The situation an IFA faced last week that left him speechless

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.

I am sharing a very interesting situation that you would find useful in your regular interactions with prospects and clients.

This one was from a very prominent IFA (Akshay- name changed), whose client asked him the following “I heard from someone that the government is broke and has no money to pay salaries. The FM and PM are going to announce a freeze on assets or taking control over it. What do you think will happen and what should we do?”

What would you answer if your client asked you this? Think about it for a minute or more.

How would you respond?

Akshay’s instinctive response was “This is not possible. The government just cannot do that”. He went on further “How can they do that? Who is your source? This is simply not possible”.

Are you able to relate to Akshay’s response or would your response be different? I am sure most of you would be able to relate to Akshay’s response because this is how most people would react.

The client immediately said “Why is this not possible? “Demonetization took place, right?”. Akshay was stumped and had nothing more to say. He managed to say something but, in his mind, he knew his answer was not convincing enough.

In case you have not noticed, Akshay was not trying to CONVINCE the client of something, rather he was trying to DEFEND something.

I asked Akshay “How can you say that some random event will not happen? Are you willing to stick your life and say it will not happen?” Akshay said “I can’t stick my life out after demonetization and COVID-19 on anything, but I know this is not possible”. I told Akshay I do not believe it too, but that is not the point of the conversation. I told him that this was not a wise way to handle the client’s concern at all.

When your client calls you with his concern about some event, your role is not to defend the FM or PM or the economy or the products or the markets. Your role is not to defend them because you cannot. You must understand one thing clearly that we live in a VUCA (Volatile, Uncertain, Complex and Ambiguous) world. The only thing certain here is Uncertainty. So, your role overall is not to say this will not happen or that won’t happen but to help your clients understand that they live in an uncertain world and you will help them navigate this world. You do that for them by being prepared for the future and course correcting whenever necessary.

Imagine you are about to board a flight and your friend tells you that this flight is going to go through solid turbulence. Is it important to argue whether there will be turbulence or not? No, it is not because what is important is that you are protected from any turbulence as well as a crash.

Will you go and argue with the airline or the pilot about no turbulence or no crash before you board that flight?  No, you won’t, and you will confidently board the flight because you know that there is an experienced pilot on board who will navigate this turbulent weather and take you safely to your destination. This is exactly what your role is in your client’s life. You need to play the role of the financial pilot in your client’s life. You must establish this at the start of the client relationship and reinforce this once every year irrespective of whether there is turbulence or not. This is what Akshay should have established rather reinforced during that call. This is so critical that I cannot emphasize the importance of this enough.

There are many ways Akshay could have handled his client concern and I have shared a clear way in one of my previous columns “The Wise Way to handle panicky clients and even get a referral”.

The universal truth of our business is that your role is not to defend anyone or the markets. However, this is exactly what many folks end up doing. This is because many IFAs have set the value proposition in their client’s minds that they can beat the markets, choose the best products, or take them out of the markets before turbulence hits. Like I have discussed earlier, these propositions are not only unrealistic and outdated but doomed to fail.

Your role is not to convince the client “the sky will not fall” but to assure your clients that you have prepared them well should the sky fall. The reality is that for some events you cannot protect yourself enough and thus a course correction will be necessary should that unlikely event happen.

Sadly, many investors believe that our role is all about predictions which it is not. We all have a collective responsibility to correct this misconception and thus ensure that we spend enough time getting the right clients on board and once we do, make sure they truly understand what our real role is.

Finally, I leave you with 2 interesting quotes:

  1. If uncertainty is unacceptable to you, it turns into fear. If it is perfectly acceptable, it turns into increased aliveness, alertness, and creativity.– Eckhart Tolle
  2. Embrace uncertainty. Some of the most beautiful chapters in our lives won’t have a title until much later.” – Bob Goff