Building a long-term relationship with clients as a mutual fund distributor is a marathon, not a sprint. Over the years, an MFD moves from managing an SIP to guiding an investor through some of life’s biggest milestones – from funding a child’s education and buying a home to planning for retirement.
But even the most dedicated MFD eventually face a difficult reality – not every client relationship is meant to last forever.
Some clients expect guaranteed returns from their investments. Others want frequent portfolio changes or expect their MFD to be available around the clock. The challenge is to understand whether the relationship can be repaired or whether the mismatch is too deep to resolve.
In conversation with Cafemutual, Trinath Lenka, MD of Wallet4Wealth, Shifali Satsangee, founder and CEO of Funds Vedaa and Mukund Seshadri of MS Ventures, share how they deal with difficult client relationships and what these experiences have taught them.
Is It a Problem-Making Client, or Just an Anxious One?
For Trinath Lenka, the first step is not to label a client as difficult. It is to first understand what is actually going wrong.
“Is the client genuinely difficult? Or has expectations that haven’t been communicated clearly?” Lenka says.
In his experience, many disagreements can be traced back to a disconnect at the beginning of the relationship. An investor may enter the market expecting short-term returns while the MFD is working with a long-term investment approach.
The solution, according to Lenka, is to go back to the basics. This means clearly defining the scope of services, explaining market realities in simple language and maintaining proper documentation.
“Documentation protects both the client and the advisor,” he says. Transparent records, he adds, can help turn an emotional disagreement into a discussion based on facts.
However, there are times when a relationship simply cannot be repaired. If repeated conversations fail to realign expectations and trust, or respect is lost, Lenka believes it is better to part ways gracefully.
Look Beyond the Difficult Behaviour
Shifali Satsangee believes MFDs should look beyond a client’s behaviour and try to understand what is driving it.
“Nine times out of ten, a ‘difficult’ client is actually an anxious client – anxious about markets, about goals or about something we failed to communicate clearly or something that has been misunderstood,” Satsangee explains.
Rather than reacting to a client’s frustration, her team goes back to the Investment Policy Statement prepared during onboarding. The conversation then shifts from short-term market movements and returns to the investor’s original goals, investment criteria and the purpose of the portfolio.
“In my view, an MFD-client relationship is a fiduciary partnership, not a transactional one. Like any partnership, it works only when there is mutual trust, aligned expectations and respect for the process,” she says.
However, Satsangee also believes there are situations where continuing a relationship may not be in the interest of either party.
Repeated demands for assured returns, insistence on churning investments against professional advice or pressure on an MFD to compromise on compliance and ethics can make a relationship unsustainable.
In such cases, she believes the exit should be handled with the same professionalism as the onboarding. Clients should be given adequate notice, complete documentation and assistance with ARN transfers so that their investments can continue without disruption.
“The principle we follow is simple – you can end a relationship gracefully and in a dignified way without ending the respect. A client who leaves your practice should still be able to recommend you, even if they no longer subscribe to your counsel. In this profession, your conduct in the last meeting matters as much as your advice in the first,” she says.
When a Difficult Client Becomes a Lesson
For Mukund Seshadri of MS Ventures, a difficult client relationship is not necessarily a reason to walk away immediately. His first step is to go back and check the facts and focus on what went wrong.
“I check facts and understand what exactly went wrong and why,” Seshadri says.
Often, that review shows that the client is not necessarily difficult. The problem may simply be that the client is looking for a service that the firm was never set up to provide.
A classic example is the difference between trading and investing.
“In some cases, we had clients who had a trading mindset and not an investor mindset,” Seshadri explains. “So, we decided to amicably part ways, as we were not able to give them what they needed.”
However, Seshadri learnt soon that losing a client can provide an opportunity to improve the business. The experience prompted MS Ventures to strengthen its systems and CRM processes.
“My advice to other MFDs is to learn from each client and draw your standard process so that next time you onboard a client, you can make things clear,” Seshadri says.
The idea is simple – every difficult client interaction should leave the business with a lesson. Over time, those lessons can be converted into standard processes, better systems and clearer onboarding processes.
“We always say in our company – ‘You can leave a contract, but not a contact.’ Clients have left us in the past and some have come back after six years. That’s why we focus on investing in relationships,” he says.
Know When to Hold on and When to Let Go
The experiences of these three distributors show that dealing with a difficult client is not simply about deciding whether to retain or exit the relationship.
The first question is whether the problem can be fixed which could mean clarifying expectations, understanding the client’s anxiety, checking what went wrong or revisiting how the relationship was set up in the first place.
In many cases, a simple conversation may be enough to bring the relationship back on track.
But sometimes the disagreement is heavy-weighted. A client looking for frequent trading opportunities may not be comfortable with a long-term investment approach. Similarly, repeated demands for assured returns or pressure to compromise on compliance and professional ethics can make a relationship difficult to sustain.
No client relationship is worth compromising on compliance or professional ethics. In such cases, parting ways may be the more responsible decision.
The bigger lesson for MFDs is that difficult relationships are not always just problems to be solved. They can also show where a practice needs better communication, stronger processes or more careful client selection.