How to Retain Clients
By TAN Kee Wee
(MediaCorp 938LIVE’s Money Talks, Thursday, 3
September 2009, 7.50 am and 7.20 pm)
A few years before the credit crunch struck in
September 2008, Professor Nouriel Roubini, the New York
University economist, was issuing warnings that such a
catastrophe would happen.
For a long time, he was ignored. But when his warnings
materialized after Lehman Brothers collapsed, he was labeled a
sage and became a key figure in the international media
Unfortunately, his predictions have not been spot on
lately. In March this year, when global stock markets hit
bottom, Roubini said that the S&P 500 Index, which was then
around 670 points, might drop below 600 points.
Instead of falling, the S&P 500 has since risen
more than 50 percent to its current level of around 1,000
points. This goes to show that when economists try to give
short-term price forecasts, they are walking on thin
Very few economists get it right most of the time.
More often than not, we get it wrong most of the
Ideally, economists should just try to educate and
explain. If part of the explanation involves a probability that
an event might occur, it is perfectly alright to highlight the
Of course, the reality is that economists are asked
for price forecasts all the time. Me too. If I knew the
answers, I would gladly pass them on. But I don’t. I suppose I
could if I have God’s mobile number. But too bad. God does not
Since accurate forecasting is impossible, it’s
astonishing that a whole forecasting industry has been build
up, even enlisting the skills of feng shui masters, in the
What is worse, some of these forecasters are fearless.
They claim that they are always right. The truth is, on closer
inspection, they always present their forecasts in
For instance, a typical forecast goes like this:
“prices are going up but there are downside risks”. In plain
English, it means that prices are going up but they can also
come down. This doesn’t tell us very much.
If you think that the forecaster is contradicting
himself, you are right. It is actually a deliberate move.
Because once such contradictory statements are given, it does
not matter whether the market goes up or down. He will always
What can we learn from these savvy forecasters? First
of all, you must not have the integrity of a boy scout. If you
are in the business of taking a commission from selling an
investment product, and your livelihood depends on having a
pool of clients, this is what you could do.
Tell half of your clients to sell because the market
is going down. Then tell the other half to buy because the
market is going up. Let’s assume that the market goes up. The
first group of clients, whom you told to sell, would be mad at
you for giving the wrong advice. They would leave you as a
But the other half of your clients, whom you told to
buy, would have made money. They will see you as a sage. So
impressed will they be with you that they will introduce you
At the end of the day, you still have a client base
and you are still in business. The downside is, you will soon
be known as a person who constantly flips his views, tossing
from side to side, like the roti prata man.