In the battle between IFAs and Banks, it is the banks who win hands down most of the time. Why does this happen?
Some of my observations:
1. Clients love activity, and banks can provide that: Most clients like to do something on a regular basis – but may not be too keen to do a SIP. This means regularly they have a big balance built up in their bank accounts. The RM approaches them and converts this into a product.
2. Most people invest without a goal: A person normally has a few goals – children related, retirement related, asset acquisition related, etc. The bank RM says ‘Sir this fund is doing well please invests….and the client invests’. Sadly many customers buy products because forms are thrust at them, not because it is suitable.
3. Most customers can rationalize anything: ‘It is only Rs. 400,000’ or ‘That girl had to meet her target’ – literally anything so they do not feel that they have done anything wrong.
4. Sheer lack of application of mind: the bank that never sleeps had sold an income fund (yielding 5-6% p.a.) and sold him a personal loan too (at 16%). The client continues to bank with them, DESPITE being shown this loot. Later on he bought a Rs. 300,000 per annum ULIP from the same bank. When these are pointed out clients feel bad that they are being exposed in the presence of their spouses (till then the men have been strutting showing off their investing skills). Now the anger towards the bank is actually anger TOWARDS THE IFA who pointed out these things. LOL. Many IFAs are still to learn that man is NOT NOT NOT a rational animal, but an emotional animal who has been described in point no. 3.
5. Sheer technological convenience: creating a maze of accounts (savings account, fixed deposit account, demat account, mutual fund transaction account) the bank holds the client like an octopus. I am still to meet a client who understands all the bank statement.
6. The RM has a job to call the client regularly and ask (nay pester) for business. Clients relent.
7. Clients feel obliged because the RM runs errands like kyc etc. – and rub it into the client and make him feel guilty if he does his business elsewhere. The RM will keep saying ‘Sir you did …..with some other person….please give us also’…IFAs with self respect will NOT do this EVEN if they know. In most cases they will not know.
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