26 Sep Financial Advisor Chanakya
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1) During first 5 years provide clients with the finest investment experience. Keep them away from the throes of volatility. Make them invest largely in debt funds. Your client in thia phase is like your child and hence do as Chanakya says ‘treat your kid like a darling during the first 5 years’. These are years to educate, understand their needs, keep them away from the throes of volatility and help them in shaping and reshaping their life goals like how a parent figures out the ambition of his children by talking to them and fine tuning their heart’s desires.
2) Next 5 years move assets gradually from debt to equity. Let the rude and unkind market volatility test the investments like how the parent exposes the child to the tough and mean world. Be strict with the client because this is the most vital phase to ensure a great future. Because of the relationship cemented in the first 5 years, the client will experience love even when you are strict. Move to a 60:40 or 70:30 equity debt ratio. This is the stage when you are the no nonsense teacher/guide.
3) In the next 5 years, let the investment remain untouched. Interfere less. This phase is the compounding phase. The wealth begins to come into it’s own like the kid in college away from the parent grows into a smart young man or a smart young woman. This is the stage in which you are your client’s friend. Both have understood one another very well, trust factor is at the highest and compounding begins to show its magic.
4) This is final phase where you are more of a Mentor and less of an Advisor. Even though the client is on a high due to massive value of compounding experienced, you have to act like the loving parent reminding him of his more important goals in life. You have say things like, ” wealth is not an end in itself but a means to an end that was constructed during the first phase of investing” . This is when you move his investments from equity back into debt like a father who guides his child from the fun and frolic of college into the the real work of work and family