Don’t become the product sellers make money from

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My friend has some blockages in the arteries that supply blood to the heart. He smokes and drinks, holds a stressful job and can’t stick to a workout regime. The doctor 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 in such a manner that he feels good and provides him with continued business. This sales orientation is all pervasive, and has harmed us so much and we are still figuring it out.

Enter a bank branch to transact any business, and a relationship manager will persuade you to buy a product. 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, or the installment plans for a new scheme.

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?

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? How much tax will I save?

Recognize the one-sided and poorly informed nature of these questions: The premium is 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.

Little wonder that the market is filled with ill-defined products. The prevalence of persuasive sellers who will lie or highlight 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. Marketers pride themselves as being able to define needs that you did not know existed. When and how did you allow someone else treat you like hapless victims?

If you are not saving enough every month, you need products that will enable you to draw from them as needed. 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, don’t be gullible about what a product will do for you. 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. For every multi-bagger share, there are abysmal failures and you cannot tell them apart. 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 taking that free quiz online, or forwarding mindless stuff to your contacts, consider that when something is free, the product being sold may very well be you.

The author is Chairperson of The Centre for Investment Education and Learning

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