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