This is 100% true for 100% financial advisors;

Just that some tell it more than others!


(1.)    We are likely to disclose selectively– No mentor ever told his prodigy – ‘you will have to lie to succeed’. That is not something anyone aspires to do. What financial advisors do all the time however is to withhold information; particularly if they feel that you have a very strong view on something, THEY WILL NOT TELL YOU ANYTHING TO CONTRADICT YOUR VIEW PARTICULARLY IF SUCH DISCLOSURE WILL HURT THEIR BUSINESS.

Every stock, fund or financial product has its own advantages and disadvantages. Suitability of these financial instruments to a client’s needs is what differentiates them. Short of that, all products are good in their own right. Think about it, why anyone would think this way – “oh, today let me create a bad product and charge a high fee for it”.

You know what’s the most annoying thing that financial advisors have to deal with?

– Meeting with a client who has already decided on what he wants to do.

In 60-70% cases, these are the clients we get. Recently, I met a client who told me exactly what he wanted to do. In fact, he was so sure that he had even decided on percentage allocations for his portfolio. He suggested that he will buy all mutual funds through my firm. Most of the funds which he had decided to buy were not something I would recommend. When I told him about a fund which he should not be buying, he said – OK, I will buy this one independently.

Basically, I had 2 choices

  1. To let him do what he wanted to, which would bring me more business, or;
  2. To speak the truth?

In your line of business, what would you have done?

As advisors, we always hope that we get clients who let us do things our way. A CEO of a big AMC once told me- “if you really want to be big in asset management then choose your clients wisely. Refuse to work with clients who behave badly with their money”. 10 years in this business and I still think that was the best advice I have received.

Investor Tip: As investors, even if you have a strong view on something, just remember that you are talking to someone who does this far more than you. Do you ever contradict a doctor with something like this – I think heart bypass will be a better idea than oesophagus surgery. What changes when it comes to diagnosing your portfolio?

(2.)    We don’t like unsolicited interrogation – You remember that uncle or cousin you have been consulting on your portfolio? How’s that going?

It is a mystery to me how people work so hard for their money, and then invest it based on what someone told them at a party, often after a few drinks.

What I write below is pretty autobiographical:

5-7 years back, if you had asked me about Pidilite Industries, chances are I would have replied. I would at least have given you some view on it. The truth is that I don’t follow or understand speciality chemicals space as well as I should so as to give you an informed view on it.

Why did I reply then?

Action bias. It’s better to say something than freeze in the moment and come across as someone who has no clue. I am a financial advisor after all; I am expected to have a view on stocks. Nobody wants to admit that they have no idea about the stock or sector you just asked them about. In reality, 100% of people are at times unsure of what they have been asked. Over the years, I have learnt to say “I have no idea” even at the cost of sounding ignorant. I have always hoped that on such occasions the investigator will respect my ingenuousness.

Investor Tip:  The reason I am disclosing all this is for you to know – DO NOT TAKE AS ADVICE IF IT WAS NOT MEANT AS SUCH. If you ever put on the TV and see an analyst being asked about a particular stock, and it appears that it is not something he had volunteered for; then just don’t listen to him. He is talking crap.

I have noticed that a lot of advisors have still not learnt to say “I have no idea”. They will then tell you something which even they do not believe in. Too bad if you take it as advice.

(3.)    At least a majority of us know that certain things don’t impact economies, yet we harp on them – There are many things that have absolutely no correlation to the market and yet we talk about them in market discussions. Why? Because we believe that you believe it does have an impact! We play on a pre-conditioned mind.

By way of an example, if one were to put down a list of factors that economists pay most attention to, this will find a place in top 5 of any such list:

Whose Government is it (anyway)?

I have come to realise that markets do not do well or poorly because of governments. They do well or poorly despite the governments. To many, it may still come as a surprise that stock markets performed at their best in years of fractured mandates.

So…. are coalition governments good for the market?

Nonsense I say.

Coalition or brute majority, Governments do not alter the course of economic cycles and definitely not of stock markets. Academically, one may debate that Government X passed 10 economic reforms or Government Y had many scams happen under its watch; but when it comes to economy and markets, they follow their own course. Probably for this reason economists hardly ever go on to make big money. They pay too much attention on policy and government.

Investor Tip: Do not hope that the government or the Prime Minister will come to the rescue of the market. The government is too small an entity to control human greed and fear. In fact, forget economic cycles, collective human emotion overthrows governments. As a fun exercise, ASK YOUR ADVISOR – WHAT IMPACT DOES THAT HAVE?, every time he talks of governments,  crude oil prices or interest rates in the U.S.

(4.)    We don’t tell you that we are not asset managers, we are emotion managers – Yes, 80% of our job is to manage your emotions. The rest 20% is easy. We cringe when you tell us to buy stock because stocks are delivering a great return, equally when you tell us to sell your portfolio because it is down 10-15%. Towards the end of 2017, I moved a major part of client holdings into fixed income schemes and closed my stock advisory service on account of lack of buying opportunities. Over the next 16 months, I got so much grief for clients having missed out on the 2018 stock market rally (in 2018, Nifty went up from a low of 9900 to a high of 11680). Today, markets are back to 2017 levels.

I am still not sure about where this correction will end but the key take away is this:


Sell @ 100

Invest @ 8% for 2 years

At the end of 2 years = 117


Stay invested @ 100

Enjoy 120

Fall back to 100 in 2 years 

In the first scenario, Return at the end of 5 years from the date of investing into fixed income (assuming a similar rate of growth) of 8% = 148

Basically, markets have to rise 14% on average (i.e. for each of the next 3 years) to make the return that these clients will make in fixed income over a 5 year period.

Do you think this is possible?

Forget that, I for one am still convinced that my clients will beat market returns by a mile. 

It is easy to convince clients to take an action, to buy, sell, switch or do something. What is difficult is to control investor craving for stocks when they see the markets going up (and believe me 9900 to 11600 in 8-9 months can make the dumbest guy question your rationality of staying invested in something that is barely generating 6-8%), equally to stop them from withdrawing when markets are falling.

Investor Tip: STOP HOPING THAT ADVISORS WILL BE ABLE TO CATCH THE PEAKS AND BOTTOMS. No one can predict what will happen in 1-2 years but with a 5 year view at any given point of time, it is possible to make very good returns. WHEN YOU SAY, YOU ARE IN IT FOR THE LONG TERM, PLEASE BE SURE ABOUT IT.

(5.)    CALL ME FOR THINGS OTHER THAN WORK: This may just be me so I am keeping this as the very last point. Those of you who do what I do should please tell me how you feel about this.

I love taking it easy a few times a month. Call me for a general chat (or to give a friend’s reference, it helps!). Sometimes, it is much good to just talk about things other than your portfolio. It goes a long way in understanding each other.

In any event, I don’t move money all that much. If you wait for my call to suggest changes to your portfolio, we may talk no more than once every 2 years (or even lesser).

I don’t know if this is a professional thing to say but,

My clients are as much friends as clients . . . . . and so far, it hasn’t got in the way. And if you are not a client . . . . Call me and tell me your story. I am always open.

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