Always wanted to get the higher wallet share from clients and encourage them to stay put for long term but did not know how. The answer to all your questions lies in planning the future of client’s children.
Today the costs of raising kids are skyrocketing. With cost of living and education taking its toll on the common man, advisors can play a key role in helping their clients make the right choices for their offspring’s future.
Encourages goal oriented investment
Planning for a child’s future gives the right opportunity for advisors to help them identify their financial goals and set the expectation right from the beginning.
To start with, you can let your client know about cost involved in raising a child such as school and college fees, hostel expenses and marriage. You can use financial calculators to help them understand the future cost of such expenses by factoring in inflation.
The next step could be to make them understand how they can achieve these goals through mutual funds. You can either do asset allocation on your own based on the risk appetite of the clients or simply recommend a child fund offered by a few fund houses.
Chennai-based AK Narayan of AK Narayan Associates says that IFAs should educate clients on what a child plan can do. “Most of the time people are unaware of investment options available in the market and end up buying an insurance plan. You need to create awareness and keep talking to them, no matter how many sittings it might take,” he added.
Inculcate habit of staying put for long term investment
Once an investor understands the significance of long term goal oriented investment in mutual funds to achieve financial goals like child plans, she will open up to other long term investment goals like retirement.
Nikhil Kothari, Etica Wealth Management is of the view that child planning could be the first step to inculcate discipline of long-term investment among investors. He says, “From an emotional perspective, parents are generally reluctant to redeem investments from a child plan if anything goes wrong with them. It is very rare for investors to quit mid-way, making this ideal for both advisors and clients.”
Relationship building exercise
Taking an initiative to ease the financial burden of your client’s offspring helps strengthen your relationship. If the client feels happy about the level of commitment you have taken to help him plan the future of her child, the relationship becomes stronger.
Delhi based Tamanna Verma feels that child planning provides an opportunity for IFAs to create long-term relationship with clients. “Since child planning requires long term commitment, it helps IFAs create an emotional bonding with clients. In other words, it helps in starting a long relationship, not just between your client and you, but also with her family.”
Helps in targeting getting second generation of existing clients
When you start managing investments for your client’s children, it is natural for them to seek your advice when they want to start investing independently.
To increase your engagement with children, you can request you clients to bring their family members while setting up a meeting. Also, try to engage with family members of your existing clients in social gatherings, meetings, etc.
This will help you engage with your potential clients. In fact, it is a win-win both the ways since it is learning for them and benefits you by helping you make a smooth transition from present generation to Gen Next.
Follow systematic process to help your clients identify importance of child education and how to achieve this goal
Child plan can you help you inculcate discipline of staying put for long term among clients
Since child planning is usually long term in nature, it opens up your clients to think about other long-term goals like retirement
Strengthen your relationship with clients by involving their family members during meetings