Wednesday 1 May 2024
You are Risk Manager (a Saarthi like Bhagwan Sri Krishna) of your client
You are Risk Manager (a
Saarthi like Bhagwan Sri Krishna) of your client
In my last 35 years of
association with investment industry I have observed that mutual fund
distributors, investment advisors do not value themselves the way they should.
My view is that they are playing the biggest role in the money management
journey of their client.
To all of them I would say, “You
are Saarthi like Bhagwaan Sri Krishna for your client (Arjun)”.
We all know Arjun had lots of
queries, confusion in Mahabharat and how Sri Krishna resolved them and
convinced Arjun through logical explanation to help him win the battle. Sri Krishna
knew the overall situation, disturbing thoughts in the mind of Arjun then gave
him practical solution which was advantageous and beneficial for Arjun. Once
Arjun got to know who Sri Krishna was, all fear, all confusion, all negative
thoughts got removed. His faith grew to boundless level on Sri Krishna. So the
key here is FAITH/TRUST.
Now your role is similar and your
own product is faith/trust. Many of you think your product is good service,
great knowledge, correct guidance etc. Yes, they are but client will review all
from his perspective. Relationship is built on not what you are but what you
are perceived to be. This perception is created by experience and if that
experience is of trust/faith then no one can replace you however other
qualities one has.
All investors want no loss, safe
return, good return and many times get confused, fearful and end up taking no
decision, wrong decision w.r.t investment. Investment is all about risk
management and not return management. Return is desire, outcome. That
desire/outcome is fulfilled if risk is managed well. Risk is not dependent on
return but return is dependent on risk. Return is a quantitative thing but risk
is both quantitative and qualitative. Return is an easily understandable thing
but to understand risk one has to put an effort. Return is a unidimensional thing whereas risk
is multidimensional thing.
Your role is in risk management.
If you handle that well the desire result will come. In fact, you are playing a
bigger role than fund manager in managing the risk of your client.
You are not managing only the
risk of money of your client but risk of your client which is much more than
money. When I am saying risk of the client it means keeping the focus on client’s
needs/requirements of money in order to meet any of his financial goal you also
have to see how notional loss (on paper) impacts him emotionally, how volatility
is handled patiently, how different emotions of investors (greed, fear,
temptation) is handled wisely, how a right balance is made between earning: expenditure:
saving: investment. The important aspect linked to all 4 is consumption only.
We earn for livelihood (consumption), we spend on consumption, we save and
invest for future consumption. Consumption activity is throughout life and
money plays a big role. Your role of money management of client throughout this
life journey is based on all types of risk management.
I compared your role as Sri
Krishna which I meant life is a journey (battlefield like Mahabharat), money is
like (arrows), when, how and why to use money (spending, investment) is like
which approach, strategy to use against which warrier in battlefield. Just like
Sri Krishna you also have to play same role.
Your 1st role is to
win the mind share/ heart share of your client. Understand your client first.
Understand how much his money means to him from emotional and usage point of
you.
Since no one wants loss. Start
from 1 day to 1 month to 1 year to 3 years to 5 years……. A clear investment
plan through which asset ensuring no loss whenever he wants and how liquidity
will be met in case he wants money. We all know which part of economic cycle
(expansion. slowdown, recession), market phase (bullish, bearish; interest rate
movement, long term vs short term trend of interest rate etc) impact adversely
to which asset, and generally till what time these adverse impacts last (based
on past data). Tell him to ask any
negative question if he has in his mind. Even if he is not asking any negative
question, you visualise that. For every negative situation/query you should
have a positive answer. Don’t talk about product in this stage but win his mind
share/heart share through logical reasoning and explanation.
Then think of investment product.
In it apply simple rule client should get his money easily and comfortably with
a safe growth (safety + growth) whenever he needs. Safe growth has be looked
keeping asset features, characteristics in mind, saving from adverse/negative
market and economic factors. Have a clear, well documented plan in place why a
asset preferred or avoided with respect to time ( short term, mid term and long
term), keeping adverse impact of
economic and market factors which action will be taken to protect and ensure
safe growth. Once you discuss and convince your client and follow also in toto,
trust will automatically develop as you have managed the risk.
Be a trustworthy saarthi to your
client throughout his journey of life, help him to win all battles: emotion,
money, priortisation of financial goals etc. and ensure just like Arjun won the
battle and ended as winner, your client also crossing all hurdles (market cycles,
economic cycles) and never face financial problem.