Meeting HNI Expectations (Part 2/2)

Amar Pandit , CFA , CFP

Amar Pandit

A respected entrepreneur with 25+ years of Experience, Amar Pandit is the Founder of several companies that are making a Happy difference in the lives of people. He is currently the Founder of Happyness Factory, a world-class online investment & goal-based financial planning platform through which he aims to help every Indian family save and invest wisely. He is very passionate about spreading financial literacy and is the author of 4 bestselling books (+ 2 more to release in 2020), 8 Sketch Books, Board Game and 700 + columns.

Part 2 of my conversation at Wealth Forum’s IFA Growth Colloquium revolves about meeting HNI expectations. (Read Part 1 here)

I told Vijay that IFAs first and foremost need to SET the Right Expectations. HNI’s and other investors have certain expectations that have been built by the industry. They too have been trained to think in terms of Product, Returns, Benchmark and a lot of garbage. 

Thus, they believe that Experts are Financial Astrologers. There are a lot of smart people in the industry who are smooth talkers and get people to believe in what the mind what’s to believe (Highest Returns Safety of Capital). 

Which investor will not want Risk Free Returns? Which investor will not want the Highest Returns but Safety of Principal? Which investor will not want to get into the market at the lowest and get out at the HIGHEST only (If you get out before the highest, you come across as a fool).

A lot of people make a killing playing on this psychological expectation of investors and thus you see people losing their capital, sometimes their shirts and then losing faith in the entire system. 

A few gems that I have heard (I am being sarcastic here)

  1. We follow a long-short strategy and it means that you will make money when the markets are up and make money when the markets are down too because we will short the right stocks. WOW. Superb argument but how do you exactly do that and what happens when you go wrong both ways. Investors generally don’t understand long positions and do not have the behavioral grit that is required to stay invested during downturns, but DOES it sound plausible? Yes, it does.
  2.  We only invest in 7 stocks as we have an army of analysts, journalists, auditors who track the best opportunities for you.
  3.  Trade in Options and make 1.5% a month Risk Free. This one is brilliant, and I have personally seen RMs of a big Financial Institution peddling this as a Risk Free Product. 

Thus, the first thing you must do is to SET the Right Expectations. I am repeating this again as it is so very important for you (IFA) to understand this.

So, you are operating in an environment where there are not only lies but differing opinions, views and your HNI prospect has been conditioned to think in a certain way. The bigger the portfolio, the bigger the competition and so you will see that you will have to work really hard at the Start in setting the Right Expectations and reinforcing it along the way.

You need to Set/Reset it with your value proposition. You need to make sure that you correct any misconceptions that the HNI prospect has and that he understands your value proposition. 

Second, you need to understand that your prospective client is not a NUMBER but a Real Person. Treat him like one. This means that you need to look at the whole person not just his portfolio number.

Third, your role is to evaluate the prospect just like he is evaluating you. It’s not to sign up anyone just because they have 10 Crore. Otherwise, like investors who land up with a plethora of products they do not need, you will land up with clients you don’t need and then WONDER what to do. I have seen IFAs feel the frustration when they meet with clients who they don’t enjoy working with or with clients who are insulting /abusive. As it is this business is a stressful business for Advisors who take their work to be impactful as you are responsible for ensuring that your clients are able to achieve their financial goals and they live the happiest financial life possible. It is a big responsibility one that you have signed up for.

Most IFAs burn out in managing client expectations because they have not set their client expectations based on the value proposition, they have to offer.

Like I have mentioned in my earlier post, not every HNI prospect that you come across is your Ideal Client. If you realize that there is a mismatch in terms of expectations whether in terms of returns, strategy, process and your value proposition, you must clearly walk away by politely but firmly saying “Thank you so much for your time. I don’t think I am the right advisor for you, and you are the right client for me.”

Yes, it takes courage and is very difficult.

However, if you do manage to do this, I can assure you that this will be the fastest way to grow. You might ask again “What did you just say, Amar?”

I said, “The fastest way to grow is by saying NO” Can you say “No” to a prospect who has ₹5 Crore? We have done it at a time in 2006 when we could have gone out of business. It was very difficult but the right thing to do. You just need to overcome your fear. 

Our results are for everyone to see and is proof of the pudding that Your ability to Set the Right Expectations and your ability to say No will go a long way in building a world-class organization with fantastic clients, who will love you for what you do for them.

I hope you loved this post. Feel free to share it with your fellow IFA colleagues and friends. 

My objective here is to add real value to as many IFAs as possible and help you build the wealth management firm of the future. Let me know your thoughts and if there any topics that you would like me to cover.