Source/Contribution by : NJ Publications
With an incredible product on offer, our charismatic persona and our alluring sales skills, we often can't figure out why the investor is skeptical about me and my product. We are seasoned performers, well prepared for unordinary questions and situations, we follow our customary principles of advising. We focus on overall Financial Planning of the investor, Goal based investing, Age and Risk tolerance of the investor, and advise accordingly. Yet, sometimes the end result – the investor isn't convinced.
The investor lacks conviction probably because your perception of his needs is at odds from his. A common mistake that many advisors commit is they advise according to their own judgment, although in the best interest of the investor, but often omit noticing what exactly is going on in the Investor's mind, what are his real issues. The primary need of the investor could be utmost safety of principal even if it is at the cost of returns, and you are trying convince him for Equity. He will never fall for it since his basic requirements are not being met. A financial Advisor is a solution provider, but what's the point of offering a solution to an unknown problem. There is a gap between your understanding and his state of mind. To bridge this gap, you need to step into his shoes and think like him to understand his concerns and preferences.
You need to understand the thought process of investors, what exactly do they want in return for their money. When there is parity between his views and your perception of his views, the end result will be quality advice.
So, how do you achieve this parity?
The simplest method to getting the right answers is through asking the right questions. Spend some time with the investor and ask a lot of questions. Apart from the direct rapid fire, try to gauge his risk appetite by observing his reactions in fictitious financial situations. Ask him about his personal life, his goals, is he willing to compromise on some, what's his priority list, etc. A tête-à-tête with the client can erase many misconceptions that you may otherwise have, and help you disseminate the desired solution.
Try to understand his reason especially during volatile periods. You feel that there is no need to panic and the investor is overreacting, but here you actually need to understand why is he reacting this way. Try to analyse the sudden turn of events from the investor's point of view. Money is a sensitive issue, he might have some concerns, some doubts which may need clarification. Only when you substitute yourself in the investor's position, you'll be able to rightly identify the doubts and provide a satisfying explanation.
The investor may have a number of questions and anxieties revolving in his mind, it's essential to ascertain them and advise accordingly.
Sometimes the issues that are holding him back are small. The client may have doubts about the offeror, in case of a Mutual Fund he might be skeptical about the AMC's brand name, and may be simply looking for a more familiar name for investing. So when you know the problem is so simple, it'll be very easy for you to convince him by sharing some success facts about the AMC, performance history, quality of the portfolio, expertise of the fund manager, etc.
A client may be looking forward to adequate and not extraordinary performance, but is not ready to compromise of the safety of his capital. Another investor may be a little aggressive in nature and the primary purpose of investing is soaring returns. Once you thoroughly understand the risk reward preferences of the investor, you'll have superior solutions to put on to the table.
He may have numerous apprehensions pertaining to his goals, hoping he won't have to compromise later, ease of liquidity, like what if he may have to withdraw the money before the advisable investment period, he may be reluctant to technology or may be finding the investment procedure complicated, etc.
So the crux is, the investor's mind is an ocean of questions and anxieties, they can be really petty or can be pretty intricate on the other hand. The central idea behind this article is you should never base your advice on assumptions. It's crucial to analyze and understand the Investor's Mind and Advise Right.
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