March 15, 2022

Reading Client Fact Sheets – Why, How & What?

Vinayak Sapre
Author, Public Speaker and Financial Coach

Before I explain the reason, why did I use the term ”Client Fact Sheet”. Let’s look at what do we see in a fund fact sheet. Names of the stocks/bonds, their weight in the portfolio, Sector weight, Size of the fund, expense ratio, and other ratios in addition to the performance of the fund and IDCW history. What do we make out of this information? Hardly anything, as most of the MFDs, do not do any kind of research work on companies whether reading balance sheets, meeting the management, tracking peers, etc. Therefore, keeping a track of holdings across tens of portfolios is practically impossible.

Let me say in Bold and Italics that I firmly believe that MFDs are not investment managers, which many of them try to impose on the world. They are primarily investor managers. I have mentioned this in chapter 9 of my book, Dohanomics also.

Why read Client Fact Sheet –

For longevity:

So, while it is very important for investment managers to know everything about stocks they buy in their portfolio, it is equally or probably more important for an investor manager (read MFDs/RIAs) to know everything about the stocks (read investors) they have in their portfolio.

Why important? Because, unlike investment managers who generally do not hold stocks for 8-10 years at a stretch, the investor managers need to keep the investors for generations. Also, it is more important because the same set of people are the biggest contributors in increasing the business through referrals, which have been the biggest contributor in the acquisition of new clients. In addition to this, existing clients can add their next generation to the existing investor database.

For Risk Mitigation:

Though MFDs/RIAs do mitigation of risk by diversifying the investments across many asset class categories it is done only with the information provided by the investor. Many times, investors don’t tell the size of the wallet or MFDs/RIAs to find it difficult to probe. Making a client fact sheet helps in knowing the size of the wallet for example how much money is in FD/Post office/Insurance, valuation of real estate, and gold.

Also, it reduces the concentration risk and brings down the dependency on a certain set of investors. Not to forget that any business especially money management business requires a high degree of risk mitigation for example if the top 20 percent of the clients are contributing to 80 percent of revenue or 10-15% of AUM is between 2-3 clients there is always a big risk of losing the client and the AUM on a click of a button, therefore providing great customer experience is very essential.

Better Customer Experience:

As they say ‘Data Is The New Oil’. Everyone has the data but what is the process to mine it and use it to near perfection is the key. People do KYC for regulatory requirements but very few actually put in extra effort to know the client and even if they try to know more about the client the information is left to the memory and doesn’t get documented in an organized way.

For example, to start with if one creates an excel sheet which should have fields like Spouse Name, Salary/Income of husband and wife, Increment month, Bonus/Incentive month, Interests and Hobbies, Kid’s name (Future client), School he/she goes, their area of interest, etc. All this information is important in addition to their birthdays and anniversaries.

How to start?

Not having a Boss/Mentor/Coach is one of the biggest drawbacks of MFDs/RIAs. There has to be someone who should take weekly reporting, so what, if it sounds so minuscule job like taking report on updating the database. Generally, the MFDs have huge data of investors which itself becomes a dampener to start. The fact is they have a very long tail whose contribution remains very insignificant.

If one has a team, assign 125-150 clients to every team member and ask them to fill up their excel sheet for the top 20 clients of theirs. Most of the information can get updated only after meeting and many a times questions need to be asked in a subtle way, instead of making a sheet filled with them.

What to do with the fact sheet:

Unlike fund fact sheets, client fact sheets will seldom give 100% information. However, one needs to extract as much information as possible. The information can help in adding SIP, SIP top-up, Insurance, health as well as life, efficient tax planning for the client, liquidity management, we saw how people struggled in managing liquidity at the peak of the pandemic. Also, knowing their hobbies and interest will make the conversation more interesting, for example sharing articles of their interest or making customization in gifting can bring in more joy.

These are the things that are in MFDs control. Always remember, no matter how good one is an MFD/RIA market return is in no one’s control. Most importantly, this activity can help them in building their brand of ‘Solution Provider’ instead of getting tagged as Mutual Fund guy, Insurance guy, etc.

5 Thoughts to “Reading Client Fact Sheets – Why, How & What?”

  1. Rohan Kale says:

    Please take the suggestion in the right spirit – It would have been great if the author would have shared a sample file of how he makes a Client Fact Sheet.

    Even a simple 2-3 minute video where the author is explaining how he uses this concept will go a long way.

    The learnings would have been much better.

  2. SANJEEV DAWAR says:

    Amazing thoughts which can be implemented very easily

  3. What Mr. Sapre has described in terms of Client Fact sheet I fully coroborate with his views. However, winning clients confidenece in sharing minute details are always a Challenge. Clients guard their incormation as kids odo with their toys. So encouraging them to unfold meaningful informations for their own good can be done effectively by narrating stories about how others clients in such situations opened up realising the importance of holistic financial solutions.

  4. sandeep shah says:

    I think what Sapreji means is we take some additional data in each meeting and keep filling up the client fact sheet which we maintain.

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