Why Financial Guardians Shouldn’t Ignore Investor’s Needs   Feb 11, 2017


As you may know that understanding client's need is imperative; but unfortunately that's not practiced with the correct intent. Due to which investor have felt that they've been taken for a ride, betrayed. They're disgruntled!

As a result, faith in financial advisors is receding. They are not respected as other professionals are viz. doctors, CAs, solicitors, etc.

But if financial (investment) advisors follow high fiduciary standards and put their investors interest at fore at all time, RESPECT and TRUST can be earned

But financial advisors directly jump to the last step—offer a solution (financial product) without understanding the client’s outlook. This approach results in a fractured relationship. 

By failing to understand a client’s needs, you risk the following:

Losing the client, credibility, and trust What would you do if a doctor recommends a medicine to you without an examination? Would you be comfortable to take the medicines or would you take a second opinion? A second opinion, off course, isn’t it? You would not visit the doctor again, nor recommend him to your friends and family.

That is exactly what will happen to you, if you recommend a financial product to investors without understanding needs and concerns. He may listen to you patiently, but ignore the advice and move on.

You’ll be portrayed more as a salesman than a trusted advisor – Because you have pushed a financial product without understanding the client’s financial health, number of dependant family member, his financial goals, insurance needs, risk profile, among a host of facets.

Remember, when an investor walks in, he expect you to handle his money with enough care and prudence as you would while managing your own money.

Pushing investment products is not the long-term interest of investors, or financial advisor. It could splinter relations. No one likes to be sold a product or a service; but appreciates a genuine, advice which is what investors look for in a financial guardian.

Risk tolerance will not match with that of the investor – As you may know, there is no universal level risk tolerance. It varies from individuals to individuals based on factors such as financial conditions, financial responsibilities, investment horizon to achieve financial goals, insurance coverage (both life and health) and liquidity.

A prudent assessment of the risk tolerance along with his/her age, past experience, knowledge and the comfort factor; laying an investment strategy is a prudent approach. It is best not to take investors for granted. After all, it’s question of their hard earned money and their long-term financial wellbeing.

For example, an investor who has burnt his fingers in the stock market may be apprehensive about investing in the stock market. Respect that! But rightly educate him/her if investing in equities is warranted aided favourable factors viz. age, income, investment horizon, financial goals, etc. on his side. Every drop can make an ocean; so encourage to take up a Systematic Investment Plan (SIP) in mutual funds by advising consistent performing schemes from fund houses that follow strong investment processes and systems. To achieve long-term financial goals, SIPs are a preferred route. A favourable performance can help investors’ gains confidence to invest even more.

The investment portfolio may go askew- Besides, wealth creation the investment portfolio should be able to address financial goals – children’s future needs (education and marriage), retirement, amongst a host of others, even the materialistic ones. If that not the case, portfolio construction would be ineffective or futile.

Recognising financial goals and then astutely selecting investment avenues, will ultimately achieve investment objectives, and earn the respect from investors.

So, when you deal with investors, ask them to pen down financial goals and edify them if they are S.M.A.R.T (Specific, Measurable, Adjustable, Realistic and Time-based), and classify them into short term, medium term, and long-term for the portfolio construction exercise.

End note…

Reputation is the key in the financial advisory business. If you follow high fiduciary standards and apply professional wisdom with utmost care, the brownie points you earn add to respect and trust amongst investors.

Remember, the customer / client is always the KING. So, always put his interest at fore as financial guardian.


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