Financial advisers contend that one of their most important functions is encouraging clients to “re-balance,” or sell whatever has gone up and buy whatever has gone down. This is so simple, technically, but so difficult to implement emotionally. Or like Buffett says ‘be fearful when others are greedy…’IFA behavior has not been professional to say the least’ says American data. There is no such data available in India, so nothing much can be said. However I have such behavior in India and let me tell you why this happens.

1. When the market is booming the client wants to hear that it will boom permanently. The IFA also gets carried away.
2. When the market is booming the fund houses are busy launching NFOs (Sebi does not like Nfo anymore) and setting targets
3. IFAs are attending NFO meets, CIO meets, conferences every body talks of a permanent bull market.
4. To expect IFAs (the last link, and the weakest link too) in this food chain to behave differently is wrong.
5. CIOs, CEOs have an AUM agenda…and that is beautifully conveyed to the whole chain.
6. Imagine the market is at 26000 index and the IFA feels it is a good time to sell (do not ask me why) and he sells. Market goes up to 28000, the client rips him apart. At 30,000, the IFA has lost the client…EVEN IF THE MARKET comes down to 24000.
7. Mostly IFAs go to meet the client with a particular thought…they come out doing what the client wants to do.
8. Imagine going to a client and telling him ‘put 400,000 pm SIP in a single fund with 65% equity and bal in debt’ you do not need anything else. Its almost impossible. Client will want 7-8 funds – large cap, mid cap, multi cap, value, micro, foreign….AND UNDER-PERFORM the index.
9. IFA mostly ends up doing what the client wants him to do….and then together they blame the market for value not increasing
10. It is very very difficult for a young, inexperienced IFA meeting a big client to tell him something radically different.
11. I told a doc ‘you maybe getting a good return…but the risk is too high, so a risk weighted return is not worth it’ – he promised to review and re-balance
12.  ‘Less is more’ only in theory…most clients love complications and a long range of products…rarely do they ask for simplicity
13. IFAs require tremendous stamina and conviction to urge for simplicity
14. Many IFAs ask the client to do 12-14 SIPs in various funds…hoping that some will do well. In most cases they under perform the bigger and better managed funds
15. It is very difficult for an IFA to convince a client to put reasonably big money in small and unknown funds – TILL THEY are so big and almost risk averse..
16. When an IFA does what a client wants him to do, he should write it down..and keep an email record – but remember this cuts both ways…