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Why its not in your best interest to sell what is easy to sell

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Financial Advisory article in Advisorkhoj - Why its not in your best interest to sell what is easy to sell
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In our industry the popular Hindi adage "jo dikhta hai, wahi bikta hai" applies as well as it applies to any other. But unfortunately our industry is such that the rule has to be re-written. "Jo dikhta hai wahi bechna khatarnak hai". Whether it is brand, product, asset class, service or feature this is applicable. Let me explain why.

When does it become very easy to sell some product? When there is pull for it! That then begs the question when is there pull for a product? Let me capture all possible situations.

  • The product has delivered spectacular results in the immediate past

  • The product is offered from a very very popular brand so popular that any product by that name would sell

  • The popular media, literature, websites, so-called opinion makers are tom-tomming that product so clients are impressed

  • There is huge advertising and marketing promotion, everybody is launching same type of product and excessive supply is generating some demand

Now let us study the implications of this on the advisory or distribution business.

Point 1) If clients are demanding to invest in a product because of recent past performance, then either it is the wrong time or you need a better evaluation of sustenance of that performance.

Point 2) Brand is based on trust, capabilities, relations, and similar softer aspects. Brand gets clients and gives some possibility of future performance but brand doesn't guarantee competency or sustained competency. In our industry brands are built on what is offered i.e. Products but we are yet to mature to a level where brands are built on processes i.e. how it is offered. Sustainability comes from process not from product!

Point 3) Media may respond to advertisements, smart PR, quid-pro-quos and finally media is also susceptible to influence of immediate past performance!

Point 4) Excessive supply often kills the return potential because opportunity comes with time limits and it can be exploited by people with competency. Just because everyone is launching that product, it means a lot of people without requisite competency are inherently also looking to make hay while the sun shines!

So now the question is why and how should one be contrarian and sell something that the client isn't demanding and hence is difficult to sell. So first, ask this basic question to yourself, are you in business because you want client to make decisions and control your life or you are in business because you will decide for clients and make their life? If you were a doctor the easiest product to recommend would be Crocin or Saridon or Combiflam but then if your doctor prescribed you these pills, would you pay a fee to the doctor? So let's be clear of one fact, you earn for sticking your neck out and giving some different product, different advice and adding value. If Crocin or Saridon is how you make your living then you better start fearing the day your client will go direct to the pharmacy or online in our business and leave you out in the open fending for yourself. What you earn for providing returns, portfolio information and forms of popular products can be easily disintermediated in the online DIY world but if you give some unique differentiated advice and products that may not be popular but are fundamentally good for clients and are ahead of time, you can justify earning that much more.

So now the question is why and how should one be contrarian and sell something that the client isn't demanding and hence is difficult to sell. So first, ask this basic question to yourself, are you in business because you want client to make decisions and control your life or you are in business because you will decide for clients and make their life? If you were a doctor the easiest product to recommend would be Crocin or Saridon or Combiflam but then if your doctor prescribed you these pills, would you pay a fee to the doctor? So let's be clear of one fact, you earn for sticking your neck out and giving some different product, different advice and adding value. If Crocin or Saridon is how you make your living then you better start fearing the day your client will go direct to the pharmacy or online in our business and leave you out in the open fending for yourself. What you earn for providing returns, portfolio information and forms of popular products can be easily disintermediated in the online DIY world but if you give some unique differentiated advice and products that may not be popular but are fundamentally good for clients and are ahead of time, you can justify earning that much more.

And finally, if you were the manufacturer offering a very popular product for which client is demanding, over a long term that is applicable for equity mutual funds; like over 10 years would you like to pay the intermediary a large part of your margin for fulfilling that demand? Or are you likely to try and pay lesser because the product is anyway selling, clients are asking for it, intermediary is not really convincing the client!!!

If what I am writing doesn't appeal to you please discard it. If what I am writing makes sense, do something about it.

Protect your business, keep control with you, not with client or manufacturer.

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Aashish Somaiyaa

Aashish Somaiyaa is the Chief Executive Officer & Managing Director of Motilal Oswal Asset Management. Mr. Somaiyaa brings with him rich and varied experience - with more than 13 years in sales and distribution, channel management, product development and institutional sales from ICICI Prudential AMC and a brief stint at project management with Bharti AXA Investment Managers.

His last assignment was with ICICI Prudential AMC, as Senior VP & Head - Retail Business. Mr. Somaiyaa holds a Bachelor of Engineering in Polymer Science and a Masters in Management Studies in Finance from NMIMS, Mumbai.

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