Source/Contribution by : NJ Publications
When Indians think about investing, Mutual funds will never come into the investor's mind. The evident choices will be FD, PPF, even LIC, or if the budget is high, Real Estate. It is because we are brought up in a traditional investment vicinity, this is what we have been seeing our parents doing ever since, and we are following suit. Fixed Income Investments are so deeply rooted in an Indian Investor's blood that it can be indeed difficult for the advisor to be able to even talk to a fixed income investor about Mutual Funds. Although, an increasing number of investors are game for exploring the modern methods of investing, yet the category of traditional investors occupy the lion's share of total Indian investors. And concentrating on the modern ones only, means leaving a big business opportunity behind. So, what do we do? How do we target the skeptical ones?
The most crucial step is to convince such investors for a meeting. You must remember that you don't have to get too aggressive or too conservative. You don't have to talk about the investment products with the client right away, since the viewers under question are the suspicious ones. So, you may try to strike the chord with a line like “you know there are so many investment options, which can generate good returns, plus your investment will be safe”. So if he asks you about the options, you can ask him “Let's meet, and we'll discuss”. If in case the first line doesn't work, then you may say something like “Let's meet once, even if you don't want to invest, it'll be nice to have you over a cup of coffee”. Even if the client looks totally disinterested, then too a cup of coffee is worth the try. And once you get the meeting, it's your sales skills that will do the job.
When you get the opportunity to see that client, make sure you have done your homework and researched about the client's background. Do not rush into things, it is very important that you go slowly and enter into the comfort zone of the investor, before breaking the ice. So, to begin with let him do the talking, this will give you a better idea about his priorities and how strong is his conviction for traditional investments. So, you know how deep you need to dig to get business from the client.
If the investor is a naysayer, changing the mindset is a tough job, but isn't impossible. Straight away if you start with reciting the advantages of a mutual fund, it won't help. For the simple reason that the client is not willing to hear about it, he has built a fictional wall which will not let any modern investment product enter. He believes everything that is modern is risky, and he is too happy with the safe and low return yielding fd or ppf of his. So, you need to devise a strategy to break this imaginary wall.
Doctrine of Substitution: This, for the matter of fact, holds true for all kinds of investors. You need to virtually step into the client's shoes and think from his mind. So, if the investor is a typical Savings, FD and PPF investor for short, medium and long term investments respectively, he is definitely not looking forward to hearing about equities. So, you need to give him what he wants.
> For the investor, who is parking his money in savings account, he has two things in head; one, high level of liquidity so he can withdraw the money any time in the future whenever need arises, and two, safety of principal. So, you need to tell the investor about liquid funds. Ask him to invest a small amount like Rs 10,000 for a month. After 30 days, redeem his investment, and show him a comparison of the liquid fund returns with savings account. Explain to him that the liquid fund is a combination of the liquidity of a saving account and returns of a fixed deposit, and there is no threat to the principal amount.
> An investor whose all time favourite is Fixed income investments is not seeking any criticism on his ways of investing. So, now you need to counter the FD or PPF with a debt mutual fund or a bond by carefully choosing your words. You may say, “it's great you have been investing in FD, it is a wonderful product which offers good returns. I also have a product which offers the same safety of principal with slightly better returns. If you have invested a lac in FD, try investing 10,000 in this product too. I am sure you won't be disappointed.” Remember safety of principal is paramount for the investor, so you should restrict yourself to short term debt fund or a fixed maturity plan or a bond, depending upon the investment period he is comfortable with.
Impart knowledge. Share articles, insights from experts, Mutual Funds investment stats in developed countries, news, updates, etc., with the investor on a regular basis. Simple facts printed on a piece of paper will help you weaken the wall gradually. These will develop curiosity in the investor's mind leading to questions. These questions will give you a platform where you can exhibit the various investment products you offer, their advantages and how they are better than their traditional investment counterparts. You need to explain to them the concept of aligning investments with their life goals, that equity is the best product for long term goals and any volatility is neutralized over a long horizons.
These are your hard earned investors, and you need to be careful with them and not introduce them to super high risk products in the initial stages. Once the investor is comfortable with you, and has developed conviction in his new investment, you shall begin with something like SIP in a Balanced Fund. Tell him about it's unique structure, tax benefits, the debt component protecting the principal and the equity component working for growth. Show him the performance charts of a balanced fund over the years.
All advisors have their unique ways of handling traditional only clients, these tips may help you in the process. Because “Sometimes a slow gradual approach does more good than a large gesture” ~ Craig Newmark.
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