The importance of personal client interactions

By Guest |  27-06-19 | 
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Morningstar invites thought leaders from the investment community to share their insights. Views expressed are personal and should not be construed as investment advice.

Market regulator Securities and Exchange Board of India (SEBI) has made it mandatory for investors to update their Permanent Account Number (PAN) of first unit holders in all folios. In a bid to prevent any fraudulent transactions, SEBI has advised fund companies to turn down redemption requests in folios where PAN is unavailable or invalid.  Redemption transactions in such folios won’t be permitted from April 1, 2019. So distributors who had onboarded clients from prior to 2011 are rushing to get the PAN numbers of their clients. I have more than 1000 folios where PAN needs to be updated across 800 investors.

Collecting PAN numbers of so many clients is indeed a daunting task. In large organizations, I guess many distributors would have assigned this task to their relationship managers/client support executives. Even I could have delegated this task to my team. But I choose to do it on my own. Meeting clients personally helped me connect with them on a different level and gain insights about their current situation. My clients also felt good that I have come to meet them personally.

Know your customer norms change frequently and we as distributors feel that this adds to our work and cost. We feel that our precious time can be devoted in other productive work like research or business development. But there is a silver lining. Distributors should not treat this as just a regulatory requirement to update folios. Rather, they should look at it as an opportunity to connect with clients. Look at it realistically. How many of us would take the effort to reach out to all clients once a month or every quarter just to catch up?

Here is an opportunity for us to meet our old clients, show them how their portfolios have performed and gain new insights about their lives. You never know a client might have got a promotion, windfall, or their son/daughter might want to start investing. There are pros and cons. During my recent visits to clients to get their PANs, I showed them their latest portfolios and explained the purpose of my visit. Some of them were happy and redeemed their investments citing a need. I think that’s fair. From other meetings, I ended up getting a lot of new business from clients. Let me share a few experiences I have had during these meetings.

During one such visit, I met a client who works in a municipal ward office. His job location changes frequently which requires him to shift his home often. I didn’t have his email id, his mobile number had changed, and the address was not updated. After a lot of effort, I managed to get in touch with this client. I explained that the KYC needs to be updated. I also carried his latest portfolio statement. He had invested Rs 10,000 in a tax saving fund which has grown to Rs 68,000. He was pleasantly surprised after seeing the returns and regretted that he kept investing in traditional products all these years. To make good, he stared a new SIP.

I met another client who is a doctor. His SIP had ended in 2011 but he had not redeemed his investments. His portfolio had also performed well, and the doctor was happy. His confidence in the product increased and he committed a new SIP of Rs 60,000 per month.

During a few other meetings, some of my clients withdrew their investments after seeing decent returns. These episodes reinforce the advantages of long-term investing. When investors view their portfolios regularly, they are tempted to take action. On the other hand, investors who don’t check their portfolios end up making more money by virtue of staying put. Technology has brought about the convenience in viewing and transacting. In their earlier era when technology was not pervasive, investors had to meet their distributor and fill up a redemption form. When they meet a distributor and tell them they have to take out money, the distributor would find out the reason and guide accordingly. But I guess this is not possible in the technology era where investors can redeem at the click of a button, without consulting their adviser. This is a topic of discussion for another day. Coming back to my recent experience of client meetings, these episodes taught me the importance of keeping in touch, even if you have no agenda.

Trust is a scarce commodity in financial services sector, where mis-selling, frauds, clients losing money in chit funds, volatile markets are common. It may sound preachy, but I believe honesty, keeping client interest in mind and keeping in touch with them goes a long way in reinforcing the trust factor.

The author is Director of Tejas Consultancy, a Mumbai-based advisory firm.

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