Published Article Details

Being an informed and vigilant buyer is your responsibility

Posted by: Uma Shashikant on Apr 09, 2018, 06.30 AM IST

By Uma Shashikant

The results of the scan are not good. My friend has some blockages in the arteries that supply blood to the heart. He is a habitual smoker and loves his drink. He holds a fairly stressful job and can’t stick to a workout regime.

As we look up at the doctor, he smiles at him and says he will be fine. Where are the strictures, words of disapproval and stern warnings, I ask myself. And then it strikes me hard. My friend is not a patient alone, he is also the doctor’s customer.

The doctor has to deal with him such that he feels good and provides him with continued business. The kid gloves that the doctor is wearing are because he is now a smooth-talking salesman. He has revenue targets set by his corporate hospital. Revenue per patient is the metric he is measured and paid by.

This sales orientation is all pervasive, and has harmed us so much and we are still figuring it out.

Schools won’t discipline students. Parents have paid a fee that is so high that they now demand a privileged treatment that creates an inflated sense of entitlement in the young minds. And then some undergraduate colleges will impose unrealistic and excessive control over words and actions of young students. Stroll through the engineering colleges of Chennai to see the bewildering levels of control, imposed because the paying client —the parent—would have it no other way. Coaching classes compete to publish photographs and ranks of the students they helped to clear a competitive exam. They have call centres and rooms full of counselors, who are sellers in the garb of well-meaning advisers. They will convince parents and their wards that paying a steep fee will place their children within reach of the coveted seat in the elite schools.

Enter a bank branch to transact any business, and a relationship manager will persuade you to buy a product. It is common knowledge among NRIs that when they walk in to change their addresses, they also walk out with an insurance policy on which they have committed to pay a few lakhs as premium. If you phoned a call centre for help, you will sense the persuasive talk to sell you the next holiday package, the newest financial product, the discounted ticket to Timbuktu, or the in-stallment plans for a new scheme. Support staff that have to resolve a problem, also have cross-sell targets that make them an extended sales force.

It is the curse of the modern world we live in, where we are consumers and clients first, and the survival of several businesses depend on their ability to sell to us and thus grow in size and volume. How does this affect our financial lives and what can we do about it?

First, restore the balance so that you know your rights and responsibilities. When we buy an insurance product, we are asking the insurance company to stand in for us should there be an unexpected setback, even as we are building assets for our family to lean on. It is critical to understand that building assets for the family is our responsibility. How much, how soon, and how well we will do this depends on our own capability. When we seek insurance, we protect against the possibility that we may not complete that task as intended.

Now imagine the behaviour of the typical consumer of insurance products. The questions that are commonly asked are: how long should I pay the premium? How much will I get? What is the assurance that I will get it? How much will my money grow into? How much tax will I save? Recognize the one-sided and poorly informed nature of these questions: The premium is I what one can afford to pay, and therefore has to be as small as possible; the money I get from the policy should make me and my family rich, and if I get nothing it is a bad policy; if there is no assurance of how my money will grow, I won’t invest; and if it saves taxes today it is a good start, tomorrow can wait. Little wonder that the market is filled with ill-defined products that pretend to send your child to school for you, pay your medical bills, or secure your retirement. The prevalence of persuasive sellers who will simply lie or shine the light on only those portions of the product that appeal to you, is encouraged by your unwillingness to take responsibility.

Second, be clear that your need is the primary driver of your decisions. If you went with a shopping list to the supermarket, there is a good possibility that you won’t fill your cart with junk. Marketers pride themselves as being able to define needs that you did not know existed. Really? When and how did you allow someone else to play mind games and tag you along like hapless victims? If you are not saving enough every month, you need products that will enable you to draw from them as needed, anytime. If you are earning enough, you don’t need products that will generate income for you. If your investment is expected to grow only if given time, you won’t be able to draw on it easily. There are simple ways to define what you need before you step in to shop. Knowing what you need is a responsibility you have to take on .

Third, stop being gullible about what a product will do for you. Saving schemes that enable you to buy gold at the end of several installments are actually funding your jeweller. Mutual fund schemes are tools to expose you to the capital market and will not come with guarantees. A bank, NBFC, or a company’s ability to pay interest depends on the quality of its assets. That has nothing to do with its name, ownership, or familiarity of the manager selling the product to you. For every multi-bagger equity share, there are abysmal failures and you cannot tell them apart in advance.

An informed buyer is the only foil to an incentivised seller. Sellers have their own interest firmly in mind. Your interest can be protected only when you take charge. Before gullibly taking that free quiz online, or pasting on your timeline meaningless content, or forwarding mindless stuff to your contacts, pause to consider that when something is free, the product being sold might very well be you.

