|
Lets look at the issue of portfolio reviews in two parts :
For retail clients For HNI / affluent clients
In this article, we will look at the relevance of portfolio reviews for retail clients and how best to conduct these in a cost effective manner. The next article will examine how we can strengthen our review processes when dealing with more affluent clients.
Portfolio reviews for retail clients
We are deliberately taking retail clients first, although portfolio reviews are more commonly associated with HNI clients. There are many distributors who believe that portfolio reviews are impractical in the retail world because
It is too time consuming and unremunerative when dealing with small portfolios Clients don't share their full portfolios - so how can a review be done Many clients are "walk-ins" - where the nature of the relationship is transactional.
Portfolio tracking in the good old days
There was a time, long ago, when retail distributors largely sold fixed income products with defined maturity periods - company deposits, Government small savings schemes, Postal deposits etc. Business in most cases was transactional in nature - walk-in clients would consult the distributor on investing certain amounts they had saved, and the distributors would offer them alternatives from what was currently available. Some of the distributors who went on to become very successful, understood that they needed to do something more than just wait for investors to walk in whenever they had savings to invest. What if they walked into another distributor's office instead of yours? These successful distributors started creating records of every investment made, with maturity dates. They religiously sent out post cards or letters advising their clients about impending maturities, offered to get maturity proceeds collected and thus put themselves in a good position to intermediate in the re-investment of these maturities. Not doing the tracking and maturity assistance would mean not knowing when your client will have investible surpluses, and therefore having no influence over how the maturity proceeds would get deployed. These interactions during maturities of old investments also gave the distributors an occasion to understand more about other savings of the investor that could be deployed. A simple act of maintaining records and following up ahead of the maturity of any investment, put these distributors in a much better situation to retain assets and build on them.
Portfolio reviews give you much higher control on your own business
In today's world, when investments are increasingly being made in open ended funds, you don't have the luxury of writing down a maturity date and following up a month before this date for re-investment. The other aspect of open ended funds is that they offer market linked returns and not fixed returns - which means variability in returns and therefore different sets of investor experiences when they look at portfolio returns periodically, and different sets of investor perceptions on market news and developments. If you don't have a mechanism in place where your retail clients consult you periodically, you will most likely find that they take their redemption decisions without you even knowing about it. And, there is no assurance that they will come back to you to seek your advice on re-investment in alternative products. If that be the case, how confident will you be that they will come only to you for fresh investments from annual savings?
Unless you have a mechanism that gets clients to engage with you regularly - like some of the older distributors did with post cards for maturities - you may keep trying to grow your business, but may find retention of old assets a big challenge - which means you are running hard to stay in the same place.
Look at it from your client's angle
That was the business angle. Look at it from an investor's point of view : he's moved from a cushy world of fixed return instruments into market linked products in the quest of beating inflation in the long term. Doesn't he need hand holding to help him navigate through market volatility and stay on course to meet his long term objective of beating inflation? Shouldn't we be proactive in offering periodic reviews of his portfolio rather than wait for him to panic or get worried and then hope that he will come to you in that state of mind, so that you can help soothe his nerves? What if he doesn't come to you and redeems out at an inopportune time, in his state of anxiety? Have either your client or you benefitted?
The question is not whether to but how to conduct reviews cost-effectively
All clients - big or small - can benefit immensely from a regular monitoring of their portfolio so that course corrections can be made to ensure that they remain on track to meet their goals. Right selling would mean that you not only sell well at the outset, but also review and monitor what you have sold to ensure that it remains relevant for your client. The question is therefore not about whether it is needed, but about how to execute regular portfolio reviews in a cost effective manner when dealing with retail clients.
The best strategy in this context would be to fully embrace goal based selling and then conduct annual reviews based on these goals. We will discuss more about this in a subsequent article. For the moment, let's deal with existing clients who you have already sold various funds to, before you embraced a goal based approach.
Will your client "walk-in", seeking a portfolio review?
The biggest roadblock in conducting regular portfolio reviews is that retail clients are unlikely to walk in on their own every 3-6 months, for a portfolio review. For retail oriented distributors who rely on "walk-ins" and don't go around meeting clients in their homes or offices, this presents a big challenge. Even if you are willing to go out and meet them, the time involved in each such meeting including travel time, often does not make it worth your while, given the small size of the portfolios.
The job at hand is therefore how to encourage clients to come to your office for a portfolio review exercise, where you can review their portfolios and offer your views on steps to be taken if any to realign their portfolios. What will make a client want to seek a portfolio review from you? He would be willing perhaps only if he knows that you have his best interests at heart, that you are monitoring his portfolio regularly and that he can count on you for unbiased guidance on his portfolio, especially in turbulent market conditions.
Simple way to commence portfolio reviews for retail clients
Each month, most distributors send out consolidated portfolio statements, using their back office software. These statements contain scheme-wise performance details, and are often printed out and sent directly by your back office staff, without you seeing these statements. Clients receive them, come to their own conclusions, and sometimes act on their own conclusions, without you even knowing what happened.
A simple start towards periodic reviews could be for you to take a look at these portfolio statements and make hand-written notes on aspects of the portfolio you would like to discuss with your client. Lets say there is an equity fund which has depreciated 10% in value over the last 1 year since the date of investment. You know your client will be worried about this. How about putting a small hand written asterix against this line and a foot note at the bottom of the page saying that you would like to discuss this in particular with your client, at his convenience? Or take a situation where you believe the time has come to take profits from one investment. Why not put a note against that line item suggesting that its time to take profits and that you would very much like to discuss and action this at your client's earliest convenience?
Your client who receives this consolidated statement with your notes, may feel quite good that you have taken the trouble of reviewing his portfolio and have made observations - it shows him vividly that you care. His willingness to pick up the phone and ask you about these notes should be quite high - thus giving you an opportunity to at least telephonically conduct a review and advise your client on course corrections, if you feel they are necessary. Often, advising your client to stay invested is the right thing to do - but one needs to proactively tell this to clients, rather than hope that they will come over on their own and ask you what to do.
Portfolio reviews are great for retention as well as additional business
A conversation triggered by this review is an additional engagement opportunity, where you have one more opportunity to look for incremental business from fresh savings. A client who receives monthly / quarterly reports from you with specific notes (hand written gives a good personal touch) for action or discussion will be more amenable to increase his business with you and will be less likely to look around for another advisor simply because the last investment didn't work out as well as he would have liked. A client who knows that you care, will be a lot more open to discuss investment of fresh savings with you - which is what you want.
Build your business by showing you care
Showing your clients that you are monitoring their portfolios goes a long way in building trust and in therefore deepening the relationship. Your clients want an advisor who values their money, even if it is not a large amount. When they find one, they will be happy to stay loyal with such an advisor, through challenging times. On your part, you want retail clients to stay invested and keep adding their annual savings into the investment pie with you - which will make it a profitable business for you to run. Both stakeholders objectives can be easily met, by a simple decision by you to ensure that you review all client portfolios at least once every 3 months - irrespective of how small the client is today in your books. Portfolio review need not mean an exhaustive 1 hour session at a client's office - like you typically see when dealing with HNI clients. Small ways in which you demonstrate to your clients that you care about their portfolios, will go a long way in building a win-win relationship that helps you grow your business and keeps clients happy.
All articles in the Sell Well - Grow Well section are created by Wealth Forum. These are not to be construed as opinions given by SBI Mutual Fund.
Share this article
|
