I was NEVER in the ‘wealth management’ business in the 1990s. We were brokers and simply believed that for US to make money, clients had to make a lot of money, like our services, and refer more clients, so that we could make even more money.

We did not ask clients for referrals, but would ask EVERY client for 2 referrals BEFORE we started doing business with them. We would ask for money in advance for buying shares and would of course make the payout AFTER we received money from the clients. Some of our clients still hold on to the Mnc portfolio that we had suggested to them, and many of them hold on to LnT, Hdfc, Murugappa group shares, etc. – recommended in the LATE EIGHTYs. Some of it is luck, some inertia, and some because of death of the active investor.

WE NEVER EVER BOTHERED ABOUT CHURNING A PORTFOLIO TO EARN BROKERAGE.

Not sure why, we never bought or sold because we would earn brokerage. Maybe we were satisfied or believed that there was so much business to go around that if a client makes money, slowly he will give us more business. We had no MBA working with us to make ‘strategic plan’ or ‘Mission statement’ or ‘Vision statement’. We believed that we had to CREATE WEALTH FOR THE FAMILY so that they could meet their goals. Funnily we never thought of ourselves as teaching people ‘GOAL BASED INVESTING’.

We are lucky to have quit this patient business in the year `99, because from 1988 to 99 most of our clients had made a lot of money, simply because we did not panic in 1992 (I sold shares to buy an office, lucky me) when we sold nor did we panic in 1993 (market fell 46%) when we could buy. We had also stuck to some of our blue chips which helped us. Many of our clients used to seek our advice even between 2003 to 2007, and we stuck to our ‘We do not buy or sell markets, we buy or sell scrips’. So even in this boom the fact that many FMCG shares went nowhere, and only the INFRA stocks and BANKING stocks boomed, really helped us.

As a broker we had missed parts of the tech boom – we never thought it was sustainable – but had played along (luckily) as the clients were anyway buying.What helped was having an educated client base that was making a career in that sector. We actually copied them after having a discussion about their companies prospects – based on how many people were travelling. We of course saw the cost advantages. One of our clients was a fund manager handling India funds – and he was based in Germany, not the noisy Dalal street or Wall Street!

So shares were bought, held on for decades (our Chairman’s GRANDFATHER had entered this business in the 1920s), and had clients for over 3/4 generations. His son continues to be a member of The Stock Exchange, Mumbai, now famously called BSE.

My Learning: 

Following a very long stretch that was the best and worst of times (sorry Dickens), we have seen a welcome evolution in SOME parts of the investment industry to focus more on wealth management. There is TOO much client communication – it is time the WM industry taught the clients to sit tight, and enjoy their wealth creation, and the wealth creation process. Too much of the financial services industry narrowly focuses on trying to “out stock  pick (or fund pick)” other investors. Most investors lack an ‘internal scorecard’ which tells you how you are doing.  The desire, quest or attempt to find the best share, fund, or pms scheme, or build the perfect portfolio, is NOT just futile, BUT COMPLETELY UNNECESSARY.  The perfect portfolio, or perfect wealth management plan is the one that you LIKE, understand, and allows you to meet your goals. It need not do anything else. Most people love this ‘I do a quarterly review and an annual rebalancing’ kinda exercise, just to keep themselves active. It’s more important to focus on an overall wealth management plan that brings joy and peace of mind, and benefits you and your loved ones.

Remember 1979 till 2016 has been one long BULL ride – 17% in a country where the inflation has been about 8% is awesome return. Come to the new NORMAL, expect less please.

IF YOUR PORTFOLIO HELPS YOU ACHIEVE YOUR GOALS, it has done its job.

Earning well but poor…part 1