My heart goes out the credit analyst sitting in an oblivion in a successful private sector bank. He dared to ask the what if questions. What if the size of the borrowing by Nirav Modi was too good to be true. What if there was more to it than what meets the eye etc. Some of the questions led to his bank missing out on a ‘massive’ business/loan giving opportunity. Probably, he was taken to task by seniors in the bank for putting his red rubber stamp that said Rejected. Probably, for many years the analyst was the butt of all jokes to many and an eyesore to others.
Same is the case for professional wealth advisors. For years together they refuse to change asset allocation or refuse to the next coinomania on the block or refuse to change the funds or refuse to invest in American / Chinese equities. They are at the receiving end of comments like too slow to act, not proactive, boring, too diversified etc. Only years later does it all add up to a prosperous and sustainable wealth growth. And it is only years later he realises that signing up for wealth management included signing up for managing the client (behaviour) too. Infact, investments is just the first lap of a 10 lap marathon.
The first lap is important. Both for the client and the advisor. Through their experiences, over a period of time both parties calibrate their respective approaches and expectations. On an average it takes 7 to 10 years for this maturity to set in. No surprise that the time frame is similar to that of one full economic cycle. A cycle full of hypes and horrors. With so much change around, it is almost a miracle that a highly stable and closed approach comes up on top. Pretty much like the American constitution. It has been amended less than 25 times across a chaotic timeline last 200+ years. And look at the results it has delivered.
Talking about PNB, we have always maintained that Public sector continues to be poor capital allocator. Reason enough we don’t advise CPSE and Bharat 22 ETFs of the world. Another reinforcing investment lesson is that accidents will always happen. Today it’s PNB. Yesterday it was Satyam. Having a concentrated portfolio of instruments may give a slight edge in returns but it exposes the portfolio , — that too not your own portfolio — a portfolio for which we have a fiduciary responsibility – client portfolio, to irreparable damage and loss of capital.
But today our credit analyst is the saviour. The Noah who built the ark many years ago when he did not allow the overenthusiastic sales team to lend to the Nirav Modis of the world. His one simple and brave act of refusal possibly saved the death line risk to his bank. No amount of accolades can compensate for that.