High Net Worth Individual (HNI) is one segment which every financial advisor is looking forward to work with, because of their huge portfolios.

With net assets of US $ 5.2 trillion, India now ranks 7th in the world HNI wealth index. India is home to 2.36 lakh high net worth individuals (HNIs) and their population is expected to grow by 135% to reach 5.54 lakh by 2025. (Source: Cafemutual)

The opportunity is lucrative and you must be tempted to manage the assets of HNIs. However, managing HNIs is entirely different from managing a retail customer. An HNI is not looking to invest for building a house, or buying a car, or for his children's education. He has already fulfilled these goals from his existing means. He's looking for something extra, and your advisory strategies should be customized to meet his specific requirements.

There are certain pointers which are specific to HNIs, their behavior towards investments, their goals, strategies, manner of dealing with people, etc. An advisor shall keep these things in mind while conducting business with an HNI client.

HNIs have built wealth through their businesses or jobs, they possess substantial market knowledge and skills and they try to apply the same to investment management. An HNI believes that his success in his professional life can be carried forward to his investments as well. It becomes difficult for the advisor to explain to an HNI that his investments are different from his business, and that the advisor is an expert in the field, so let him apply his expertise to the client's portfolio and multiply his wealth.

The first question that you should ask an HNI is "Do you have a Will?" If the answer is not in the affirmative, you must advise him and take him through the Will writing process. Even the big shots of India Inc. who did not leave a Will behind, their families have faced turbulence later. Take the example of Dhirubai Ambani's family after his death, there was unrest with respect to property distribution and finally Ambani's wife had to step in to sort things out.

HNIs are usually influenced a lot by their bank relationship managers. They trust their banks and buy some investment products which are a complete misfit for their portfolios.

HNIs generally have an inclination towards real estate. A lot is already blocked in real estate and they want to park more money in illiquid assets. Irrespective of the fact that their portfolio needs to be diversified and other investments have to be included and irrespective of the market conditions, they tend to religiously follow the real estate path only.

HNIs are business minded and want the best deal out of everything. They always try to extract a lower than the standard expense ratio in every transaction. And the advisor considering a huge investment, tends to fall into the bargaining trap of his client and ends up committing to terms which are not beneficial for him. As an advisor you should refrain from falling for it and focus on value addition you bring to the table. if you spend more time bargaining, you will lose the deal the moment any other advisor offers extra 5 paise as passback. Focus on offering solutions to the problems of the investor. doing an objective analysis of clients existing investments and giving right advice on it will help you strengthen your relationship in the long term.

Since an HNI has built a decent wealth base, so ideally he should work towards preservation of this wealth. He should secure his wealth with investment options which can protect his money and offer returns higher than the inflation rate. But to the contrary he aims towards generating more wealth and is ready to risk his principal as well.

HNIs rely heavily on their advisors. There is lack of due diligence on their part, they seldom have the time to go through financial blogs or magazines and discuss their viewpoints with the advisor. And if anything goes wrong, the responsibility falls on the advisor's shoulder.

HNIs are generally too busy with their careers and often are not able to devote enough time to their investment planning. The advisor needs client's views on devising a plan, and for periodic amendments in his portfolio. But the client is not able to give time to his advisor, which leads to wrong or delayed investment decisions.

According to a report published by Spectrum Group "more than one-quarter of millionaire and one-third of UHNW (Utra High Net Worth) respondents say that they want a response to a phone call in two hours or less." They want their advisors to respond to their emails or phone calls quickly. They expect you to at least acknowledge to their query if the solution is expected to take time. So, the advisors are expected to maintain an efficient and quick communication system while dealing HNI clients.

Senior citizens among HNIs is another interesting category; they are probably in their late 60s or early 70s and have enough wealth to sustain their lifestyle for the rest of their lives. Their goal is to leave a huge estate behind for their children and for their grandchildren. So the approach to investing would be completely different from a normal retail investor. Investing in equities in order to generate significant returns over a 15-25 years time horizon would be an ideal investment plan. So, there is significant business opportunity here, you have to identify their specific goals and devise an offbeat investment plan for them.

These specific attributes relating to HNIs would help you transact better with HNIs. You should further keep upgrading your knowledge and be technically sound while catering to HNIs. Focus on your branding. Little things like logo, good quality stationary, websites, etc. matter. Try to have a fixed frequency of reviews, so both of you are on the same page always. Also communicate the crucial points effectively, like a contract for advise with fees charged.

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We know Mutual Fund is a product of exceptional caliber, and are a boon for your investor's portfolio. But how do you explain the value of this wonder product to your clients, especially the new ones. People have varied perceptions about Mutual Funds, some believe it is a different kind of a direct equity trading product, some think of it as an insurance policy, while others just don't want to know about it because either they are focused on other investments or they think it is a financial jargon which is beyond their comprehension. Such investors do not choose mutual funds because of these beliefs and also because of sour experiences of their friends and family in the markets.

We try to sell our product by explaining how good it is, how it has been outperforming its competitors, how you as an advisor have helped investors make huge money. And then we wonder that even after our best sales efforts, the client is too confused to say 'Yes'. The logic behind your client's response is, he's clueless about the product you are trying to sell. We forget the basic, that it is very important to explain the product in detail to our client. Unless he knows what's the base, he would not be able to develop a conviction about it and the confidence to purchase it.

Explaining the product right can help your clients in building wealth and help you in achieving your sales targets. In this article, we will focus on explaining the concept of mutual funds to your clients.