The author is Chairperson, Centre for Investment Education and Learning



This article appeared in Economic Times dated Apr 09, 2018, 06.30 AM IST

Online Courses

Capital Markets
Basic Level
BANKING AND CAPITAL MARKETS

Get the training you need to work in the Banking and Capital Markets industry through this intensive course

Capital Markets
Basic Level
SECURITIES AND OPERATIONS PREPARATORY

This NISM preparatory training is designed to help students whowant to take the securities and operation ex

Capital Markets
Basic Level
DEBT INSTRUMENTS - BASICS

Get a complete understanding of debt instruments in India. This course is ideal for professionals who want

Capital Markets
Basic Level
EQUITY MARKETS BASICS

More people in India are investing in equities and shares creating a need for more skilled equity managers

Capital Markets
Advance Level
EQUITY LINKED STRUCTURED PRODUCTS

Structured products are used to introduce tailor-made investment options in the world of finance. Our cours

Capital Markets
Advance Level
DEBT INDICATORS

What factors affect the debt market? Learn all about debt market indicators to understand the world o

Capital Markets
Advance Level
DEBT MARKET ANALYTICS

Need help to understand the bond market? This bond valuation course simplifies debt bonds, bond yield

Capital Markets
Intermediate Level
CREDIT RATING

Poor credit ratings indicate risky investment opportunities. Learn about the concept of credit rating, its

Capital Markets
Advance Level
EQUITY VALUATION PRINICIPLES

Learn the different principles of equity valuation along with their real world applications.

Capital Markets
Advance Level
EQUITY MARKET INDICATORS

Reinforce your stock market basics by learning about equity market indicators through our online course.

Capital Markets
Advance Level
DEBT MARKETS LEVEL - 2

Understand the structure of debt capital markets and the structure of its primary and secondary markets.

Capital Markets
Intermediate Level
FINANCIAL PLANNING AND MUTUAL FUNDS

Learn to invest based on investment goals and objectives through our Intermediate course on Mutual funds.

Capital Markets
Advance Level
EQUITY MARKETS -II

Learn advanced methods of fundamental and technical analyses of financial statements in capital markets.

Mutual Funds
Basic Level
MUTUAL FUND PRODUCT PRIMER

People in India are increasingly knowledgeable about the investment options available to them. Mutual Funds

Mutual Funds
Intermediate Level
MUTUAL FUND FACTSHEETS

Become a mutual fund investment advisor. This course will teach you the basics of mutual fund investment th

Mutual Funds
Basic Level
PREPARATORY COURSE FOR NISM MFD EXAM

This NISM modules preparation training is designed to help students who want to take the NISM examinations

Mutual Funds
Basic Level
MUTUAL FUND PROCESS PRIMER

Acquire the ability to provide complete financial solutions to investors using mutual funds through underst

Mutual Funds
Advance Level
PERFORMANCE EVALUATION OF EQUITY FUNDS

Learn to evaluate a portfolio thoroughly through our advanced level course on portfolio evaluation!

Mutual Funds
Intermediate Level
EQUITY FUNDS - PRODUCTS AND POSITIONING

Learn about the different types of equity funds and their positioning through ourintermediate level course.

Mutual Funds
Intermediate Level
DEBT FUNDS - PRODUCTS AND POSITIONING

Learn about the types of debt funds and their positioning through our intermediate level online course.

Mutual Funds
Advance Level
MUTUAL FUND PRODUCT POSITIONING

Learn how to choose and understand mutual funds products with our online course on mutual fund positioning.

Mutual Funds
Advance Level
DEBT FUNDS - RISK, RETURNS AND PERFORMANCE

Learn to market debt funds and how to calculate their risks and returns through our advance level course.

Mutual Funds
Advance Level
FUND SELECTION AND SUITABILITY

Learn to choose the right category mutual funds based on your clients' risk profile and financial needs.

Mutual Funds
Intermediate Level
LIQUID FUNDS AND TREASURY MANAGEMENT

Learn how to invest in liquid funds for treasury management through our advanced online course. Enrol now!<

Stock Broking
Intermediate Level
DERIVATIVE TRADING-2

Master the basics of option trading strategies and learn how to balance profits, risks and returns us

Stock Broking
Intermediate Level
EQUITY TRADING - 2

Delve into the nuances of equity trading strategies. Hone your skills to gain maximum rewards through this

Stock Broking
Basic Level
TRADING ACCOUNT - COMPLIANCE

Understand the consumer redressal procedures used by broking houses, their clearance and settlement process

Stock Broking
Basic Level
TRADING ACCOUNT - LEVELS - BASIC CONCEPTS

Get started with the basics! Learn how trading and DEMAT accounts are different along with their opening an

Stock Broking
Basic Level
DERIVATIVE TRADING

Get the tools and knowledge you need to understand derivative products. Learn about the pricing of differen

Stock Broking
Intermediate Level
MARGIN LENDING AND TRADING

Margin trading and lending is a high risk and return strategy. Learn how it works from our online course.

Stock Broking
Basic Level
DEMAT ACCOUNTS - PROCESS

Learn how to open and operate DEMAT accounts through our beginner level online course.

Stock Broking
Basic Level
EQUITY TRADING - 1

Learn the concepts of equity trading and trading strategies through our beginner level online course.

Stock Broking
Advance Level
DERIVATIVE STRATEGIES

Gain a thorough understanding of the best options trading strategies through our advanced online course.

Stock Broking
Intermediate Level
IPO AND MARGIN FUNDING

Understand the IPO funding process in India and their benefits to investors through our intermediate course

Stock Broking
Intermediate Level
LAS, IPO FUNDING & LEVERAGE

Learn about IPO, ESOP financing structures along with loans against securities through our online course.