If you are only managing a client portfolio, you are doing big mistake.

  

Are you managing the psychology of the client rather than only managing investment advisory?  Are you able to understand the client's mind and his expectations? Are you able to set the client's expectations from the investigations or just follow his high expectations?   The biggest risk you as an MFD are facing is losing client relationships. Misaligned expectations lead to panic selling, churn, dissatisfaction, and damaged relationships.

New client additions have come down, and redemptions on the other side are not getting stopped. Further lump-sum investments have dried up, and clients are scared. Most of the clients are looking for global products and GFT city outbound products, making MFDs run from door to door to get knowledge about these products. SIPs have stopped at a record pace, followed by clients avoiding the tone for investing in the market despite risk, mouth-watering low valuations in many segments.  Are you able to cope with the never-ending new product requirements from the clients?

Further most of the clients are saddled with investments that have corrected from the correction that began in September 2024.  The sudden jump in demand for global investment products has scaled to around 25 to 30% in portfolios, and in many cases, it has become more than that, which is a matter of concern for long-term wealth creation. Many clients have become so aggressive that, without even knowing the underlying risk, people are investing just to chase returns blindly. A sudden belief has been constructed within the investor's mind that Indian markets will not be performing, and global markets' growth is going to be a long-term game. Indians have been discounted now by many investors, whereas we are living in India, spending in India, consuming in India, but we are investing in countries like Taiwan, the U.S., Japan and China.

The demand for complex private equity products has also come up from the HNI and UHNI client segment, and most importantly, from the 2^nd generation family offices. 2^nd generation of family offices is more inclined towards returns, and the same story boils down when retail clients also start looking for global ETFs and index funds, and even individual stocks of Taiwan or China, etc.

Why is India being discounted? Does that mean we don’t believe in Indian economic growth or its policies?  India is no longer the same country as it used to be tagged in 2011-2013. At the same time, we are not having a banking NPA of 18%, which created a huge bottleneck for the supply of liquidity within banks. We don’t have the inflation rate hovering around in double digits, nor do we have POLICY ISSUES.

If a client is investing out of India and not trusting India, then it’s a mistake of the MFD that he did not set the tone of investing before getting the same. The key to enjoying a long and successful relationship with clients is to set clear expectations from the very beginning, and then deliver on them.

Then why are clients behaving like misguided missiles seeking an opportunity to invest in those places just by chasing returns? The lack of goal planning and having a risk analysis is the key component missing while discussing investments with clients.  We often lure clients with returns and asset allocation models, but we lack discussing risk, speaking about the dark side of investments and more importantly, we don’t drive clients away from returns but to look into the source of returns.

Discussion related to risk management and how much worse the market can go is an opportunity to strengthen the client's behavioural aspects towards the return-chasing mindset. Lack of goal planning and chasing returns are two of the most damaging investing mistakes—they often go together and are especially risky when investing in global markets, where volatility, currency risk, and information gaps are higher.

The 2^nd generation of clients is knowledgeable, but as an advisor, it's a duty to outline the various downfalls of the market and also to map the investments with goal planning. Behavioural management of the client is more important than just asking blindly for investments.   Reactive behaviour is the key component that needs to be revised and updated for the clients, which will enable them to create long-term wealth. Less familiarity with foreign companies/countries increases psychological discomfort.

Did you ask the client about his investment decision leads to his  global portfolio drops 30% in a year due to currency + market combined, would he sell or hold?"

Realistic risk tolerance for international assets = the lower of your psychological comfort AND your financial ability to withstand currency + market volatility, adjusted for your time horizon. Start conservative (10%), then increase only if you've tested your emotions during a market downturn. It's well clear that emotional management is more important than investments only. "Markets will go up and down—this is normal, not a sign of failure. Your plan is designed to withstand 40% drops without derailing your goals.

In volatile times, increase contact frequency from quarterly to every few weeks to inure clients to new realities. Are we doing that?