We know Mutual Fund is a product of exceptional caliber, and are a boon for your investor's portfolio. But how do you explain the value of this wonder product to your clients, especially the new ones. People have varied perceptions about Mutual Funds, some believe it is a different kind of a direct equity trading product, some think of it as an insurance policy, while others just don't want to know about it because either they are focused on other investments or they think it is a financial jargon which is beyond their comprehension. Such investors do not choose mutual funds because of these beliefs and also because of sour experiences of their friends and family in the markets.
We try to sell our product by explaining how good it is, how it has been outperforming its competitors, how you as an advisor have helped investors make huge money. And then we wonder that even after our best sales efforts, the client is too confused to say 'Yes'. The logic behind your client's response is, he's clueless about the product you are trying to sell. We forget the basic, that it is very important to explain the product in detail to our client. Unless he knows what's the base, he would not be able to develop a conviction about it and the confidence to purchase it.
Explaining the product right can help your clients in building wealth and help you in achieving your sales targets. In this article, we will focus on explaining the concept of mutual funds to your clients.
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The Concept: The first step to explaining Mutual Fund to your client is explaining the essence of it in layman language. A Mutual Fund is nothing but an instrument, through which a large number of people pool in their money. This money is then used to purchase stocks, bonds, and other financial securities, and is managed by professionals, who by their wit and experience administer these assets, with a view to generate superior wealth for you. You are getting a small piece of all the invested securities by investing a small sum of money.
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Offer him a solution & not a product: There is a unique scheme for each investor profile. So you have to first understand the client's needs, his risk appetite, his goals, his age, family background etc. And after a thorough analysis, offer him a solution. Remember, you are here to help your client first. So, if a client is looking for regular income, then you may suggest him a dividend option or SWP. If he's looking to invest for long term, but is not ready to risk his money at all, you may suggest him a debt fund. If he's the one who wants to make money and is ready to take risk, you may suggest him an equity fund, and the like. The bottomline is, whatever product you recommend, should be a solution to his problem.
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Not too technical: When you go to buy a car, in the salesman's one hour speech, he'll talk about the engine capacity, the torque, BHP, etc in two lines. And 90% of the dialogues will be on the features of the car, the comfort that you will experience, how it is better than others, etc. It is because the buyer understands the end result, the features, how the car will benefit him, how it looks. He would not conceive the engineering technicalities of the car. Similarly, while explaining the MF concept to your client, you must not go too much into technical details. So, if you are marketing an equity mutual fund, you shall not talk about the percentage of equity allocation, or the number of scrips in the portfolio, ratio analysis, risk ratios, etc. You have to explain the fund in terms of his requirements, how the attributes of the scheme matches his needs, how has been the performance in comparison with the benchmark, other schemes, and how well it has performed historically.
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Explain the benefits of a mutual fund: Next, highlight the advantages of a mutual fund. Explain about the operational ease, online & quick transactions, easy liquidity, SIP option for a convenient & disciplined investment, STP and SWP options for easier transfers & withdrawals, choice between dividend and growth options, professional management, etc. If the investor is an equity investor, explain to him how through a mutual fund, he can invest in a variety of stocks from diverse sectors, being handled by specialists and he doesn't exercise such comfort in direct trading.
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Disclaimer: Lastly, be honest with your client. Don't forget to mention that the returns are not guaranteed, in case he goes for an Equity Fund or a Balanced Fund. Tell him about the risks involved and tax implications of the product. Also, bring to light the benefits of long term investing, and how his investment will be better off, if he invests for a longer term.
Mutual Fund is an awesome financial product which assists the investor in long term wealth creation. It is our responsibility as a financial advisor to explain about this opportunity to the investors and spread awesomeness in our clients' portfolios!
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