Interpreting your banker’s advise!
Let us see what your banker says…..and how you should interpret it…
It is not easy being a layman today! The amount of ‘advise’ that is dumped on you is stunning. Advise on where to travel, when to travel, how to reduce weight, how to impress your girlfriend / wife / boss/ …, grow your hair, colour your hair….the list is endless.
However the guy who can really get all your ATTENTION is the banker. This is because he has all your money, though theoretically you think you have all the money. So here is a guy who has seen your life bare (RBI jokes once in a while saying this is illegal, but what the….). Let us see what he says:
1. Sir It is nice for you to keep all the transactions in one place: Complete bull. You pay a very heavy price for this so called convenience. The interest rates even on Fixed deposit made online is not as good as you think it should be! They also have some small boxes which say ‘renew automatically’ – which means for exactly the same period it will be renewed. Most times this is suboptimal.
2. We have the full range of products: Complete bull. All banks may not give you the full range of services that you need. Take the Indian example Axis bank sells Axis mutual funds, Icici bank sells Icici Prudential mutual fund, SBI, Hdfc,….and the story is the same! Life insurance is again a known story – THEY CANNOT SELL ANY insurance other than their own parent companies’ product!
3. Our advisors are here to help you. Complete bull. A bank advisor has sales targets, not relationship targets. They have great ‘products’ meant for ‘prospects’ which are nicely couched as ‘solutions’ for ‘customers’. Actually their greatest benefit is when you keep a lot of money without doing ANYTHING in the SB or Current accounts! However nowadays (10 years) ULIP has made them more greedy.
4. Our Advisors will give you optimal solutions: Impossible. There are advisors who will make you invest your money in a ULIP and at the same time give you a loan against shares – even using the same money to pay the premium! Get the transaction reviewed by a friend, and you will realise that you are holding a lemon!
5. We are here to help : Of course yes! Not sure help whom? well join the gang, I am also wondering. It is surely not me!!
6. We will give you the finest rates: Impossible.: Banks which talk less, have poor customer service (they are almost anti customer) have better rates. Banks which call you a dozen times, wish you on your birthday, wedding anniversary, dog’s birthday…are likely to charge you for all the calls in some form or the other! All rates, charges, services, are negotiable. The more you move around, the better off you are. Take a simple example if you issue a Hdfc bank cheque to your Icici bank credit care it will take 2 days for the debit..but if you issue a same back cheque the debit will be immediate..simple na? Thanks to technology, keeping all the money in one place is not necessary to get the best rates.
7. The Relationship Manager is your friend. I refuse to say anything further…..correct?
some more …later on!
Sreekant
Caveat Emptor. there’s no point blaming the bank guys. They are doing their “job”. If the customer bothered to do some homework and just ask a few questions, they can avoid most of the lemons. But when form takes precedence over content, lemons are what they will get. Customers feel nice when they hear “privileged banking” “preferred customer” “special lounges” etc. When the owner of the money cares two hoots, why should the “relationship manager” care more? Greed also creates a lot of problems. How else would you describe the CEO who lost 32 crores in the Citi scam? A fool and his money are parted easily.
krish
I do not know why some people thrash customers of previlaged/preferred banking. People are willing to pay higher price for the personalised services and ambience as like 5 star hotel. Banking space is no different.
For most of the high end customers, 1% higher rate do not make any difference and time is essence for these people. It is not their primary income. Just by sending mail, SMS or phone talk, the needful is done if you are a preferred customer. Try & see the difference in treatment if you have deposit of 1 million in Canara bank and in Private bank.
Even the scores of ordinary investors had burnt their fingers with SBI life and MFs. Why to blame one guy who had fallen prey to rogue RM.
Sreekant
I am not out to thrash anyone, most certainly not the “privileged”, myself being one of them. But that is why I am appalled. The privileges are mostly cosmetic. My only point is if someone doesn’t have the time to involve in managing his own money, he cannot shift the blame on somebody else. If a person has no time to bring up the children that he has been blessed with, then most probably the child will go stray and there’s no point in blaming society for it. It’s his baby, quite literally 🙂
Visvanathan
LOL!! if your bank is calling you a privileged customer, you should listen to what the bank thinks of you internally! It means ‘hey sucker, you leave Rs. 9L in the SB a/c on an average, when, actually with a click of a button you could have put it in a liquid fund and got a better return’. It means you buy FINANCIAL products without comparing (which is stupid), you are not a demanding customer (how many times have you said, get me the cash to my house, NOW!) …etc. What 1% p.a. can do over 30 years..on a compounded basis…well that is for Subra to write about na?
krish
I could not quite understand Kids bringing analogy with managing money. Frankly I do not like to visit Big Bazaar for every small item even if it is close by my home. I would rather pick it up from next door shop.
