Bull-market temptations
In this chapter: Recency and the chase for "the next multibagger" · When to disappoint a client
Bull markets are emotionally easier but more dangerous. Clients want to add risk (FOMO), increase allocation to recent winners (recency), and explore "themes" (small-cap, sectoral, new-fund-offers). The advisor's job: remind them of the IPS, slow down decisions, and disappoint when needed.
Bull-market client requests: "should we increase equity to 90%?" (recency), "let's buy ABC small-cap fund — it returned 70% last year" (recency + FOMO), "can we add the new EV/AI/manufacturing fund?" (theme-chasing), "I want to switch from large-cap to small-cap" (chasing). Advisor response: "your IPS targets 70/30; your goals haven't changed; recent returns are not predictive". Disappoint with kindness — most clients accept disciplined refusal if it's framed as protecting their long-term interest. Document the request and refusal in the CRM.
A nuanced insight: bull markets create the most mis-selling (and the worst long-term outcomes). New funds are launched at peak appetite — and they often invest in already-extended themes. SEBI flags "thematic NFOs at sector peaks" but they continue. Practitioner discipline: never recommend an NFO; wait 1-2 years for the fund to develop a track record. Reject "hot" sectoral ideas without evidence of mean-reversion potential. The most valuable advisor moments are the ones where you say "no" to a tempting idea — these are also the hardest to monetise. Fee-only RIAs do this better than commission-paid distributors.