One of the most vital roles played by financial advisors is managing behavioural biases of their clients, who are stuck between timing the market, following the herd, chasing returns, among others; thus creating substantial value over time. There is a plethora of literature available on behavioural bias affecting investment decisions and how to overcome the bias, but most of this information caters to one side of the story only, the Investor side. Apparently financial advisors too are victims of the paradigm, but seldom would they realize that the advice they deliver may also be clouted by their emotions or behavioural bias. The investors are better off as you are there to help them overcome their bias, but in case of advisors, the challenge is, it's only you who can help yourself. Hence, for an advisor keeping a check on your own emotions along with the clients', becomes paramount.

And a super way of overcoming such biases is to be aware of them, as the first step to solving a problem is understanding it. So, here are some emotional prejudices which may be dominating your judgment and decisions, needed to be taken care of.

Heuristics: Heuristics typically means applying mental shortcuts, that is processing only a part of the information received or processing the information incorrectly, when there is inflow of a large amount of data. Financial advisors too at times apply heuristics by processing partial or incorrect information while advising clients. Say for instance, the client under consideration is a young unmarried person, we may assume he has a high risk appetite, which may not be the case, and base our advice on the basis of our subjectivity. An advisor must never have a presumed background, each investor is different, we should always draw the sketch on a plain white canvas.

Industry Trend Bias: Another phenomenon that impacts advisors' judgment and the advice they deliver is market trends. Like other individuals, advisors too tend to believe that the market trend will continue. For Example, when markets are on the bull run, advisors believe that the upsurge will continue for a while and base their advice on this belief. The irony is they understand the fact that the direction of the markets cannot be predicted, yet they get influenced by trends. Even if it is highly likely that the bull trend will continue, yet it's wrong to base your decision on the likeliness. You never know the markets might start correcting from the next day. Take the example of the recent bit-coin rally and the subsequent downturn, when the coin was taking giant leaps and surged to US$15,000 levels, people started believing the trend will continue for at least some time, until the coin's pace was thwarted and it changed course.

Familiarity Bias: Another cognitive bias often seen in advisors is tendency to prefer familiar, tried and tested products. Real Estate or Gold can be a good example of the Familiarity Bias. Because people were familiar with these asset classes, they did not look beyond them, and both sectors witnessed sluggish growth over the last decade.

Familiarity Bias in advisors has two drawbacks:

1. Lack of proper diversification in the client's Portfolio. Your preference for let's say equity, will result in over concentration of Equity in the client's Portfolio.

2. Unable to meet specific needs. The investor who is looking to invest in a product, which isn't your forte, may not get the solution from your end.

Anchoring: Anchoring is one of the most common behavioral bias, witnessed in both, advisors as well as investors. Anchoring means when we consider our past experience as a foundation to base our future decisions on. And it is very difficult to modify our perceptions of products based on our first experience. We may have had a pleasant experience with a particular sector in the past, and there are chances we may have anchored the episode to the extent that all our clients have that particular sector in their Portfolios, irrespective of it's relevance in the Portfolio.

So these were some of the most common behavioural biases, among others, witnessed in financial advisors. The crux is it's not just our investors who are not letting go their emotions and biases while investment decision making, quite often we advisors might also be influencing our clients' portfolios with our emotional biases. It is extremely important for advisors to understand these biases and get over them, and deliver fair advice, which is unaffected by judgments or prejudices. It is a continuous task to guard yourself and them against bias.

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There are certain amendments proposed in the union budget FY 18-19 with respect to investments in equity and equity oriented mutual funds. Find below the summarized note on each of the important point.

A) Updated Tax Structure:

The following is the updated tax structure applicable from 1^st April, 2018

(For Resident Individuals / HUF)

Additional: Health & Education Cess of 4% + Surcharge based on total income applicable to Capital Gains.

* Cost as per fair market value / grandfathered upto 31^st January, 2018.

B] Long Term Capital Gains (LTCGs)

The recent budget provisions have created some confusion in the minds of investors regarding taxability of mutual funds units, especially for equity oriented funds. Here is the some clarification for same.

Summary:

Any Long Term Capital Gains (LTCG) over Rs 100,000 per year on Equity Mutual funds will now be taxed at 10%. All gains until January 31, 2018 have been "grandfathered". So one can now assume that the new cost of holding your Equity Mutual Funds is the closing price on January 31, 2018. The start date of your holding remains the original purchase date for calculation of holding period.

Applicability:

Since the budget provisions are effective from 1^st April, 2018, any transaction taking place till 31^st March 2018 will continue to enjoy the existing taxation provisions. Thus, there would not be any LTCG (applicable on any sale happening on or till 31^st March.

