My biggest lesson - Major Ashish Chadha


Major (retd) Ashish Chadha (Chadha Investments, Delhi) – currently holidaying in Tamil Nadu

How the army units work as a team

I come from the Regiment of Artillery in the Indian Army. On the front line, the Army typically is served by three types of units – the Infantry, the Artillery and the Armoured Corps. All three engage in battle, but each has very clear roles and responsibilities. The Infantry refers to the ground troops that are at the forefront, engaging the enemy directly, capturing bunkers, seizing territory. The Armoured Corps (tanks units in layman parlance) go alongside the infantry or go it alone, depending on the circumstances of the battle. The Artillery in contrast is typically placed 5-10 kms behind the advancing infantry troops. They are the heavy hitters – the unit that shells enemy positions 5-10 kms away, forcing them to take cover, softening them up, and thus allowing the infantry and the armoured corps to forge ahead.


Regiment of Artillery at Siachen Glacier


The artillery unit is used not just to facilitate the advance of the infantry, but at times to help them retreat or even as a decoy to help send in reinforcements. The artillery, in other words, plays the role of the enabler – providing the right environment for the infantry to achieve the mission objectives.

The infantry are the glam boys – the poster boys who actually take out enemy positions, the guys who scaled the peaks of Kargil and seized back our territory. They are the most visible part of an army’s victory.


Indian Army’s Infantry Regiments at the Kargil War


Risk assessment and risk management are critical for artillery

Infantry are like the strikers of a football team, the finishers in an ODI. The artillery are like the midfielders in a football team – they set up the play for the strikers to score. The midfielder decides real time, based on placement of the field, whether to create an opening for a striker or to back peddle towards safety of his defenders and look for a better opportunity to set up a play.

The artillery unit has to focus on risk management and must be very strong on processes. Before you fire your missiles and mortars, you need to check and double check that you’ve got the range and trajectory right, that your guns are functioning smoothly – the last thing you want is to land shells on your own advancing troops rather than on enemy positions. There are times when the artillery has to make real time decisions to either support advancing or retreating ground troops or even move into aggressive positions when situations warrant. As an artillery man, you assess the risks real time, take risks which you decide are warranted, and take full responsibility for consequences.

There is no hiding place for anyone on the team

Whichever unit you are with at the frontline, you are exposed to the gravest risk of them all – your life. When I am at the gun end (artillery unit), I am vulnerable to air raids and commando strikes. When I am with the infantry or with the tank guys, I am upfront in the trenches and am the one guy the enemy would love to take out. There is no hiding place anywhere at the front line.

Butt of jokes from the glam boys

When I was in the Artillery Regiment, we often used to be the butt of jokes from our more flamboyant infantry colleagues, because of our cautious and conservative style of functioning. Initially I would get upset, but my seniors would counsel me to ignore those barbs, crack a nasty non veg joke in good Punjabi at them and focus on doing what I am supposed to do.

My biggest lesson from the Artillery Regiment

The lessons I learnt in the Artillery Regiment have helped give me clarity on what my role as an advisor is and is not, in building and protecting wealth for my clients. An advisor is like the artillery unit – he provides the enabling environment to the infantry – the fund manager. Judicious asset allocation that is well aligned with the client’s risk profile enables the fund manager to do what he does best with that portion of the client’s assets as are handed to him to manage. Without adequate protective cover of debt in one’s portfolio, equity risk may just be too much for the client to handle – the casualties may be so intolerably high that the client beats a hasty retreat – and the battle against inflation is lost forever.

Cannot run away from need to take real time decisions

An advisor has to take real time decisions – tactical asset allocation decisions – based on his understanding of all the variables that typically influence behaviour of different asset classes. The advisor must know when to focus more on wealth preservation and when to try and step on the gas towards wealth creation – he has to decide like the midfielder in football, whether to pass the ball to a striker or to a defender.

An advisor is not a fund manager – he is an asset allocator. I don’t see my role as picking stocks to generate alpha. My role as an asset allocator is completely different from that of a fund manager – just as the artillery’s role is completely different from the infantry’s. And when a cocky fund manager riding a bull wave looks disdainfully at me when I turn cautious, I do what my seniors in the army taught me……😊

Fund managers don’t manage client’s risk – advisors do

A fund manager is only focused on two things – beat benchmarks and provide perspectives and commentaries that aid his fund house in continually mobilizing assets. Your client is not in his radar at all – he does not know your client, he does not know his goals – and he does not consider it his job to do so anyway.

Beating benchmark remains a fund manager’s focus – whether the market is going up or down. Sticking to the fund’s mandate is what he is required to do – whether that mandate is currently looking extremely risky or rosy. All of a fund manager’s risk management processes revolve around how he is doing against his benchmark – in terms of performance and the volatility of it.

Risk management is the unsung hero in wealth management

That, as we all know, is not what your client understands as managing risk in his portfolio. Deciding a broad asset allocation is the first step in portfolio risk management, followed by tactical asset allocation aimed either at incrementally focusing on defence or aggression, as the situation warrants. That’s the role of an advisor. Risk management is the unsung hero in wealth creation, just as the artillery is in the battlefield.

My biggest learning in my years as an advisor is that my role is that of an asset allocator and my focus is on risk management. Fund managers will always talk up their schemes, their NFOs, their processes and so on. My job is not to be a fund manager’s mouthpiece – my job is to objectively assess risk-reward and take asset allocation decisions which I believe are in my clients’ best interests. That often involves going against the herd, it involves taking calls that are often exactly the opposite of what marquee fund managers may be espousing in the media, and, as it’s happened to me more than once, it involves significant pain in the time from when I took what I thought is a sensible call to the time the market agreed. It calls for conviction and communication with clients on why you are doing what you are doing, it involves clients sometimes wondering whether you’ve lost it, but when sense finally prevails on the market as it always eventually does, these are the same clients who love you for your independent thought and happily refer their friends and relatives to you.

There is no hiding place in wealth management too

Just as with the army, there is no hiding place in wealth management. A fund manager can only try to hide so much behind an index, an advisor can only try to hide so much behind his “long term” mantra. Clients expect more from us – clients expect intelligent risk assessment and risk management.

In the second and concluding part of this article, I will take you through some of these tactical asset allocation calls I’ve made in recent years. I hope you will find these examples useful as you think through deeply on how you as an advisor can take a proactive role in managing portfolio risk for your clients – because truth is that fund managers don’t, can’t and won’t take on that responsibility.


Risks are everywhere – they can strike when and where you least expect 😊

Share this article