A key to success in mutual fund distribution business is to retain clients for longer. And one of the simplest yet effective ways to do this is to become a choice architect for your clients. In fact, this will allow you to retain clients for generations, says noted financial life planner Partha Iyengar, founder of Accretus Solutions India.
Choice architect is the professional who creates an environment where many features - noticed and unnoticed - can influence people's decisions. The job is then to design the scenerios that affect or nudge people in a way that these choices alter people's behaviour in a predictable way without blocking any options.
To explain this complicated definition, Partha cited a simple example at Aditya Birla Sun Life MF and Cafemutual’s popular webinar series 'Lessons from the Masters'. He said that in a school in the US, there was an experiment to nudge students to eat healthy food. They were offered the same numbers of items but healthy food items were presented first followed by junk foods. And gradually, students started eating healthier food.
Similarly, you will have to handhold your clients, work on their behavioural biases and nudge them so that they live a healthy, wealthy, happy and meaningful life. And once you do that, you can retain your clients for not just their lifetime but generations.
Further, this would also bring more business from existing clients. Citing his own example, Partha said that once he started financial life planning of his clients, the AUM per client rose from Rs 50 lakh to Rs 1 crore, Rs 2 crore and even Rs 10 crore in some cases.
How to become a choice architect?
Partha listed some of the key skills required to become a choice architect for your clients. One of the skills is transformational vocabulary - i. e. avoid the negative thoughts and use positive ones.
For instance, Partha explained that an average human being generates 64000 thoughts in a day. And most of them are negative. Leaders in any industry generate much less - around 18000 thoughts which helps them remain focussed and hence more successful.
Another key skill is rapport building with clients through communication skills. And the first step in this is to be a keen listener. The next step is to discuss at length expectations and dreams of clients. This helps in a big way to manage their behavioral biases. And once that is done, it creates a virtuous cycle of more savings and prudent investments.
Partha said that he was able to do all this because he was very selective about clients. While this may not be practical for everyone, you can start financial life planning of 1% of your clients to begin with.