People who earn big money to be previlaged customers in most cases would like to focus their energy on primary income source so that they can leap bigger benefits rather than focussing on passive source which requires considerable time frame to match with the primary income. These set of people are happy with 8-10% returns with least effort. It could be any debt instrument, FD or FMP. Some of them are SIPPERs in equity MFs. There are lot of people who says direct participation in equity gives much superior returns than MF equities or debt products. It is the choice that individuals make about the returns that they are happy with and one has to respect their decisions.
1% rate compounding for 30 years is great idea. I have not seen anyone who rolled FD for 30 years and did not tinker in between. But the theoritical figure rocks.
pravin
i agree with krish.those willing to consume their money(ie waste it or utilize it) for the sake of ‘privilege banking’ are demonstrating that they value the special treatment more than the possible returns on the investment which can be done outside.
in other words,these guys are not looking for the optimal,cheapest,best and risk appropriate investment at all-atleast their actions say so.they are looking for something where they get some personal attention and being ‘sirred’ and ‘madamd’ by people in ties.
nothing wrong with it.everyone has different value systems.
if ‘smart’ people dont like it,then they should do their homework and visit blogs like subras
Riyaz
I understand you are warning about marketing and marketers, its true its almost impossible to find out try advisers who is thinking in investor point of view, why dont you help others by starting something which will help poor ignorant investors..
Sreekant
Very true Viswanathan and Pravin. Money means different things to different people. To some, what it does and buys matters. To some the mere possession of money makes them happy irrespective of what they do with it (ask those with illegal swiss bank accounts). And to others, the mere thrill of earning it seems to be all. They don’t care whether it exists after that. If someone cannot spend 5% of his time in managing the money that he earns with 95% of the time, does he deserve it at all? My analogy meant this: If you have no time to take care of your money or children, you don’t deserve them.
krish
Is 5/95 the benchmark standard that one has to follow to prop up the investments and raise the children. Is it that we should not raise children if we can not turn them as Harvard and stanford grads. As it happens people comes to quick conclusions without understanding the whole issue itself. Let me clarify.
Some of the high earners do focus on their money management but their expectation of rate of return could be moderate as they can not actively participate in various roll overs. As an example, the Doctors and Consulting profession that involves hectic travel fall in this category.
In one of the above post it is said that we have to have 9lacs in savings account to be a preferred customer.
Imagine this scneario, you have got some fund and certain portion of it, you wanted to do FD with the bank. When you did this they offered preferred customership. In such situation, every one would take it am I right. Some of the banks are offering preferred customership with zero balance in Savings account but have some relationship of FD. This arrangement is superior than the funds keeping in liquid funds.
Sreekant
The real issue here is not about your child going to Harvard. But at least spend time to know if he is in 5th grade or 8th grade, whether he is attending school properly, whether he is passing his exams etc.
The real issue is not about investing in FDs or the 1% extra. It is more about not being taken for a ride, about not being sold lemons and not being cheated outright. Smart earners can make this minimum effort to read before signing and asking the right questions. If they do not have time for even that, what to say?
Krish
The real issue that was discussed here is opting for preferred customership with any bank is foolish and these customers were shown in poor light as these are greedy to get higher returns or want VIP attention and so on. Some of the comments said here that these people would compromise on returns and more often end up paying the price for being preferred customer.
With the growing challenges, frankly many enterprenuers or successful professionals or working couples find it difficult to balance work life and personal life. It is a reality. If a Doctor gets a call in the middle of night who had just reached home to attend some emergency case, he still go back to Hospital to save life. There is no doubt that these people would find little time to educate themselves about the investments. Meanwhile some rogue RM comes in between and lures them with all kinds of honey stuff. They believe in people thinking that every one would be like them and bite the option. Sooner they realise that they were taken for a ride and ofcourse gets cautious so much so that even later on would not yeild a bit even if honest RM comes on board. Once the trust is breached of these successful guys, it would be herculian task to get the business no matter how great it is.
I won’t ever blame the customer for getting fooled just because they trusted some one. In certain countries word itself is sacred and once told they presume that everything is done as it is informed. For sure, once bitten these people would be thousand times careful.
Anon
Really appreciate Point 6. When I took a home loan, I was adviced to take up the loan with ICICI. Our company has a tie-up with ICICI, they offer the best rates for us, we don’t even have to go to the bank, their officials will come home and get all details, loan disbursement is quick, they hardly check any documents, the list was quite long.
But, thank God, I still went ahead with SBI. They are not customer friendly, they make us wait for hours, they don’t care a hoot about whether or not we want to take a loan with them, they expect us to provide a million documents, they expect us to come to their RACPC for every small thing, they take their own sweet time to verify documents. But in spite of all that, I trust them far more than I trust ICICI. I am quite glad that I took my loan with them and I have already benefitted from it 🙂
vikrant
Loved it, Specially the Complete bull, i totally agree.
rajivahuja
Useful information & bang on the exprienences that I am sure others have faced ,various other times.