Grandfathering:

The grandfathering is a simple concept wherein the Finance Minister has given exemption of all notional Capital Gains earned till 31^st January 2018. This means that for calculation of LTCGs, all gains made till this date will be exempted and not counted. As explained earlier, the tax computation will only be applicable by this method if the sale date is on or after 1^st April, 2018 when the budgetary provisions come into effect.

Calculation for STCG:

The scenario for STCG calculation effectively remains the same as is currently in effect. The tax rate of 15% will continue be applicable if the sale happens within 365 days of purchase of the equities / units.

Calculation for LTCG:

For LTCG, the following is the calculation method:

Purchase price is to be considered higher of (a) and (b). (the idea is that only gains made after 31^st Jan is taxable) .

a) Actual purchase price

b) Lower of ...

i) Fair market value (it is the highest price /market value as on 31^st January, 2018)

ii) Full value of consideration (it is the actual sale price).

Examples:

1. Actual purchase price = 100. Market value on 31.01.18= 110. Sale price = 90. Then Fair purchase price = 100.

2. Actual purchase price = 100. Market value on 31.01.18 = 110. Sale price = 120. Then Fair purchase price = 110.

Exemption of Rs.1 Lakh:

Next, for calculation of final LTCG amount applicable to taxation, the exemption of Rs.1 lakh is applied. Thus if LTCG as per above is say Rs.1,20,000 then 10% on only Rs.20,000 = Rs.2,000 only would be appliable.

This is applicable irrespective of any purchase date and any amount of capital gains and is effective any sale made on or from 1^st April 2018. For any sale date before that, LTCG is not applicable so the exemption amount is immaterial.

Scenarios:

This is the clarification available till now. There are still more clarifications awaited which shall be received in days to come.

C] Dividend Taxation:

Dividends on Equity oriented Mutual funds now taxed at 10%. This provision had to come into effect since LTCG tax @10% is also imposed. Not doing so would have left a window to avoid LTCG tax by switching to dividend options.

This change will also be effective from 01 April 2018.

To assist you in understanding and calculating capital gains tax liabilities we have prepared a Capital Gain Calculator also, Click here to download it.

Download the Frequently Asked Questions (FAQs) regarding taxation of long-term capital gains proposed in Finance Bill, 2018-reg. released by the Income Tax Dept on 4th Feb 2018. Click Here to download

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Be it buying jewelry from Tanishq, or a Tata Car, or an everyday product like Tata Tea, people are sure of the quality of the product.

Do you know Why?

Because people buy Tata products on it's name. Tata, our home grown multinational company, carries an image of serving Quality products and services since decades. This is Tata's Brand Image.

Brand Image is the key to any successful business today.

However, somehow in the financial advisory practice, sadly and surprisingly, building a brand image is largely ignored.

The job of a financial advisor is a noble one, you bring prosperity into peoples lives. And when you are working towards the larger good, you shouldn't be overlooked, you need to do the right kind of branding to be recognized.

The need for financial advisors is undisputed and is gradually growing, but the number of advisors are also growing at a very fast pace. There are so many advisors around, how do you stand out of the crowd is the key challenge.

The solution lies in your brand image, which is shaped by the differentiation strategy you adopt. To build an image you don't have to be just good, try to be distinguishable.

So, What exactly is a Brand Image?

Is it the name of your firm?

Your Logo?

Your tagline?

Or the about us section of your website?

No! Your Brand is none of the above. Although all of them play a significant role in the branding process, yet none of them can be exclusively construed as your Brand.

Your brand conveys your approach, it reveals the tenets on which your business is based. In simple words, your Brand Image is how people perceive you or your firm. It's about how your clients or your prospective clients see you as an advisor. And hence building the desired perception is building brand image.

The Need?

Building a Brand Image is the need of the hour. In the modern day cut throat competition, you cannot survive for too long if you aren't unique, if people don't associate you with certain qualities. Why would someone be willing to work with you, entrust you with his finances, lies in how your image looks like in his eyes. Therefore, branding is absolutely necessary to do business, to acquire and retain clients.

So, how do you build your brand?

Identify the key attributes: The first step to brand building is identifying the key constituents of the brand, that is the attributes you want to be associated with, by the mass. It can be one or a combination of virtues, like you want to be perceived as an ethical business, or someone who never leaves the client's hand as a result of superior service and regular communication, or a technologically upfront business, or a combination of these traits.

USP: Your USP, Unique Selling Proposition, can be a primary constituent of your brand image. Some advisors may have a USP, like someone may have a family history of advising people, so he may be perceived as the one who has been advising people since generations. Or an advisor may have a relevant degree or a certification, or relevant experience, these attributes make these advisors stand out of the crowd. Many advisors have a USP, others may have to look for one. You never know, you may have a USP which just needs to be identified and showcased. For Example, you have been catering to a specific genre like, retired people, or millennials, or corporates, etc., so this segment becomes your USP, you understand this segment's unique needs and have experience in fulfilling them. USP is all about how a quality of yours makes you different from the others, like your education, any specialization, a niche, etc. If you are perceived as a specialist, people will be drawn towards you for that specialization.

