Historicaly, Indian investing could be characterized as Risk Averse. People were skeptical about stocks and mutual funds, and most of our savings were concentrated in FD's or in gold. In fact in the initial days, people were not even comfortable with the idea of having accounts in private banks. Even today, Investing in India is largely dominated by debt. We as compared to the world are way behind considering the penetration of modern investing products, but times are changing, people have started coming out of the fixed income shells, signs of the great financial revolution are evident.

Here is some data which depicts the transition:

Outstanding amount in bank deposits, mutual funds and life insurance

Source: Cafemutual

The above table depicts People's developing Confidence in Mutual Funds. Mutual Fund AUM has grown from around Rs 7 lakh crore to Rs 21 lakh crore. Mutual funds as a % of India's favourite, bank deposits has increased from 10.44% to 21.07% in less than five years.

The seepage of Mutual Funds is gradually increasing, the Mutual Fund to GDP ratio which was just 5.6% of the GDP of our country in the year 2000, in 2018 it has increased to 12.8% (Source: Cafemutual)

Post Demonetization, even though FII's withdrew their investments from the Indian markets, but we did not see a dip in the Indexes, for the gap was bridged by domestic institutional and individual investors. A major contributor in this respect has been the Mutual Fund Industry. The net inflows in 2016-17 have reached Rs 3.43 trillion, a 155% rise from Rs 1.33 trillion in 2015-16, the highest ever for the mutual funds industry in India.

SIP's inflows have increased dramatically in the recent years. As per AMFI, the MF industry has added about 9.83 lacs SIP accounts each month on an average during the FY 2018-19 alone.

The investment pattern in India is changing, a strong inclination towards modern investment options is witnessed as seen above. Talking about the evolution in financial assets, two decades back our parents were largely restricted to PSU banks, with their Saving Accounts, Home loan, Car Loan, Fixed Deposits, Recurring Deposits, PPF in these banks; and a lot of them had invested in traditional life insurance policies. Today, many investors have their first Saving or Salary accounts in private banks, have their SIP's running from Day 1 of their job, people are buying term plans, investors are investing in Mutual Funds for their big goals like Retirement.

This evolution in the investment pattern presents an incredible businessopportunity for Mutual Fund advisors in India. And there are some solid factors behind why the trend is going to continue:

Falling Interest rates: Gone are the days when investors used to get interests as high as 10% on their FD's, the rates have gradually fallen and are currently in the range of 6-7%. The falling interest rates scenario is an opportunity for non-conventional products like Mutual Funds with a much better return potential and with added tax benefits.

Young population: The demographics of the country are highly in favour, India boasts the maxiumum percentage of young population, among all countries. This generation of young people are more tech savvy, they do not limit themselves to traditional investing, and are exploring modern methods which are easier and quicker, and are a better bet than the low return FD's.

Regulatory: The government is taking steps to drive the economy on a digital platform. The regulators are also taking initiatives to educate investors and spread awareness about the modern products.

These factors above depict the potential for the modern financial products, including Mutual Funds. Because of the ease of investing, a history of strong and consistent performance, and people's changing attitude, the future is blooming for MF advisors. And this is just the beginning, there is an immense opportunity lying ahead for the next 10-20 years at the minimum.

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Our entire advisory practice revolves around pleasing our customers, we put in our best, we engage in practices fulfilling our client needs, and creating a league of happy and satisfied investors. But often, there is a gap between our perception of what clients need from us, their satisfaction and what they are really looking forward to.

A major percentage of your clients won't communicate their preferences in words. Due to the implicit nature of the client partner relationship, doctrine of substitution has a major role to play. We need to step into the shoes of clients at large and assess their lookout.

To make things easier for you, here are some common traits which most investors are looking for in their financial advisors:

A Relationship of Trust: A client would be comfortable entrusting his/her money and personal financial information to someone only if the client trusts him/her. A client partner relationship can survive only if it's based on trust, and building trust is not a day's process, it evolves over time and a number of elements go into it, two prominent ones are:

Ethics: People will trust you if you are ethical in your conduct, when you maintain integrity and high professional standards, and when you place your clients' interests above your own. Your ethical conduct will let people believe that the financial planning and investment activity will be in their best interests. So, be honest and stick to your ethics even if it means losing the client.

Knowledge & Experience: Another factor that goes into winning trust is your credibility, which banks on your knowledge about the products and the industry, practical application of financial planning concepts and your experience. A wise financial advisor is trusted by clients because of the fact that he is qualified and has the ability to deliver right advice.

Communication: One basic expectation that all investors have from their advisors is timely communication. People appreciate being informed about industry updates, new products in the market, regular review and performance of their portfolios, etc. Proactiveness in communication keeps investors in the loop and instills confidence in them, plus it helps in taking right decisions in time. Investors do not like being kept under false impressions, so it's important that you communicate the risk associated with investments, communicate even when things are not going right, because of bad markets or because of a bad decision. Timely communication is essential so that you can focus on the solution, instead of accelerating the problem.

