Managing Client's Anticipation

Hi! We meet again.

I would like to start this article by touching on an issue that disturbs many Unit Trust Consultants. I believe that if this issue is not tackled properly, the relationship between the clients and the consultants will get sour and subsequently depleting the consultants reservoir of customers.
The issue in reference here is confronting the client's anticipation against their return on investment on funds entrusted under the consultants care.
In my course of work, i have met many clients with various background. From the perspective of Investment knowledge, i am able to sum all them up into 2 types of investor category.

1. First category is the type of people classified as investors who assumed that they know how the profits are captured.

2. Second category are investors who understands exactly how the profits are captured.

The distinction between this two is closely related to investment education!

In the first category, investors assumed that they know. Their assumption is purely based on their loose understanding of what is expected from them. These investors have one anchored perception buried deep in their mind and it is obviously continuous sustainable ANTICIPATED RETURN irrespective of how markets move. This understanding is very dangerous if investment time frame is not mentioned. Clients anticipation for aspired return can be managed if the investment holding period is mentioned.
To cite a case in reality, one client of mine withdrew her investment after 7 years. The redemption was done against my advice. During the time, the market  was declining. And because of her fear that the market would collapse, she decided to sell off all units. I have advised her to hold because the decline in price was just temporary and it will not prolong. However, she didn't buy my words.
If only the investor reiterated that her holding period is 7 years (instead of disclosing time frame, which normally all investors practice), i would have redeemed her position before the 7th year.
Many investors would like to keep their positions even if the target return have been met. That is fine, but i prefer to lock in the profit thereafter. Because of no disclosure is made on their time frame, consultants usually will let the fund move on market's direction.

The second category of investors mentioned above are the true investors. These investors understand the concept and the affect of 'duration/holding period' to the overall performance of the unit trust investment. They anticipate that they would achieve the aspired return at the end of stated period and, what happens during the tenure of the investment period is less of a concern. Volatility in market is a common thing to them. There is a popular saying that goes like this, "Being an investor requires us to think and act like an investor".

Consultants have a greater responsibility to educate their clients, especially in the area of investment behavior. Parting knowledge to clients are no longer seen as a burden but a service rendered with honesty and integrity.