Consistency: The factors which represent your brand image should be clear and consistent. If you want to portray yourself as Ethical, then Ethics is one thing you must practice religiously and not let go even in extreme circumstances. Your brand image must be conveyed in whatever you do.

Physical Representation: Your website, your tagline, your logo, your visiting card, your social media page, banners, etc., can take you a long way ahead in building your brand, if utilized right. They should all carry a reflection of your brand image. Your website and social media page is like a gateway to your brand, whatever you want to portray they serve as an opportunity, you can have testimonials, images, quotes, etc., you can make the best use of content marketing here.

Lastly, words must translate into actions, your services must be a mirror image of your brand. “We keep client's interest at the center” or “We are there for you always”, shouldn't be restricted to taglines. Your work should justify the words, consistently, it's only then, your brand image can be built in true sense.

So, the crux of this passage is, building a brand image is inevitable to survive and grow in this world. This brand image must be inseparable from you, it must reflect in your deeds, your words, your disposition, so that people don't have an option but to associate you with the brand you wish to create.

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Wish You A Very Happy New Year !!

The year 2017 was an action packed year for our industry with regular headlines made throughout the year. The year started with the push of the digital payments in the post demo period and ended with big debate on bitcoins. Intermittently we passed through news on GST, tech-startups, rising markets, SEBI consultation papers and Aadhar notifications. Looking at 2017, it shouldn't surprise us if year 2018 turns out to be a year of rapid transformation and evolution in the industry.

So what is the transformation and evolution we are talking about? What are the key trends that are shapeing up the industry? These are the obvious questions that need to be answered and as financial advisors, needed to be understood.

Key trends:

• Democratisation and adoption of Internet: Thanks to competition in the telecom industry, data is becoming very affordable in India. Combined with falling prices of smart mobile phones, India has emerged among the top contries for very high internet penetration and the highest with data consumption. What internet access to the last person in remote village, devoid of roads and electricity, can do is amazing. Today he feels empowered and equal to virtually anyone, powered again with the JAM trinity. This has opened doors for digital banking, access to financial products, ecommerce, social media, news and so much more. It comes as a surprise to many that Indians have found themselves to be so comfortable using apps like Facebook, Whatsapp, Paytm, BHIM. This is also a reason why we say that India is a very data rich country. It is perhaps safe to say today that no one is shy of technology or using it as long as it is easy and it fulfills a person's needs.

• Technology is becoming mainstream: There was a time when products, features, price differentials was enough to influence decision making in financial products. Today however, convenience, features, customer servicing, digital availability, etc. are also becoming mainstream. Technology is no longer limited to backoffice processes. With technology taking center stage and attacting attention, the fin-tech startup community are now coming out with simple, neatly packaged and easy solutions across board in financial services industry. This has forced incumbent heavyweights in the industry to sit up and take notice, especially players in the banking and equity broking business. Their is a growing realisation that a digitally integrated, technology centric but client focused solutions is a must for success.

• Data is the new oil: When Mukesh Ambani uttered these lines, what must have been in mind? Let me try. We are well into the information age and data is what differentiates winners and loosers. As a country, we may have been unfortunate to have huge oil reserves and were also late to technology adoption. However, the later has actually been a boon in disguise as India can directly adopt new technologies with much enthusiasm and emerge a global leader, which it is doing remarkedly well, especially powered by the JAM trinity. India today also has the largest consumption of internet data in the world. Within financial services industry, data is weighted in gold and everything from client acquisition, servicing, business decisions, sales, etc. is powered by intelligence gathered from data. Just to cite an example, every major company today is focussing on Business & Sales Analytics to find cross-sell and up-sell opportunities in new and existing clientele. Client communications are made keeping these outcomes in mind instead of the earlier practice of bombarding everyone with everything you have to sell.

• Emergence of new technologies: 2017 was also a year when new technologies gained critical mass, enough to intrigue even the non-technical, business guys. Terms like Artifical Intelligence, Machine Learning, Chatbots, Robotic Process Automation (RPA), Blockchain, Internet of Things (iOT), etc. now sound familiar to us. Financial services industry is now exploring and adopting some of these technologies in their business operations. For example, AI and social media analytics today play a very important part in marketing. Chatbots (a chat software which talks like a human being to a customer) have literrally become a backbone for customer servicing in many companies. Even companies like SBI are today studying blockchain technology to find appropriate usages.

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