all over the world the HNI investor is considered to be the sophisticated investor. It is amusing to say the least…so here are some of the HNI mistakes that I have seen…

a) many of them sign the bunch of papers that a Wealth Manager or a Bank Relationship Manager puts in front of them. I have seen (last week) 3 investors who had changed their agent WITH NO CLUE that they had done so. It was the IFA who alerted them. However that IFA lost the commission, the client paid lotsa taxes, and was wondering what hit him!

b) One person had about 105 schemes in which he had invested…this included dividend options, dividend payout, and growth options of the SAME FUND..invested at different times. It is not as though the funds had not performed well, but the whole thing was a mess – and this portfolio was being sorted out by an IFA AFTER the death of the holder.

c) Portfolio full of REIT – and believing that the whole portfolio was liquid in 3 days! How do these ‘sophisticated investors’ believe whatever is told to them without verifying completely beats me.

d) many of them do a lot of FnO. The problem is that the brokers do not do a year end or even a month end calculation of all trades. As they depend on Mental Accounting, they do not realize that it is not a great game!

e) the churn in PMS service providers is awesome. If it does well “book profits” and if it does not do well “we need to shift from A to M or M to A” – and the frequency of review? well in one case it was 6 months. Guaranteed fees for the bank: 5% of aum. With 50 crores of aum, the RM is assured that he meets his “revenue targets”. I am so tempted to name the bank, the branch and the RM, but in self interest I will not do so!

f) Sir I earned so much for you last year (Mental accounting) why don’t you buy some life insurance? – nice way to suck away whatever got left behind by the market and the continuous activity on the portfolio.

g) a few of them whom I met said “happy to keep the RM away from my other assets” – and hence agreeing to what they want. Well,well.

….then there are more stories…all stunning..