The article is about two of my clients whose names start with V & J respectively. You might be thinking why I wrote an article and added the word principle by their initials. This is one of the mistakes I did with my career as a distributor. Well, let’s hear their story.
Mr V’s story: Mr V is young and married with no liabilities from a well to do family. He has been my client from quite some time now. I recently introduced a small-cap fund in his portfolio to give him some higher returns. It was a pretty small SIP of 500/-. At that time the small caps weren’t performing well and the fund value was around 10% below the invested amount in 6 months period. After around 5-6 months he questioned my reason to select the particular fund. I explained to him the importance of having a small-cap in the portfolio and explained to him since his goals were still 30 years away it’s quite a value add as there was enough time for it to grow and invested amount was also low. I didn’t feel he was convinced and decided to stop the SIP. I told him not to withdraw the funds. He was okay with that.
I learned an important lesson here. I should have stick to the risk analysis results. Using my liberty to introduce a small-cap just because the goal was 30years away was the mistake I did. The story doesn’t end here. In the next few months, there was a bull run and his investments had turned green. Next time when he met me, he wasn’t quite happy either. He said to me that if I had asked to put him more money in that small-cap fund he would have made more profits. I was speechless. The common problem is the client tries to research his own funds and tries to push in his knowledge and fund selection to the distributor.
Mr J’s story: J’s story is no different from Mr V. He comes from a similar financial background. At that time ABSL has released a retirement solution plan. He was impressed with their presentations and videos and said that he wanted to invest in that fund. I filled up the application form on his behalf and initiated the SIP. It was the ABSL 30’s retirement plan to be invested by those in their 30s. He invested for 4 months and then finally stopped the SIP saying the performance was subpar. ABSL has released 3 funds in that series. The 30s plan, 40s plan and 50s plan. The 30s plan was meant for those in their 30s. But he lacked the risk-taking ability for a 30-year-old. His fund is also now positive and giving a good return.
The moral of the story. Risk analysis is the only way to play safe with clients. You don’t need to try to make extra money for clients unless they are willing to take risks.