Luckily my ‘work’ involves meeting doctors. Physicians, Surgeons, dentists, …and all of them. It is obvious that I chat up with them and find similarities to investment counselling. Read on…

So a senior doctor – with about 45 years of clinical practice – tells me..’as I got on in years, I realized that communicating well with the patient has to happen at various levels’. The patient has to be told get this report, do this test, observe your body – and it is common that after a month, he has done none of them, or done it wrong.

For an IFA too first understanding that Investment management (fund managers job) is different from Financial advice (his job) is step one. Then detailing follows.

An expert in medicine is what you become when you pass your MBBS – why even a degree like BPharm should make you a medical expert. It takes a lot of time for a doctor to realize that for a patient medicine is too complicated, boring, jingoistic, confusing, expensive, and worst scary. So when a scared patient comes to a young doctor who is jargon spewing, he gets irritable, and worried. Even the best diagnostic tests, and best prescription MEAN nothing to the patient who does not implement it EXACTLY the way the doctor intended it to be.

Cut to personal finance. An Investment Manager is expensive. It talks about asset allocation, asset re-balancing, expected returns, black swan events, risk tolerance, time horizons, …and believe me, if you are NOT from the industry, this is too complicated, boring, jingoistic, confusing, expensive, and worst scary. So it is the job of the financial adviser to tell him about making wise choices about the use of debt, setting up SIP for meeting college expenses, tax efficiency, making a will, and ensuring your insurance needs are taken care of. De-jargonising the Investment management terminology is the job of the financial adviser.

A good investment manager may not make a good financial adviser. A blogger may not make a good financial adviser. A smart person may not make a good financial adviser. One needs empathy to be a good adviser. Good advise is worth the money paid for, bad advise is not – the client may not stay long enough to benefit from the advise. So my being a great investor does not mean I will make a great adviser. If I cannot convince the end customer to stay around during the bad times for example! What if my style is to leave fund schemes untouched for long periods of time, but the client expects to see action every 90 days? Have I been able to convince the client that he needs to see the portfolio only on an annual basis and re-balance once in 3 years? Is he willing to stick to it? If the client shifts his money from my care to another IFA is it an investment failure or a communication failure? Some doctors love action – especially the surgeons, some physicians love procrastination!

Sadly for the adviser (as for the doctor) the world is towards short term results. From test matches to T20, we have come a long way have we not? the main reason so many IFA go towards short-term ism is because it’s the only way to run a business in an industry where customers flee at the first sign of trouble. The media too loves short term sensation, and do nothing to stop that. Be that as it may, the reason customers run at the first sign of trouble is often because the IFA has done a poor job communicating how investing actually works. Sadly the ifa has not spoken about strategy, goal setting, investment expectation, investment philosophy, and how they deal with inevitable bouts of volatility and cycles etc. He has spoken about large cap, mid cap, small cap, sensex, nifty, etc. So when the midcap goes up, the client wants to know ‘should I shift from a mid cap fund to a multi cap fund or a large cap fund. Seriously, the IFA is now on slippery ice or worse on a banana peel. He is actually incompetent to talk market timing. Hey, but he does! The advisor will blame the client, who he finds a huge conflict in what the IFA SAYS (long term SIP) and what he does – going from mid cap to large cap (it is market timing you see!). For the intelligent investor, the IFA is performance chasing, and attempting market timing. The less smart investor is happy, but most of the clients have never been educated by their advisers to behave differently.

Whom to blame?

I am convinced that me being a good investor is a big BARRIER to me being a good investor manager. I see opportunities with my experience, guts, research, etc. I know I can contradict myself while investing – I can say innovation is necessary, while being invested in Colgate, PnG, Siemens for 40 years and Gillette since inception in the ’80s.

To be a good investor, I HAVE to be able to communicate good investment ideas, steps, etc. in such a nice manner to my clients that they understand, accept, and IMPLEMENT those ideas. The best of intentions are useless if they remain unimplemented.