The most important thing in investing is Behavior control (ok it is a contrived version of Behavioral Finance). If that is so, all investment management (what the IFA does) should be based on “Goal based Investing” which is the book I co-wrote.

I would go to the extent of saying that an IFA should spend 90% of the time with the client writing down the goals and signing off on them. He should then take an oath in the presence of his family that he will stick to those goals. His hands and feet should be tied to the mast – so to speak, so that he does not jump into the sea when there is some turmoil.

The IFA should of course do his job of keep his expectations right, keeping enough liquidity, investing in a few funds, and keeping a focus on goals. Yes it may require some tactical changes, but it should not really depend on the market. A friend with a big portfolio has invested in Bharat Forge from prices ranging from 800 to Rs. 500…and does not know what to do. I said “just stay put”. Not sure how many IFA have the guts to tell their investors that “Icici Pru discovery changed its portfolio in 2017..and you should judge it over 5 years, so we will do a review in 2022, not earlier”. Makes no sense to do that. Both the investor and his adviser need “belief” (shraddha) and patience (saburi) as Sai Baba would have said.

Investors should be clear how much they will borrow, what assets they will own, how long will they not panic..not very easy to ask. An IFA should be well equipped to handle such stuff. Clients GOALS are far more important than alpha, beta, fund manager thinking, small cap, mid cap, value investing – all this is JARGON which does not sit well with the investor. However the industry loves this.

There are a few IFA who tell the client upfront “your return expectation beyond 12% is not going to happen..and the biggest risk in ANY portfolio is that your goals cannot be met”. Most clients like this upfront straight talk. Some of the things that I have heard IFA telling their client are the following:

a) 18% expectation? you are joking, right?

b) Your goals are not reasonable at all.

c) If you think you will live till 72, it is fine, I will still expect you to live till 93 years and will provide accordingly. Both could be wrong, client could live up till the age of 73, and his wife could live till 104.

So reasonable expectation, sensible goals, and well written down – and checked once in a while is what will work. Lack of commitment, shallow thinking, lack of control …by the investor and the IFA can ruin the full stay. Mostly reaching the objective is done by sensible investing, sitting tight, regular reviews and staying away from email, wassapp and FB groups of fund managers, advisers, media, FB, ….and deep meditation.

One worry for the real big client is they are scared to disclose their whole portfolio to the adviser. So a client with Rs. 150 crores of a global portfolio may not tell the IFA about the whole portfolio – lest some loose talk hurt them. IFA needs to concentrate on his role and not what the market can do. I know one client who has about Rs. 24 crores invested with one IFA. That IFA has not met the client’s family. His wife thinks he is very rich and has about Rs. 7 crores apart from the house. Children think ‘dad is very rich..and must be having at least Rs. 5 crores’ . Only 2-3 of us know his real net worth. I signed as a witness to his will….LoL.