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The Disgust and the Distrust in Money

Your banker tells you an account has no fees, but later you find yourself charged a fee for “opening charges”. A broker tells you they charge you X, but you get charged 5X as other charges. A mutual fund distributor conveniently forgets to tell you that there’s a 1% exit load if you leave within two years. Your insurance agent opens his mouth, and everything that he’s said turns out to be a lie.

I get mails and calls about this, way too often for comfort. These are not one-off; lies are par-for-the-course. You will NEVER hear the correct story from the guy who sells you a product – on the pretext that you don’t ask your barber if you need a haircut. But my barber – not in a fancy shop – often tells me stuff that doesn’t gel (sorry) with his business; he told me not to dye my hair until I got into salt and pepper mode. He tells me I don’t need a haircut for a month. He tells me this because it brings me back, because I don’t feel he’s a money obsessed slimeball.

But I don’t get that feeling from the financial industry. They lie with suits on. Without compulsion, without remorse. They lie in not just telling you untruths; they lie by not telling you enough, by leaving out vital pieces of information that could make you rethink. They peddle complex products that are only so in order to confuse you. They behave differently after you’ve bought the product.

This takes away the element of trust necessary for people to buy products. So they don’t.

Mutual funds are draining money. Stock market volumes are pathetically low. In Insurance, new premiums are dropping. No one wants to buy products that involve a risk – because the risk is not just in the product, it’s also in the slimeball banker not telling you about high expense ratios, high fees or better competitive products. If the market goes down you’ll lose money, and sometimes when the market goes up also, in certain insurance products, you’ll lose money.

You can buy insurance, but when you go to claim, they don’t want to pay out. They fight and resist and act as if they’re doing you a favour.

Pension funds are a waste; they force you to buy an annuity when you retire, which steals EVEN MORE of your money. There is no honour in banking and finance anymore – it’s man-eat-man, and in that case, our money is best left in a savings account of a fixed deposit.

If this is a time for an Anna Hazare in politics, this is also the time for the big change in finance. A financial service company that proposes to be honest. That fires lying bankers with zero notice. That insures and pays out properly, and in cases of a catastrophe, even without being prompted. A bank that gives credit and also helps related customers do business together, insurers that do discounted health programs. (Of the lot, the mutual funds are the best of the lot – most are, or are forced to be honest.) A bank that offers accounts to poor people in urban areas. We don’t need regulation – we just need a good player to change things. If there are those that exist, please let me know.

  • saurabh shankar says:

    Pretty sure that none of the big banks/distributors are honest and forthcoming, though the small sub-brokers often disclose much more.
    In MF’s Quantum mutual fund probably is transparent but they have a very small AUM as none of the large distributors promote it !!!

  • Shiva says:

    My loot story:
    Time : June, 2010; When Infosys announced its giving shares to all its employees.
    Location : Infosys Hyderabad DC
    Who: HSBC Sales agent within the office(Infy) premises
    Catch Phrase: No charges for lifetime for opening DP account with HSBC.
    Around 80% of employees chose to buy HSBC DP account bcos it had no opening charges & no yearly charges; big reason is many of them are first time investors and wanted these shares to lie around since not many would not ‘trade’. So not many were interested in paying an annual charge when they would use it less frequently. So much that people advised in Infosys Bulletin board during that period about this great ‘product offer’.
    All employees seriously signed close to 50 signatures in all angles in one booklet.
    After 1 year HSBC started to charge 300/- per year, higher than all other companies present on that day in Infosys selling the same.
    Fact is the sales agent has lied to all the employees that there are no annual charges and all employees fell for it. Now the company(HSBC) is not aware of such a claim and realised only when employees started complaining after a year. The sales agent has long resigned and collected his commission. Now HSBC is not willing to accept this saying they are not aware of it and cannot provide this offer.

