Do not enter a bank unless absolutely necessary!

Published: October 4, 2015 at 9:38 pm

Last Updated on December 31, 2015

Banks are the pillars of any economy.They create credit, accept deposits, ensure liquidity and serve as the veins and arteries of the financial system. The dream of owning property would remain a dream, but for the loans offered by banks. Yet,  to borrow a line from cartoonist Walt Kelly, “We have met the enemy and they are banks!” Here is why I believe that one should not enter any bank unless absolutely necessary.

The bank today is like a mall. You can shop for credit cards, gold, life insurance, health insurance, accident insurance, mutual funds, financial advisory, and perhaps more.

It is common experience that banks use the information that they have access to (a customer’s bank balance, fixed deposits etc.) to target specific products that they would gain from by way of commissions or other incentives.

The bank relationship manager is the very last person on Earth that we must have a relationship with. Yet, customers end up making piecemeal decisions about money after ‘consulting’ relationship managers, who are salesmen with a specific product to sell and a specific sales target to achieve.

Most people have a terrible habit of asking, “where should I  invest?” and “which is the best product?”.  Ask this question in Facebook group Asan Ideas of Wealth and if by chance Ashal Jauhari is free at them time, he would ask the right counter questions.

Ask this question to a bank or any product salesperson for that matter, holistic advice is very last thing one would receive.

“Convenience” has been conveniently sold by banks.  They offer a wide spectrum of products and say, ‘get it all in one place’. They did not say ‘get it all in a hurry’, but since most of us misinterpret convenience as ‘buy without thinking’, we as loyal customers happily obliged.

Persuasion is the key component of selling (trust me, for I have selling physics  to all kinds of ‘customers’ for 2 decades) and now we have personnel in banks who do this extremely well. The lines between persuasion and mis-selling can often be blurred and lazy customers seeking quick solutions could never tell.

Easy to find horror stories of mis-selling:

  1. Open a SB account if you want to open a PPF.
  2. Make  a fixed deposit if you want to open a PPF
  3. Home loan insurance is mandatory and should be purchased only from XYZ.
  4. ULIPs, credit card and mutual funds have been sold by proving misinformation.

But why?  Two words: target and incentive.

In Feb. 2015, NDTV published a survey conducted by the Consumer Unity and Trust Society:

To quote from, Financial Product Mis-Selling: Incentives to Blame

“76.3 per cent bankers feel that there is a pressure on them to achieve sales targets set out by the bank”.

“67 per cent consumers of financial services feel that provision of incentives leads to bank staff providing wrong information or mis-selling of products”.

Enough said. These are simple banking do’s and dont’s that I follow

1). Never enter a bank unless I absolutely have to – KYC updation, life certificate for my mother, account opening if not possible online. Practically all day-to-day transactions can now be done online.

2) Never talk to any employee who approaches me unsolicited

3) Never ever talk to the relationship manager.

4) Never maintain significant balance in the salary account. This will automatically take care of 2 and 3.

5) Never ask a banker (or any salesman for that matter), ‘where to invest’ and ‘how much to invest’. A bank is meant for ‘use’ and not a place to discuss finances, personal goals and seek counsel from.

6) If I require convenience, I consult a financial planner for a fee and invest as suggested via the bank.

7) Most important: Unsubscribe from the banks mailing list or blacklist their mail id as ‘spam’.

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About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association, IIST Alumni Association. For speaking engagements write to pattu [at] freefincal [dot] com
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