this post is being repeated. Had posted it earlier for a few hours…but was removed..because there was some more important ‘breaking news’ story…so it is coming up again…

A few days ago I did a training for a Wealth Management Company. Not too keen to mention client names..but it was a high quality client and had a lot of good, smart people. One girl who knew about this blog and my book (SJ :)) wrote a piece and wanted to know whether I would carry it. To me carrying anybody else’s post is quite ok, but just something which had never been done. She did not want her name, location, company name mentioned. In normal circumstances I would have edited it – at least a little bit. However this girl had done a decent draft..so here it is without any significant change – except for a comma or a full stop!

“At a lot of levels financial advising is like medicine. As a doctor you can advise, prescribe and then hope.

A couple of decades ago perhaps the problem was less acute and some of us could make a living in advising / and trading in equities. Now things have changed. And changed quite a lot. There is Google and there are many more doctors, hospitals, quacks, websites, paid advertising, paid websites, chemists wearing a white coat….etc.

Suppose there is a client who has a messy equity portfolio and you clean it up, and introduce him to SIP. Is he happy…well initially yes. First few months perhaps. In fact one client (now friend) opens his portfolio to all his friends and says…’S has grown my money to Rs. 3 crores – and that by doing SIP over long periods’. He has risen from Senior Manager to Executive Vice-President and his SIP amount from Rs. 1500 in 3 funds to Rs. 200,000 spread over 4 funds. Yes this amount is far greater than his Provident fund. 10-12 years SIP, I think not a single month missed – but I could be wrong.

However there are others who think they could have done better by timing. I sadly do not know how to do it.

Also some of them read many books, websites, meet other consultants, advisers, wealth managers – and you can be sure some of them may influence them also.

So some investors / customers may think they need to have more equities (especially in a boom) or should have more debt (when the index is 9k), or they should be repaying all their loans before they start investing. Sometimes data can be made to look good – after all 2003 -2010 real estate, gold and the Sensex all look the same! Then there would be customers who may think that if money is needed on Monday, they could be in equity till Friday. Asking them to withdraw over a 6 month period is sensible -but can look STUPID in a rising market. Surely another adviser can rubbish that. All this could hurt the relationship.

In most cases the solution lies in communicating with the customer – and hope that the customer means what he / she says. If he/she says they are preparing for a Marathon, you think stamina is important. However there are people who run the marathon – treating it like 42 sprints of 1-km each! – only a few Kenyans can manage that.

So talk to the customer quite often – and deliver what they want. Frankly asset allocation’s success is known only in hindsight. And hindsight is 20-20 for all of us. Including our clients. Unfortunately you invest in the present, and you review in the future.

If you have got a client 24% return over a 10 year period (sorry you did the documentation and the market did the trick is what I mean) you think you have done a good job. However data can be created to show how by just one or two switches it could have been 42% (just 2 switches in 10 years, not too many is it?)……

And if the client says this to you …you can ask ‘But why did he not tell you in advance…your client tells you…”I did not ask’…hmmm the client is always right, is he not?