• The Concept: The first step to explaining Mutual Fund to your client is explaining the essence of it in layman language. A Mutual Fund is nothing but an instrument, through which a large number of people pool in their money. This money is then used to purchase stocks, bonds, and other financial securities, and is managed by professionals, who by their wit and experience administer these assets, with a view to generate superior wealth for you. You are getting a small piece of all the invested securities by investing a small sum of money.

• Offer him a solution & not a product: There is a unique scheme for each investor profile. So you have to first understand the client's needs, his risk appetite, his goals, his age, family background etc. And after a thorough analysis, offer him a solution. Remember, you are here to help your client first. So, if a client is looking for regular income, then you may suggest him a dividend option or SWP. If he's looking to invest for long term, but is not ready to risk his money at all, you may suggest him a debt fund. If he's the one who wants to make money and is ready to take risk, you may suggest him an equity fund, and the like. The bottomline is, whatever product you recommend, should be a solution to his problem.

• Not too technical: When you go to buy a car, in the salesman's one hour speech, he'll talk about the engine capacity, the torque, BHP, etc in two lines. And 90% of the dialogues will be on the features of the car, the comfort that you will experience, how it is better than others, etc. It is because the buyer understands the end result, the features, how the car will benefit him, how it looks. He would not conceive the engineering technicalities of the car. Similarly, while explaining the MF concept to your client, you must not go too much into technical details. So, if you are marketing an equity mutual fund, you shall not talk about the percentage of equity allocation, or the number of scrips in the portfolio, ratio analysis, risk ratios, etc. You have to explain the fund in terms of his requirements, how the attributes of the scheme matches his needs, how has been the performance in comparison with the benchmark, other schemes, and how well it has performed historically.

• Explain the benefits of a mutual fund: Next, highlight the advantages of a mutual fund. Explain about the operational ease, online & quick transactions, easy liquidity, SIP option for a convenient & disciplined investment, STP and SWP options for easier transfers & withdrawals, choice between dividend and growth options, professional management, etc. If the investor is an equity investor, explain to him how through a mutual fund, he can invest in a variety of stocks from diverse sectors, being handled by specialists and he doesn't exercise such comfort in direct trading.

• Disclaimer: Lastly, be honest with your client. Don't forget to mention that the returns are not guaranteed, in case he goes for an Equity Fund or a Balanced Fund. Tell him about the risks involved and tax implications of the product. Also, bring to light the benefits of long term investing, and how his investment will be better off, if he invests for a longer term.

Mutual Fund is an awesome financial product which assists the investor in long term wealth creation. It is our responsibility as a financial advisor to explain about this opportunity to the investors and spread awesomeness in our clients' portfolios!

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What is a Business Strategy?

Business Strategy lays down the policies and plans for achieving the objectives of the organization. The objectives entails the mission, vision, and goals of the business, and the strategy is the masterplan of how you are going to achieve these organizational objectives.

Why do you need a Business Strategy?

Just like you do financial planning for your clients, you devise a plan for them to achieve their long term and short term goals, keeping in mind their needs, perspectives, their risk profile, etc. The financial plan serves as a guide to the investor through his investing journey, since it gives a broad view of the trajectory towards his long term goals, and he can understand the impact of various investing decisions on his goal achievement.

What financial planning does for an investor, business strategy planning does for the advisor. Your business strategy is the master plan for your business, it is a step by step action plan for achieving your business objectives. Having a well defined business strategy not just gives you a sense of direction, but it will give clarity of approach to your employees too.

So, the first step, Define your vision and your long term goals. Once you have visualized where you want to see your business 10 years down the line or even further, break down your long term vision into short term targets.

Next Define the strategy which is going to maneuver your business all the way to reach your goals, actualize your vision, while overcoming the challenges that come in between.

Following are the key ingredients of a business strategy.

• Identify the client segment/s you intend to target and how are you going to approach your prospective clients. You can cater to the entire universe of investors also, but targeting a specific lot on the basis of your strengths, interests, like-mindedness; will enable you streamline your business processes and concentrate your efforts in one direction. It may be difficult in the initial stages when the client base is small, but as the business grows, and you have established yourself in the niche, then it becomes relatively simple and more rewarding, since you understand the target segment deep down, people trust your knowledge, and chances of getting referrals also increase.
• How do you want to position your business and build your brand? For a product provider, his brand is imprinted on his product package, it's all around on his advertising campaigns, websites, everywhere. But for a service provider, brand building brings in additional challenges, because he is not offering a tangible product which shows off his brand. So, what impression do you want to create in the client's mind? How are you going to differentiate yourselves from other advisors? How do you want your clients to tell your story? This is your brand strategy, which must be clearly defined and communicated, because this is what each person of your organization will reflect in his eyes, in his words, in his expressions and his gait.
• Identify your take on business expansion. How will you get more leads and referrals, to get more clients on board? Identify the techniques you will use for business development activities, define the broad lines for marketing activities.
• Next, define your client retention strategy, what service practices will you adopt to ensure client satisfaction. Define a mantra for client servicing and satisfaction, this is something which you and your employees are going to look upon and practice everyday.

The above were the key elements that go into making up of a business strategy. However, Business strategy like your client's financial plan is not a one time thing, your goals evolve, specializations may change, your methods may change, so there is a need to constantly adjust your business strategy to the developments. Hence just like you review your clients' financial plans from time to time, you need to regularly look back at your own business strategy. Business strategy gives a direction to business, it is a vast concept, this was just an overview to give you a broad sense of how you can go about developing yours.

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