Many (Most) clients struggle with multiple goals and limited resources. Children’s education, poor RE returns – but will not sell the assets, poor asset allocation, poor returns over 5 years in equity, debt draw down, loss of job, fall in salary…

What is the Role of a Financial Adviser?

Should he just play by or take an active role? Should he forcefully scale down the goals? Should he say “Europe trip will delay retirement by 1 year” or adjust the risk. Asking the client to increase exposure to equity – imagine how tough it can be when equity is putting up such a poor performance. Asking the client to invest in US markets is easy when the US markets are booming. In 2 years time it could be time to shift to Indian Equity. Hey, investing in US markets is risky, is it not?

And the IFA has to decide whether to be more accomodative or more authoritative. That is not easy. Some clients listen, many do not. Keeping the clients in the right path when the markets are doing well is easy. It is a nightmare when the markets are down. However, even when the markets are doing well, some clients could cause trouble! They might now want to take more risk. Like a friend who wanted to put US $ 500,000 in an US fund because he has got good returns over the past 18 months.

When should you be accomodative and when should you be ready to read the Riot Act? It is really tough to make this call. If the client is far away from his goal (say a 43 year old with a Retirement Goal) you can play it by the ear. However if it is a 54 year old planning for his Retirement Goal the IFa has to be more vigilant and force a more conservative portfolio. The problem is when the fund manager takes risk in a debt fund – and postpones your withdrawal by 18 months.

What do you do in such cases? When do you tell the client “hold on things will recover” and when do you tell him “hey you need to put in at least a couple of crores” – for reaching your goal?

Tough call both – sitting silently, and pushing for action. Is it possible to tell the client – to downsize the goals? that a foreign vacation once in 3 years sounded good when your industry was booming, but now it has to be Goa, and you will share accomodation. Your kids will search for a airbnb! Sure it hurts egos but it is surely better than wondering what to do at 54 when the job has ended. Will you be forced to compromise on Retirement? and gently nudge him that there cannot be a borrowing possible for Retirement?

People do not invest for “growth” or “value”. They do not know which part is for growth and which part is for capital preservation. Mostly clients invest to achieve goals. If the goals were ambitious to start with, YOU SHOULD HAVE TOLD him then. You choose the pleasurable path of not telling the client. Now it is time to read out the RIOT ACT. No, not to the client. To yourself – either your coach, or your kid – anybody can do it.