MARKETING MANAGEMENT FOR LIFE INSURANCE AGENTSPART- 10

(TARGET MARKETING- POSITIONING)

“WHEN AN INDIVIDUAL GROWS BIGGER, HE BECOMES AN ORGANISATION”

POSITIONING SELF - “EVOKING A SENSE OF REPAYMENT”

Mr. Customer, let me explain why you will need a trustworthy expert advisor?

You need a good advisor who know the financial instruments and also knows you well to design the right mix for you and also to stay by you to help you reach your goals.

Many feel that financial planning or selecting a product is only a matter of IRR calculation. Truth is far away from this. For example, let us say one Mr Atul wants buy a financial instrument which will help him to fund for his daughter’s higher education, twenty years from now. He is aware he can spare 3000 per month towards this goal and expects that he should have 2000000 for this purpose. A simple IRR calculation says, that to achieve this goal he must select a product which can yield 15% returns. Looking back into the past let us say an equity based SIP has shown this return, all that he has to do is to select that scheme and stay invested all through the twenty years.

No, it is not just that simple.

While 15% yield can do the trick, it is crucial to know what are assets he his holding or proposing to acquire before selecting this product. How much risk can he afford to take? How long can he hold-on without having to compromise on basic essentials of his family, during a bear phase.

Taking undue risk to loose capital in search of big returns is foolish, and at the same time, not taking enough risk can ultimately be the biggest risk.

When it comes to risk evaluation, it is not just the mathematical chance or statistical probability of the loss that matters, it is even the emotional strength of the person involved that need to be estimated before he can be advised of taking risk. This is not possible for a machine or for a website by asking you a few questions. A sincere professional, who can ask the right questions and can subjectively estimate the investor, can alone provide the correct answer.

That is why, while at the time of selecting a product that can yield a 15% CAGR, that will help his to reach his goal of 20L the investor is up-beat. But when the yield swings from a +30% yield YOY to - 55% next year ( NAV100 became NAV130 next year and NAV 72 the year next), the investor is so scared, that he would capitulate from that SIP. Objectively it is a loss of 28% of the principle, but psychologically it is loosing more than 55% and the mind projects that if this continues then he would loose the whole capital next year itself. See Figure1

This does not happen to everyone. Let me explain look at the person who has invested 100% of his savings into this instrument and another person who has invested 30% of his savings into this instrument. We may not expect the same behaviour from both these persons.

Professional support is absolutely required not just at the time of selecting the investment, but all through the period of investment. Let us take the example of Mr. Atul again, it is likely that the investment he has selected in SIP has already grossed 20L (or almost close to that figure) in the 15th year itself that is 5 years before the goal itself, now he must be advised to shift a major proportion of this investments into low yielding but safer instruments. Normally in that situation, during a bull run to shift the investments to less attractive products requires the emotional strength of a willingness to forgo the present happiness for a future happiness. Individually this is difficult but assisted by a professional this is possible. See Figure2

You need a good advisor who know the financial instruments and also knows you well to design the right mix for you and to stay with you to guide and assist you in reaching your goals safely and surely.