Formula for success

Formula for success

Formula for success It was a warm spring day in May 1976, and Michael Lee-Chin was terrified.

It was the day before he began working as a financial advisor, and after finishing training the week before, he was expected to go to work with a list of prospects.

“I had no prospects,” he says. “On the Sunday, my blood pressure was 190 over 110. It was just off the Richter scale.”

He was waiting at the airport to pick up his mom, who was visiting from Miami. Her flight was delayed two hours, and Lee-Chin was frantically trying to think of ways to find people to see.

He decided to take a drive around the neighbourhood near the airport, where he saw people out tending their gardens.

“I thought, ‘Mike, there they are. Those are your prospects. The next person you see, close your eyes, put your foot on the brake, put the car in park, jump out of the car, and you’re in front of a real live prospect.’ That’s what I did. I was nervous as hell.”

He made six approaches that day and got five appointments. In his first month in the business he made $10,000 – a far cry from the $2.50 an hour he was earning as a bouncer at McMaster’s student pub.

Nearly 40 years to the day later, Michael Lee-Chin is a billionaire and renowned in Canada. Over the years, he has acquired and sold AIC Limited’s mutual fund business to Manulife Asset Management and the Berkshire group of companies to Manulife Financial. He is now the executive chairman, CEO and portfolio manager at Portland Investment Counsel.

Engineering success
But the eldest of nine children from northeastern Jamaica didn’t stumble into his wealth. There was most definitely a method to his wealth creation. While he might not have directly used the engineering degree he graduated with from McMaster University, the analytical mind he developed there shaped the investment philosophy that would serve him so well over his career.

Starting out his career, as far as he could tell, the biggest ‘value-add’ he could offer his clients was to make them wealthy. So he set out on a quest at age 26 to figure out how. “I thought, is there a formula that is as consistent as mixing two atoms of hydrogen with one atom of oxygen? You get water every time,” he says. “Is there an equivalent formula to create wealth?”

Technology being what it was at the time, the answer wasn’t readily available. “Unfortunately there was no Google,” Lee-Chin says. “But today, even if you Google it, nothing will come up that is prescriptive. But I found the formula in 1978.”

He figured it out by analyzing the characteristics that were common to wealthy people in the world.

Lee-Chin found five key principles that were consistent among all wealthy people. First, they own a few high-quality businesses. Second, they understand those few businesses really well. Third, those businesses are in strong, long-term growth industries. Fourth, they use other people’s money prudently. 

Lastly, they hold those few businesses for the long run. “I just practiced that formula faithfully,” he says. “I dedicated my life to being a champion of that formula.”

While it’s all well and good having a formula, it wasn’t enough. It was too easy to stray from it, so Lee-Chin also developed three keys to ensure the formula’s success. “You have to make decisions based on a sound intellectual framework,” he says. “The second thing is we need to be consistent in our decisionmaking so we control our emotions. The third thing we need is access. If we have two but not the third, it doesn’t matter. We won’t be
successful. We have to have all three.” 

But when Lee-Chin applied the formula and framework to mutual funds, he was disturbed by the results. The product failed on all five counts. “There are trillions in this product – trillions! And it fails on the five points relative to why people are buying them,” he says. “We have an industry that’s totally dysfunctional relative to what the clients want and need.”

A model for the industry
But the proliferation of mutual funds is only a byproduct of a larger concern around the quality of advice Canadians are receiving from the industry.
“Every advisor is being taught how to sell mutual funds or stocks, not to create wealth,” Lee-Chin says. “I see a lot of dysfunctionalities that are endemic in how advice is given and what clients end up with ... my cause is to do what I can to build a business that’s a role model for what a professional advice-giving organization should be like.”

It’s also a sign of the poor composition of Canadians’ portfolios. Canadians are put behind the eight ball in their quest to create wealth, with portfolios that look nothing like that of a wealthy person or an institutional investor. But as the man in charge of Portland Investment Counsel, Lee-Chin is developing that ‘role model’ for advisors to use. “I’m giving people a framework so they can control their emotions, and I’m giving them
access so that they can build a portfolio for themselves that is no different in quality or construct from CPP or the Ontario Teachers’ Pension Plan, because they’re not getting it right now,” Lee-Chin says.

“We have to ask the question: Is CPP’s portfolio like the portfolio that every Canadian ends up with? If you go to a broker, you’re going to end up with a portfolio that is 100% publicly traded securities. Name one person in the world who created wealth by doing that. Nobody! But everybody has it.” 

Spending any time with Lee-Chin, it becomes obvious his passion isn’t diminished, even though time is creeping up on him.

“I just turned 65, and age didn’t make a difference to me, but some mornings I wake up and think, ‘65?! 65?! This is crazy – it was just yesterday when I was 35,” he says. Indeed, just yesterday he was terrified, approaching people on their front lawns, and now he’s trying to change the financial advice paradigm in Canada.