What can be more fulfilling for an advisor?


When financial planner Sumeet Goel first meet Ram Sharma 5 years ago, Ram struck him as a bit of an enigma. Ram held a decent job in the finance department of a large company, was a Chartered Accountant by education, earned a reasonable salary - not quite a high achiever, but certainly not a loser. He had a great eye for detail - he would go through every investment recommendation that Sumeet made thoroughly, he would ask all the right questions - but the trouble and frustration for Sumeet was that Ram simply wouldn't make that investment decision. His money continued to accumulate steadily in bank fixed deposits. Sumeet had explained to Ram the difference between risk tolerance and risk capacity - he had argued several times that Ram had all the risk capacity that is ever needed to begin equity SIPs and move money out of FDs and that it was only Ram's illogically low risk tolerance that was keeping him rooted in low yielding fixed deposits. Ram would hear all these arguments and as it would often happen, when Sumeet tried to be too persuasive, he would abruptly close the meeting, thus shutting down further conversations.

Sumeet tried to talk to Ram's wife Geeta about getting Ram to start his wealth creation journey through regular equity investing, he explained the need to fight and win against long term inflation. Geeta agreed with Sumeet but said Ram wouldn't budge - his way of fighting inflation was to cut back on spending! She confided in Sumeet her frustrations in the very frugal lifestyle that Ram wanted for his family.

Sumeet was at the point of writing off Ram as a client and moving on to more promising prospects, when he stumbled on a book that talked about an exciting new paradigm for financial planners called Financial Therapy. Intrigued, he spent every spare minute over the next few weeks on soaking up as much as he could on Financial Therapy. One case study mentioned in the book perked up his interest immensely - it looked just like what he had been experiencing with Ram. He was fascinated by what he read in the case study, how the therapist goes to the root of the issues to help the client make behavioural changes - and he realized how superficial his attempts were in trying to get Ram to alter his risk profile.

Armed with these new insights, Sumeet asked Ram to come over to his house for dinner. Over dinner, Sumeet made one request: would Ram permit him 1 hour of time to ask a few questions about his childhood, his student days? Would Ram answer as honestly as he could? Sumeet's earnestness to help disarmed Ram and he agreed. Over the next hour, what Sumeet discovered through a series of probing questions, allowed him to complete the jigsaw that had always puzzled him.

Ram came from a family of high achievers - his father and uncle were both Chartered Accountants and rank holders in the CA Final exams. His elder brother did his CA - also a ranker, then went on to do an MBA from US and was a very successful investment banker zipping across the world closing big deals. Ram was a reasonable performer academically - but always suffered in comparison to his illustrious elder brother and the high expectations of his family. He did complete CA - but on the second attempt - a blot in the Sharma family's record that his father continued to be disappointed about. His failure in his first attempt at CA left quite a mark on him - more so because of the disapproving looks he would always get in the house that believed that he let them down. He finished his CA, moved cities, and took up an accounts department job in a large company.

Ram worried about losing his job. He worried about whether his bosses thought he was good enough. His performance ratings were average to good - not outstanding, but not a disaster either. He was very good with numbers, he could analyse balance sheets deeper than many others - but he hesitated to draw attention to his observations, for fear of being proven wrong and then laughed at.

Sumeet gently took Ram through what he discovered in the Financial Therapy book and how he stumbled upon a concept there which he immediately connected with Ram - the case of the overanxious underachiever. Often, not being able to meet high parental expectations, makes students underachieve their own potential as they bring anxiety into the equation, which only damages performance further. Over time, this overanxious underachieving pattern can rub off in the work place, in investment decisions as well and into the family - leading to quite an unfulfilling life.

Ram introspected and agreed with Sumeet that he did indeed display some of the attributes of an overanxious underachiever. Sumeet then put in place a step-by-step plan to help overcome this syndrome.

The first aspect was to address the fear of job loss. Sumeet earmarked a portion of Ram's deposits towards a contingency fund, equivalent to 1 year's expenses. This reduced Ram's anxiety somewhat. Sumeet then asked Ram to upskill himself where his natural inclinations were the strongest - he suggested that Ram explore a career in credit research, given his financial analysis skills and his worrying nature. This appealed a lot to Sumeet, and he instantly signed up for the CFA course. He started feeling a lot better about himself, with the knowledge that there are specialist, high paying jobs that are tailor made for someone like him.

Sumeet's next task was to sit down with Ram and Geeta and rearrange their monthly spending patterns - more specifically, encourage Sumeet to spend more! He got an agreement with them for a periodic indulgence amount - the odd weekend out, movie nights, consciously buying good clothes and accessories - but all within agreed budgets. Sumeet knew - from his new found knowledge of Financial Therapy - how important it is to "feel good" and how useful such planned indulgences are towards this cause.

Its now 5 years since that fateful dinner meeting between Sumeet and Ram. Ram is today a successful credit analyst at a leading fund house, he earns better, spends more yet saves much more - and invests only in equity SIPs! He's got a financial plan that he has signed off with Sumeet, and diligently sticks to it. Geeta still needs to work on him to relax a bit - that worrying nature won't go away - but he has, with the help of financial therapy - been able to limit the downsides of his overanxious nature, he has overcome his underachiever tag, and as Sumeet now says proudly, his risk capacity is perfectly in equilibrium with his risk tolerance!

This was a hypothetical case - but one that we believe many financial advisors confront when dealing with investors. Its easy to get frustrated with an investor who "just can't see sense" and won't act on your advice, to write him off and move on to others who are less "challenging". But, if you equip yourself with insights on Financial Therapy - the new field of study that intersects financial planning and psychological therapy - you will be able to see clients like Ram Sharma in a different light, you will be able to do much more for them than just drawing up a financial plan. You can contribute meaningfully to turning around their lives and helping them achieve much more. What can be more fulfilling for an advisor?

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