<p>Yes, it is very challenging to handle this objection. First of all, an advisor converts the clients fd into debt funds and then it under performs.</p>
<p>This could be your response to clients:-</p>
<ul>
<li>These are tough times. I understand your concern. Due to unforeseen hike in interest rates in the country, debt funds are under pressure. (explain the inverse relationship between interest rates and bond prices).</li>
<li>However, there is a positive development also. Since interest rates have gone up, the yield to maturity of debt funds have also gone up. This means, if you hold for another year or two, your return is expected to go up. Currently, in most debt funds, YTM after management fees is much higher than FD rates. If you continue to hold, you will get this benefit.</li>
<li>If you hold your debt funds for 3 years, it qualifies for indexation benefit and lower capital gains tax. Your tax liability can reduce by upto 65-70% (if you are in 30% tax bracket) if you continue to hold. Because of this, even if the returns are equal to FD in 3 years time, you get better post tax returns.</li>
</ul>