An Advisor's Best Business Card - my talk on 25th January

Lessons for the IFA from airline safety announcements

IFAs can draw lessons on how to alert and caution investors from airline safety instructions. 

Read on to find how…

Understanding calculated risk and its impact on investments

 Very often, one comes across certain clichéd terms, one wonders whether the user understood the meaning of what was said. The other day, I was having a discussion with someone who was concerned about the loss in an equity mutual fund account. He had been investing in this account through SIP for almost three years now. The moment I indicated that equity investments are always subject to a higher risk that this gentleman uttered a very commonly used phrase that he understood the risk and he always took “calculated risk”.

Read on ...

http://www.moneycontrol.com/news/mf-experts/understanding-calculated-riskits-impactinvestments_846028.html

Lessons from a jungle safari for the advisor - my article as appeared on www.cafemutual.com

Amit Trivedi, Karmayog Knowledge Academy, went for a jungle safari recently and realized that given the similarities between the jungle and financial markets, advisors can learn a trick or two.

A jungle safari is a great adventure for those who come from cities. Earlier this week, we also went for one. This sanctuary in the Himalayan foothills is known to be home to a few endangered and rare species of animals and birds.

As is the practice, we hired a guide for the jungle safari. Before hiring the guide, we asked him the charges and sought assurances on what we could expect in return. We asked him what all would he show us.

And his answer is something all advisors can learn from. He said, “Sir, it’s a jungle. We will show you what is possible.” No tall claims, no big promises. He gave us the plain straight truth – the best way to manage expectations.

We did not see any animals. But the route he took us through was an experience in itself. After a while, the weather turned and clouds built up. It started to drizzle. There was no chance of being able to see any birds or animals. Can we blame the guide for the change in weather?

Compare this to the financial advisor’s business. Very often, financial advisors build expectations, which though well intended may be unrealistic. Many investors take it for granted that because one has hired a financial advisor; one will see only positive and high returns with no risk whatsoever. Many times, the investors assume such things even when the advisor may not have promised such things. It is important to ensure you clarify right in the beginning.

Then, what is the point in hiring an expert?

The guide knows the various routes. You do not. The guide will ensure you reach back. On your own, you may lose your way in the jungle. The financial advisor is supposed to know the behavior of the market and help the investors ride out the storms.

The jungle is neutral. It does not care how much money you paid to the guide. It is oblivious to your name, title, position, or popularity. You may spot an animal, or you may not. The probability of a CEO being able to see an animal is exactly the same as that of say the office boy. The jungle is neutral. You have to follow the rules of the jungle. So are financial markets. The market does not care about your position or title or even the size of your pocket.

The financial market is also like a jungle. It is neutral. It does not care how much money you start with or it does not care what your educational qualifications are. You have to follow the rules of the financial market. And some most basic rules are, “buy low, sell high”; “plan well and stay the course”; “do your independent research instead of following the crowd”. So simple to state but so difficult to follow.

It is the guide, who is supposed to help you navigate through the jungle. Whether you spot a big cat or not, the guide can only play a small role. Whether you will get a ten-bagger opportunity or not, the financial advisor can only help you be in a position to benefit if the opportunity arrives.

And like we cannot blame the guide for the change in weather, one cannot blame an advisor if the economy turns bad. The guide has to help you ensure that you were prepared enough to take care of the unforeseen situations.

The financial advisor’s role is akin to that of the guide in the jungle. One has to know what all can go wrong and help the clients prepare for the unforeseen events. At the same time, the financial advisor positions the client portfolio in a way that it can profit from the opportunities.

As someone has said, “You cannot direct the winds, but you can adjust the sails.” The financial advisor helps build a boat and then adjust the sails.

Remember, the jungle is neutral. And, so are the financial markets.

The views expressed here are solely of the author. He can be reached at amit@karmayog-knowledge.com

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