Amit’s team serves over 38,000 clients ranging from pure retail to family offices, has MF AuM now in excess of Rs.8400 crs and an SIP book of over Rs.43 crs – and yet manages to actively guide all clients in a timely manner to take proactive action when market excesses become very visible.
Amit strongly believes it is an MFD’s responsibility to guide clients to protect capital when markets become obviously expensive and likewise be bold to step back in when they become obviously cheap. These are not tactical calls, but strategic ones taken in times of market excesses on both sides.
His team started advising clients to exit small and midcap funds from June 24 onwards and over 85% of clients switched out by Sep 24. Tech enabled communication and execution platforms enable proactive portfolio action at scale.
Some of the metrics he tracks diligently that enable such calls include:
1. Market cap to GDP ratio (when it crosses 110%, start cutting back on equity)
2. Valuations vs long term averages for large, mid and small caps (when they start approaching 2 SD, act)
3. Yield gap between bond yields and equity yields (when yield gap goes above double, act)
4. Quality and quantity of new issuances – IPOs and NFOs
When you share with clients the reasons for striking a cautious note amidst a raging bull market and back it up with such data, clients’ natural tendency of bull market greed gets subdued and they are willing to act and take profits.
Setting expectations at the outset of a new relationship is vital to deliver good investor outcomes. When despite your best efforts, prospects’ expectations are beyond what you think is reasonable, stick to your ground. They may choose not to work with you – that’s fine. They will come back to you in the next bear phase – and find you saying exactly what you said in the bull phase. That’s when they become your client for life.
Amit disagrees on the idea that MFDs should offer hybrids (less engagement solutions) to retail clients and a wider range to higher engagement HNI clients. Risk profile determines product selection. You have to build a robust communication and execution platform that can deliver tailored guidance at scale.
His advice to MFDs who are perhaps now rueing not taking proactive steps to get clients to take profits before the correction happened: if you feel you failed this unit test, don’t fret too much. Go back, study harder, crack your terminals and ace your final exams. Its never too late to embrace a better way to serve your clients!
Sapient Finserv has always grown fastest in bear markets and Amit is looking forward to turbo-charge growth in this one too. With so many investors now disillusioned with lack of proactive support from their guides/advisors/distributors – especially those who engage less when portfolios go into minus – there is a huge opportunity for proactive and diligent intermediaries to win market share by simply showcasing how they help clients build as well as protect wealth.
Editor’s note: This is a 1 hour long podcast, but well worth the time for every distributor and indeed every AMC sales person to view, imbibe and implement the numerous takeaways Amit offers.