Brijesh Damodaran, Founder and Managing Partner, Zeus WealthWays takes you through the important role played by Emotional Quotient (EQ) in an advisor’s success
The periods of 2002-2007 and 2008-2012 are two interesting but contrasting periods in the history of the fund industry. The first period (2002-2007) was characterized by extreme optimism among investors at a time when equity and real estate were generating eye-popping returns.
And in the second period, investors expressed extreme pessimism when equities did not do well overall though real estate and gold did better. Clearly, investors do not refer to history of market cycles to predict the returns on investment. Most of their decisions are usually made in real time, with the most recent data available at that particular period of time becoming the basis for estimating the returns in the respective asset classes.
‘Pessimism’ and ‘optimism’ are behavioral responses – how you choose to look at events and situations can be an important determinant of success. It’s your EQ (Emotional Quotient) and not your IQ (Intelligence Quotient) which will determine your sustainable success.
As an advisor you play the same role played by Lord Krishna in the battle field of Mahabharat. You help him determine his goals, time horizon and expected rate of return. You will only put forth what is best for him. However, if the investor goes off track (just as Arjun was confronted by Bhisma), you come forth forcibly and take actions (in this case dissuade the client from a potentially wrong choice) and ensure the investor is reaching his targeted goal.
Here is how an advisor can counsel his clients to help them reach their goal.
· Do not become too emotional or too overweight in any asset class
· Have multiple investment buckets
· Give each goal a time frame
You need to manage your clients as a charioteer, as was accomplished by Krishna. As a professional, who will only provide advice and work for the client’s benefit. And to carry out this task diligently, do charge your fees.
Approach the task of asking your clients for a fee with a positive mindset. If you are adding value to your client’s portfolio and if it’s clearly visible through the returns generated, he should not be hesitant to pay you.
In this process you might lose a few clients. Think that they were never yours and had associated with you only because you provided the service for free.
Customers will always treat you the way you want to be treated. If you are confident, offer unbiased advisory and work for the benefit of the customer, you will be looked upon as ‘Guru’. But then you need to earn that. As Narayan Murthy once said, “It took me 10 years to become an overnight star”.