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Do you know the cost of ignoring mutual funds over real estate? A real-life case study shows that investors who have invested in real estate can potentially lose over Rs. 1 crore in 15 years if they ignore mutual funds.
This happened a few years back when a villager approached Coimbatore MFD Ramprabu to seek his views on putting Rs.30 lakh in real estate to create a legacy for his three daughters. The client came through referral and was keen on buying a piece of land with this money.
Interestingly, Ramprabu did not stop this client to invest in real estate; instead, Ramprabu educated him about the long-term benefits of investing in mutual funds and advised him to put 50% each in mutual funds and real estate.
While the client liked the idea of investing in mutual funds, he did not invest his money as he had no clarity on returns. However, Ramprabu persistently followed up with the client and educated him continuously about the benefits of mutual funds. Finally, after four months of discussion, the client invested Rs.15 lakh each in mutual funds and real estate.
Surprisingly, after 15 years, when this client tried to sell his land, which was valued at Rs.40 lakh, he was unable to find any buyer. However, he was amazed to see that his Rs.15 lakh in mutual funds had grown to Rs.1.50 crore. He now regrets his decision of putting Rs.15 lakh in real estate.
Recognising Ramprabu’s efforts in creating a big difference in clients’ life, Axis MF and Cafemutual came together to celebrate the extraordinary work and accomplishments of MFDs through Sanjeevani MFD Awards 2023 at Cafemutual Ideas Fest. The awards felicitated eight inspiring MFDs who are ‘Sanjeevani’ for their clients and have become an indispensable part of their lives.
Talking about this, Ramprabu told Cafemutual that he met this client several times to build trust. “It took four months to close to deal. However, I never gave up and followed up with him constantly.”
Another thing that played a key role in converting this client was advising the client to invest a portion in mutual funds. “In my experience, MFDs should never tell clients that they are wrong. In this situation, many MFDs tell their clients that they should not put anything in real estate as it is illiquid and expensive. But clients do not want to hear this. Instead, MFDs should ask clients to start investing in mutual funds with 50-60% of the total investible corpus. This makes them receptive to your ideas.”
Narrating the story further, Ramprabu said that the client saw his investment portfolio fall by 40% after 6 months of investment and the value remained flat for another 3 years. “This client approached me to redeem his money from mutual funds after six months of investments. However, I told him to have patience and stay invested for at least 10 years. I met him several times to keep his confidence alive in mutual funds and handhold him during difficult times. As a result, when this client came to know about value of his investment, he thanked me and told his daughters to invest with me. Today, I am managing the wealth of the entire family.”
Giving us some pieces of advice to acquire clients from villages, Ramprabu said that MFDs should first build relationship with rural people before onboarding them as clients. He said that MFDs can reach out to prospective clients in rural areas through referrals and education sessions.
He also believes that MFDs should make repeated efforts to educate such clients. “Have patience, it may take more than 6 months to convert rural clients. But once they come onboard, they remain invested for life.”
