The Petrov moment in a client's life

A sketch by Carl Richards illustrates that the advisor stands between the client and her big mistake

I was looking at a graphic on the glass partition in our office when my thoughts turned to Stanislav Petrov. Petrov was a lieutenant colonel in the Soviet Air Defence Forces who played a key role in the 1983 Soviet nuclear false alarm incident. On September 26, 1983, three weeks after the Soviet military had shot down Korean Airlines Flight 007, Petrov was the duty officer in charge of the early-warning system which reported that the United States had launched six missiles. Petrov judged the alarm to be false based on the reasoning that a missile attack by the US would involve hundreds of missiles, not just six. His decision to disobey orders, against Soviet military protocol, prevented a retaliatory nuclear attack on the US that could have resulted in a nuclear holocaust. An investigation later confirmed that the Soviet satellite warning system had indeed malfunctioned. 

Despite the significance of Petrov’s action, very few people know about him. Clearly, a disaster that did not happen is soon forgotten.

I was reminded of the role advisors inevitably play during Petrov moments in their clients’ lives as I looked at the sketch on our office glass partition wall. The sketch by Carl Richards on BehviourGap (https://bit.ly/3FOtedr) indicates in a remarkably simple manner that it is the advisor who stands between the client and her big mistake. 

Let me narrate one instance to illustrate this point. One of our clients, Girish, 45, had several crores sunk in two under-construction projects that had been stalled for more than a decade. He had purchased the first so he could live in it. Then he repeated his error and booked another flat which also got stuck. Despite doing well in his career and earning handsomely for close to two decades, his financial investments were around Rs 30 lakh at the time when he approached us for advice. His daughter was 15 and he was looking to fund her undergrad education starting in three years. He planned to use his existing financial investments, plus his savings over the next three years, to pay for this. 

Girish also had an alternative plan. He was sick of living in rented premises. He had reason to believe that at least one of his flats would be ready in three years. He wanted to use his existing funds to make a down payment for a ready-to-move-in home and fund the rest by taking a “bridge home loan”. The sale proceeds from the flat that would be ready in three years would enable him to fund his daughter’s education and pay off the bridge loan. 

When probed, Girish admitted that it was highly uncertain whether either of his flats would be completed in three years. I pointed out to him the risks he was taking. He would have zero financial savings to meet any contingency during the next three years. Also, if neither of the properties was ready in three years, he would not be able to fund his daughter’s education, nor be eligible to take an education loan, as his entire repayment capacity would be used up by the “bridge home loan”. 

I was able to stop Girish from taking a suicidal step. Three years have passed and neither of the flats is near completion. Fortunately, Girish was able to meet his daughter’s education expenses and is happy he took the right decision. 

Truth be told, one of the perks of being an advisor is the opportunity to be the architect of the Petrov moment in our clients’ lives.

The writer heads Fee-Only Investment Advisors LLP, a Sebi-registered investment advisor