RBI wants banks to hive off advice. Long shot, won’t work

We’ve had issues with the way our banks sell us financial products. We swap stories at social dos about whose bank sold the bigger lemons. After experiencing one or two toxic products sold by banks, we’ve learned to stop the bank official mid-sentence and just stay with what we want. A joke did the WhatsApp round sometime back where a man runs into a bank, pulls out a gun and screams: “Just open an FD for me. I don’t want an insurance plan or a mutual fund. Just the FD.” We wonder how banks are able to get away with these pervasive sharp sales when there is a banking regulator in place. Well, you need to know that last week, the Reserve Bank of India (RBI) came out with a notification that will deal with this problem of mis-selling. You can read the notification here: http://bit.ly/1Qygiqr.

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When SIPs become cool

At a wedding reception recently, a friend’s daughter, who just got her first job, wandered over to where us oldies were huddled. Aunty, I, like, wanted to chat about this SIP (systematic investment plan) thingie? Whenever you have the time, whatever? Another friend, not known for being sane, who lives consultancy cheque to consultancy cheque and regularly blows up her bank account on mad-hatter trips, worked with me over three afternoons to set up her SIP accounts through her online bank account. “I just totally have to get this SIP thing going—it is so cool!”

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The answer lies in simplicity

We’ve all been guilty of pushing for another day financial decisions we need to take. It’s not that we are actually lazy slobs who’d rather get a beer than choose financial products on a Sunday afternoon; that’s there, of course, but our unwillingness to move on many things financial is also related to the complexity of the task. Research shows that when the task is complex or when there are too many choices, we freeze and mentally push the decision away to another day. Why do I say complex? Consider this: an average mass affluent household needs to own at least 10 financial products like deposits, different kinds of insurance cover, different loans, different tenure investment products, and retirement products, to name a few. Each of these is offered by several ‘universal’ brands. Each brand has many companies. Each company offers several products, and each product has many options. If each person was to read through the brochures of each product in the set, it may take many years to work. By then, of course, new categories, brands, companies, products and options would have arrived.

 

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