Concern: Another universal desire most investors have from their advisors and which often goes unsaid is, they like being cared for. They want their advisor to listen to them, and base their advise on their unique needs and financial position. They must feel that you genuinely care for them and you are working in their best interests. Advising is about micro level servicing even if you have a thousand clients. When you go to see a client, quickly run through the client's profile, and his goals, because you are not exhibiting concern when you don't remember the basics about the investor. An investor will be comfortable talking to you, sharing his life story when he/she senses your authenticity.

Safe Returns: Investors want high returns, but they also don't want to lose their money. So, it's important that you explain to them the risks associated with different investment products. Risk cognizance will prevent investors from taking wrong decisions, when the risk comes to play. Also it won't fall on your shoulders since the investor was aware of the risk and took an informed decision. Also, your choice of investments and portfolio management can significantly bring down the risks.

Human Touch: Consider the example of a dietician and his/her patient. The Patient can easily source a good diet plan suitable for his body, the kind of foods he should/should not eat, that he should exercise to cut the extra fat from his body. But he prefers going to the dietician for the human touch, when the dietician asks him about his unique needs and preferences and prepares a plan “just for him”. The Dietician personally follows up on the progress of his weight loss and appreciates the patient for the efforts he is putting in. This relationship could never be established between him and google, which takes him to the dietician. Here, the advisor is the dietician and investor is the patient. Investors choose Financial Advisors over Robos for the human element, they expect to connect with you on an emotional level. So, try to build a relationship with the client which is beyond business. Empathize, Care, Share, Celebrate.

So, the above were a few points which most investors are seeking from their advisors. There are a lot of things, much simpler than what your doing, which can draw you closer to your clients. You just need to adopt a personalized approach to cater to people, gauge their unique needs and work on them.

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Over your journey as a financial advisor, you'll find two categories of investors:

1. The conservative ones And 2. The Aggressive ones

We'll be talking about the first category, the conservative ones, who do not want to risk a penny. This category generally has had a peaceful life by investing in traditional investment options like FD's, PPF, etc., and do not want to look beyond them. Their ancestors advised their children and grandchildren to protect their money by investing in these products, and probably they have taken the lineage too seriously.

So, how do you go about explaining to them the importance of Risk in Investing, that Risk and Return are two sides of the same coin, that for survival in this world they have to get over the obsession of traditional low risk products; is what we'll talk about now.

1. Evolution of Needs: Firstly, the conservative ones need to know that 20 or 30 years back, expenses and needs were limited, the scenario is totally different today. Mere protection of money will not help them sustain through their entire life. His grandfather's son did not demand an I-phone as his birthday gift, his son will. His grandfather saw airplanes on TV, he travels in one, his grandfather or father never traveled outside India, his son had his passport when he was a year old. The needs are not the same, they have evolved, so why should the investment be the same, the investments need to match with the needs in order to fund the changing lifestyle.

2. The Concept of Calculated Risk: Modern day lifestyle and consumption pattern does require more money, and more money comes for Risk. However, investing is not gambling, it does involve risk, but sane investing is about taking calculated risks, meaning taking risk after carefully estimating the probable outcomes. It involves doing a careful assessment of the investor's needs and aligning them with the risk in investing.

3. Start with Baby Steps: The risk element in each investment product is different. It may not be ideal for a Conservative investor to take the giant leap to an Equity Mutual Fund to begin with. There are options in Mutual Funds which cater to their requirements of low risk. They can start with a low risk product like an FMP, where the risk involved is super low, since the returns are predictable, and then gradually move to bonds, and then to balanced Mutual Funds, and lastly to Equity MF's.

4. Equity for Long Term investing: Another facet of risk that all investors, who are scared of Equity, must understand is the core of it. Risk in Equity is primarily driven by market volatility, which is short term in nature. Market Volatility is the resultant impact of the market sentiment, it can be positive sometimes and negative the other times. The impact of this volatility on Equity stocks is they can witness quick picks and falls, and this transition cannot be predicted, which puts the investor's money into the Risky zone. Meaning, if an investor has invested in an Equity Mutual Fund today, he can't be sure that after six months his investment's value will only rise, the volatility and the sentiment may not be working in his favour. But over the long term, the prices of equity are not left at the market sentiment's discretion, rather it is driven by the growth and profits of the underlying companies. So, when your investor is investing for his long term goals, he should choose Equity. Because firstly, it's only Equity that can help him achieve his Long Term goals, since Equity over long periods has generated superior returns and has been able to beat all other asset classes, the traditional ones don't stand a chance. And Secondly, the risk is neutralized over long periods.

So, the bottomline is many investors are conservative because of their inherent nature, because of bad experiences, scary anecdotes, and limited exposure, and thus they don't want to restrict themselves to their 'Safe Zone'. But what they are not realizing is the safe zone isn't safe anymore, because the circumstances, the rising prices, the lifestyle upgradation, increasing choices; demand more. You have to bring them out of their shell, and explain to them that not taking Risk is the biggest Risk they are taking.

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