Interesting case of Behavior Management

Few days back I met One of my MFD client but he was disturb due to his clients behavior. According to him he tried  to “Manage Investor Behavior” and also educate the investor that “Downfall is temporary Growth is permanent” also tell him “DO not convert your Notional Loss in to Real Loss” but at the end investor has redeemed huge amount of his investment with losses.

I simply ask to MFD “The money investor has lost was their own the decision taken was also his own, you have done your job properly by informing him all the aspects of the market and would be the results. After all he is the owner of the money why are you worrying?” 

MFD surprisingly with anger ask why shouldn’t I? My AUM is reduced and my trail will be reduced. My entire office expenditure was managed by the trail income which i was getting from that investors investment.

MFD replied “My income is reduced that is why i got panic.” I tell him “While disruption your AUM gets reduced and your income is also reduced when market get recovered your AUM will also increased to older level.” MFD reply “Till that how can I manage?”

I ask MFD “Now tell me what should I do to manage your Behavior?”

MFD can’t understand my question and reply “What is wrong there in my behavior it is obvious that the person whose money gets erodes will get panic and anger”

Then I simply tell him “Now you are on the right track, when it comes to you. Put your self in place of your Investor and myself in place of your self and check conversation between us, you will realised why your client behave like that.” and I stopped and walked out after some other talks.

Until we find the reason, how can we solve the problem.

Managing behavior doesn’t comes in picture at the time of disruption only it should be there while approaching a new prospective client. Prevention is always better than cure

Change in the client’s behavior is mainly related to:

  • Client’s education (Not academic): What we teach our client will be returned to us in terms of Behavior. We might be thinking when we  have taught any thing wrong to our client so he is behaving wrong. This is a typical problem among entire industry.

Let me explain when we approach our prospective client and give a sells speech, which is the first education for our client. Our sells speech is the textbook for our client. Our client will always compare our practice with the lesson we taught him while our first meeting. Clients expectations and emotions are now directly connected to our sells speech. If we have not educate him what is to be done while disruptions they will get confused and behave according to level of his knowledge.

  • Client’s Portfolio Performance: The second reason is connected to us twice!!! Not understood I will explain.
    1. The first topic which we have discussed above is the first reason. Due to our marketing speech clients expectation was set to so high that’s why even after performing above average client is not satisfied.
    2. Poorly managed Investor’s portfolio which leads to bad performance. This is also a common mistake done by MFDs. Managing portfolio using automated transaction based system without concerning performance. Portfolio literally managed Market Bharose. When the market goes up it is up and when goes down it is down.

In both the reason we are fully responsible.

  • Client’s Personal/Financial Problems: Now-a-days due to pandemic situation there are so-many investor’s cash flaw is disturbed that is also a big reason behind change of behavior. This not in our controls but we can ease this problem by doing some financial arrangements for him from his existing investment portfolio with lower impact on his goals.

In simple word “Just like we can not expect a surgery from an engineer, how can we expect psychological treatment for investor from MFDs“. What we can do is modify our marketing speech and other activities in such a way so that clients expectations will be realistic. After all “Expectations  are the mother of Unhappiness which is the cause of all Investor’s Behavioral Problems”. Remember if client is behaving differently only client is not responsible we are also involved in it. Its just a matter of acceptance.

Just like charity begun at home for changing investor’s Behavior, we need to change our self first and rectify the causes on our side.

Now comes back to our case

After two days MFD called me and tell me “I realised my mistake after our meeting Now I have decided to change entire marketing strategy” and also shown interest to meet again regarding the topic.

I said “OK we are meeting in coming days”.

That was the great lesson for him and which help him to start climbing ladder of the success. After that event I have made up my mind to write about success in Investment. In our next Blog we will discuss about “Secretes of Success in Investment – 1”



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