Is each client really different?
Sunil (Mister Bond) Jhaveri
Provocative title – but the essence of what Mister Bond suggests is that while each client is no doubt different in terms of his unique needs and aspirations, as an advisor, you need to consider whether you are going to create individualized investment strategies for each client or would you rather formulate a common set of investment principles and practices that your firm will adopt in managing all portfolios. Mister Bond leans towards the latter and spells out the principles and practices he would adopt when dealing with all clients.
Many times, I am asked whether there should be different strategies for different sets of Investors for achieving their different goals. Basically, should there be a different strategy of investing in Equity or Debt as an asset class for so called “Aggressive Investor” and a different strategy “Conservative Investors”?
From my last 33 years of experience in Finance markets and almost 25 years in Wealth Advisory/Mutual Fund practice; my experience is that you cannot bucket Investors as “Aggressive” and/or “Conservative”. I have seen the most conservative investor (pure Fixed Deposit Investor) becoming most aggressive when markets are on a one-way upward movement and the most aggressive Investor becoming the most conservative when markets move against him.
Also, most of the Investors have very similar goals like Education Fund, Marriage Fund, Retirement Fund which are typically 15-30 years away. Hence, journey of these Investors is similar (whether aggressive or conservative). Our job is how to make these different journeys smoother and less volatile.
So, instead of bracketing Investors in these two categories and then creating strategies around them; it will be prudent to:
“When Investors or their Advisors start to chase returns; is the time when downfall in their Wealth Creation will start” – MisterBond
So, let us first address Self-Discipline within Advisory space: The Do’s and Don’ts:
Remember, there are only 3 ways of investing in Equity as an Asset Class; viz. Lump Sum, Systematic Investments (SIP) and Systematic Transfers (STP). There should be some exit strategy in all these strategies based on some market valuation matrix and should be pre-defined and communicated with the Investors before they start their Investment journey.
MisterBond (Yours truly) has designed such strategies under each strategy which will move funds from most aggressive asset class (read Equity Schemes) at pre-defined triggers in the most expensive zone (Red Zone) and move to Dynamic/BAF schemes and vice versa when markets touch Green Zones.
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