliness. From your experience, what are a few ideas that we can use to effectively offer support to our families and loved ones who are feeling anxious? Can you explain?
The uncertainty of the future due to the pandemic has certainly caused many of us to become anxious over the past seven months. It’s an unprecedented virus. Hundreds of thousands of lives have been lost and many businesses have been devastated. However, we have been through a lot as a nation including the 1918 Pandemic, The Great Depression, the 2008 Financial Crisis, 9/11 and now COVID-19. We can continue to follow the health and safety recommendations of elected and health officials. And with all of the time at home, it’s a great time to connect with your family. It’s also a good time to focus on any unnecessary expenses and see if you can cut them. Reducing expenses eases stress related to financial matters.
Ok. Thanks for all that. Let’s now jump to the main core of our interview. As you know the stock market and the economy in general have become extremely volatile and uncertain. Many people “dollar cost average” and put aside a monthly sum into a long-term savings plan for retirement, college, or a home purchase. If a loved one or a client came to you and said, “I have been saving and investing $500 every month in an S&P 500 index fund. Over the next few months until the dust settles, should I be doing something else with my money?”, what would you say to them?
In my most recent book, Mastering Money, I lay out four fundamental strategies for people to take to secure a savings and plan for financial crisis, so I would encourage readers to consider working through these four strategies and implementing them first if they have not been already.
First, take inventory of any debts they may have and to focus on paying off high-interest credit-card debt or student loans. Secondly, work on saving cash equal to six months of their monthly living costs. These two suggestions go hand and hand, because building up a cash savings reserve equal to six months of your monthly living costs also protects from high-interest credit-card debt. Credit cards are often used by people for unexpected expenses and so a savings reserve can serve as an emergency fund when needed.
After implementing those first two strategies, I recommend evaluating your retirement savings plan. If a tax-protected retirement fund has not been set up, that should be their next step. Retirement funds add to your personal net worth and financial confidence. My final strategy focuses on reinforcing the importance of savings accounts. Opening additional savings accounts for financial priorities, such as education funds to continue building and finding new skills.
If you have done your asset allocation and it calls for more stock investing, then stick to your plan. It’s even more important in these times.
Eventually the economy will recover and rebound. Certain sectors, like travel and hospitality might be hurting for a while. But other sectors, like technology and healthcare, might do very well. If someone wanted to prepare today to take advantage of the future recovery, what would you suggest they do?
I recommend building up a savings fund that can help support and protect your future investments. So, when you decide to invest, you have more confidence in riskier investments that could have potentially higher returns because of the savings stored up.
Are there sectors that provide exciting and lucrative investment opportunities today, specifically because of the volatility and uncertainty?
Anything related to products that are sent to people’s homes are having a boom.
Are there alternative investments that you think more people should look more deeply at?
Stick with a stick and bond allocation until you reach significant net worth, then use an allocator tool to branch out to other investments.
If a person in their thirties and forties came to you today and said that they have $10,000 that they want to put away today for a long-term investment what would you advise them to do with it?
I would encourage the person to allocate that money towards saving for retirement. The ideal mix of investments should include tax-free investments, bonds and an array of stocks that bear higher risk and potentially higher return. Many Americans hold too much cash, so I encourage diversification of portfolios to include stocks. Yes, stocks have fluctuating returns, an idea many have aversion to, but the strategy I mentioned earlier to create a six-month emergency fund helps protect investors.
Ok, thank you! Here is a more general finance question. You are a “finance insider”. If you had to advise your adult child about 5 non-intuitive essentials for smart investing what would you say? Can you please give a story or an example for each?
For five essentials: 1. Treat a mortgage like any other investment decision; 2. Try not to incur debt but if you do, pay it off quickly; 3. Make sure you maximize your 401(k) and take advantage of any employer match; 4. Develop your skills to help enhance your career; and 5. Make an investment plan and stick to it.
Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?
Stick with it. Whatever “it” is benefits from you staying with it.
You are a person of enormous influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be? You never know what your idea can trigger. :-)
“Teaching our children about the basics of personal finance. We’re not doing so now. That knowledge would benefit so many Americans and their families.”
