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Consistency has two dimensions for me
I have been in this advisory business from over 20 years - before the private sector MFs became popular. Right from the era of NBFC deposits, UTI, LIC, post office schemes to today, I would say one thing that I have followed consistently, which has helped my clients avoid blunders and which has built my reputation among my clients is the fact that I have always tried to keep my clients away from following the herd into red hot flavours of the season kind of investment avenues. There was a time when some NBFCs promised absurd rates of interest, lot of people went in, and many of them folded up. Then came the Unit 64 fiasco, where so many people invested purely on faith, with little else backing it up. Then came the era of PSU bank promoted mutual funds. We had funds from CanBank MF, IndBank MF and so on which were quoting at a premium to NAV during the Harshad Mehta days. My clients were naturally very interested to know more about these "promising" investment alternatives. Whether you call it a 6th sense or whatever, when I see too much excitement about an investment product which does not look logical on first sight, I always tend to stay away from the opportunity. Better to miss it when you are uncomfortable rather than knowingly risk client money when you are not fully convinced. This policy is what I have consistently followed for over 20 years.
After the CanBank and IndBank MF fiascos of Harshad Mehta days, came the Morgan Stanley issue. I saw huge lines of people waiting to submit applications, but again, I decided to stay away because I could not understand the logic. I decided it would be better to wait for a while to see how this thing would work and then look at it subsequently. Then came the tech bubble - here again, I stayed away from these funds as I could not understand what was going on. When the infra boom happened, despite being at that time among the largest retail IFAs in Mumbai, I had practically no exposure to these funds. Then came the gold fund boom, where everybody was recommending gold funds at what we later came to know was the top of the gold market. Again, you call it some 6th sense or whatever, I asked my clients to stay away from the fad of the season. If I look back at what has consistently helped me and my clients, it is this steadfast discipline of ensuring that I don't join the herd just because there is a herd, and the herd must be right.
One point that I must say is that in this journey, although I kept asking clients to stay away from these hot ideas of the season, not everybody listened. Some invested anyway, they burnt their fingers. I stayed with them through this process, and helped them come out of these difficult situations. When they saw me by their side even when they didn't take my advice, they realized two things - one, that they can depend on me and two that my advice was sensible. That's what builds the dependability factor in the eyes of the client. Sound advice is a must, but staying with your clients through difficult times is even more important. Consistency is about both these dimensions, for me.
If you ask me today what I am asking my clients to stay away from, its closed ended funds. I don't understand the need for them, and so I don't recommend them. I also don't recommend FMPs at all. I think open ended debt funds are doing a good job. Over the last 3 years, despite FMPs being the flavor, I have zero exposure. I have been an advocate of managed debt funds and I think that has paid off for my clients as they have outperformed FMPs.
Integrity goes beyond disclosures
In my experience, what clients look for in terms of integrity is not commission disclosures and such information. It is about trust in the advisor that he will not recommend something that he knows is not suitable to them. Over the years, as I kept telling clients to stay away from frothy ideas where there was a lot of business momentum, and that advice proved right, a reputation automatically builds up about the integrity of advice that I offer. When things blow up, which I asked clients to stay away from, it not only reinforces their trust in me, but also is a big source of referrals for me.
Responsiveness goes much beyond responding to calls
My business is always face-to-face, there is no remote advice. I am always available to my clients, and I always meet them with their families when we take investment decisions. Being there for clients when they need me most is what I think responsiveness is all about. And, in my experience, being responsive to client needs very often is also about anticipating needs - many times, which have never been articulated.
Having been in this business for long, there is one thing I have realized. There are stated needs and goals and then there are the unstated ones. We will discuss various goals and plan for them. We make investments as per those time horizons. And then suddenly, there will be a desire to buy a car, which will threaten to throw plans out of gear. Even in the previous meeting, there would have been no mention about plans to buy a car - but suddenly, it becomes the most important thing for the family to acquire now. For many retail investors, buying a car and funding it tends to be a big financial decision. This is where out of experience, some amount of anticipation helps. Apart from whatever are the articulated goals, I always keep aside some investments in debt schemes for such sudden expenses. This is not a contingency fund - this is sudden bursts of discretionary spending. By creating the portfolio in a manner that can cater to such impulses, you are enabling the client to chase these pleasures even while you protect the long term plans. When you provide a solution to them that enables them to go ahead with such plans without destabilizing long term goals, they realize the value you add in their lives. Responsiveness, for me, goes beyond responding to their needs - its about anticipating their needs. That's when you build the dependability factor.
Being there when they need me most is what matters. In some cases, when clients had emergencies, I have dipped into my own resources to help them out and then get redemptions done in a sensible manner. These are retail clients, where the requirements may not be very large. Obviously, this cannot be done for big clients. But, the point is that clients know that they can turn to me and I will get them a solution in their hour of need.
There's another aspect which I think I should share here. I met with a life threatening accident in 2007 and was bed ridden for months. My wife realized that the best way to cure me is to get me back on my feet as soon as possible, going out there and meeting my clients again. Thanks entirely to her diligent efforts, I got back on my feet faster than any doctor thought I could. I was back doing what I love - meeting my clients. My brother helped immensely during this difficult period. When my clients saw that I was back again in their midst instead of settling down for a quite life that many thought I would opt for, I guess from their point of view, it reinforced the fact that they can entirely depend on me.
Diligence is about understanding every client individually
I serve around 1000 families in Mumbai, but despite this, I always meet my clients face to face, understand their requirements, anticipate some potential requirements that are not articulated, and then recommend investment products that I think are suitable for them. I do not try to follow a "one-size-fits-all" approach at all, which may be tempting in the retail world to execute.
Second, as I mentioned before, when recommending products, I keep things simple and avoid fads. When I understand a product fully and have high personal conviction in it, I am able to recommend it confidently. Maybe it's a 6th sense, but I have been lucky that I have been able to avoid blunders that would have proved costly to my clients and therefore to me. Avoiding pitfalls is probably more important in building trust and credibility and therefore dependability, than identifying the next big winner.
All content in Mr.Dependable is created by Wealth Forum and should not be construed as views of Religare Invesco MF.
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What makes an investor choose an advisor or a money manager and stick with him through the rollercoaster ride that markets take him on? What begets trust in the eyes of an investor? A simple one word answer : dependability. Mr.Dependable - a joint initiative between Religare Invesco and Wealth Forum - aims to help you explore all the dimensions of what it takes to be seen by investors as Mr.Dependable, and thus build your financial advisory practice on a robust foundation of trust. After all, dependability is finally what money management is all about.