  • Yash says:

    Face it Deepak, there is something about handling other people’s money, that makes people get reckless. Especially if the other people don’t seem to catch on to your motives at all, or insist on deluding themselves into believing in your ‘good’ intentions.
    I have seen too many perfectly regular people develop this ‘third party’ view of the work they do,when they enter the financial services industry. You will never find these guys on twitter or reading blogs by the way, that reality is too much for them to handle. You will struggle to find insurance head honchos putting their name in the domain, for instance. At least till the time they feel they can defend their products and workings, and trust me, that will require a new language, planet, and morality:)
    Look at MFI’s. They, at least made a hell of a lot of hay under the widespread perception that they were the ‘good’ finance guys. And the funny part is, they actually believed it, till the time they benchmarked themselves with moneylenders. That certainly didn’t last too long, did it? Once they saw big money possibilities, they lost it.
    It’s a very touch call to make, but small certainly seems beautiful in the financial industry’s context. With the technology that is available and being used now, it will not even prevent them from being efficient anymore.

  • Manish J. says:

    Deepak Hazare?
    You are so right with your assessment.
    “…He tells me this because it brings me back, because I don’t feel he’s a money obsessed slime ball.”
    Long term vs. short term. The current thinking is get the money now and churn the customer base.

  • A pity.
    Not too long ago, the maxim of a certain Goldman Sachs was also “long term greedy”

  • Ranjan says:

    Manish has the right name for you, Deepak Hazare!! 🙂
    It’s bad. But Mr Hazare has shown us something. Let’s make our small efforts more meaningful as we go along.
    More power to you.

  • Kshitij says:

    You have hit the nail on the head.
    Single reason why I refuse to entertain most bank / insurance sales calls, have started to close most of my bank accounts and refuse any new credit cards.
    My experience was with HSBC forcibly upgrading my accounts and then making some fake debits in it under the guise of some service which they “offer” but never used by the client !
    The most frequent style of humping customers is giving a service free for “first year”.

  • Jagadees says:

    Sad but true. As munger said, “Financial incentives explain why people behave the way they do.” One player which i feel good in financial space is Quantum AMC with its greater transparency and investor-friendly products.

  • Krish says:

    Today’s motto: For being innocent, one has to pay the price. Frankly I see this trend (low ethics) everywhere where ‘service’ has become synonimous with corruption.
    1. Vacation club memberships: Lure customers with great offers and have become customer strip clubs.
    2. Aggregators in flight ticket bookings : Refund/Cancellations means no return.
    3. Insurance : Some one got great idea of clubbing with investment and chaos was created in the form of ULIPs resulting exotic holidays for agents.
    4. E-Commerce portals : Every one’s role model is Amazon. But comes to delivery, they know how to punish the customers.
    5. Private investment: From teak plants to cars, these guys promises mountains out of stone. Investor is eventually washed away in a slide.
    6. MLM: Adept in spoiling the relationship with friends, colleagues and relatives. Only the owners gets the cream.
    7. Mobile phone service provides : Knows best how to drain your recharge at lightening speed. The online compaints list is breathtaking.
    8. RE Builders : They follow exponential calender where any promised time gets doubled and tripled. They can beat vultures in committment for price.
    The list can go endless. I am distressed and let me stop.

  • Francis Xavier R says:

    Feel, Quantum Mutual Fund is the honest one among the mutual fund companies and charging only 1.25% for fund expense. Important thing is, their AUM is very less, still they charge less. In banking space, PSU banks are better, though their service quality is not great.
    The best way to go ahead is understanding the financial product before investing money. Don’t put your money, if you could not understand. Traditional RD,FD will do for you.

  • Shashibhushan says:

    I am registered investor at (online financial store) since 2009 and my experience is that I have never been charged even a single rupee. They have excellent customer service. I have seen many innovative practices with them like – home pickup by Bluedart for sending completed registration forms. Highlighter colored post it notes with text (sign here) wherever I have to sign, etc. Once I faced a problem due to some technical reason. The first thing they did was acknowledging their mistake (in writing – on email). I must mention that they compensated (direct deposit to bank account) the notional capital gain loss the same day, I arrived at and informed them about the figure.
    Such people have really become rare these days, but some like still serve as a ray of hope!

  • Shashibhushan says:

    I think that Quantum AMC is an ethical AMC. There is just one problem – I could not send an email to anyone (even by relationship manager or Ajit Dayal) at quantum AMC except to official customer care e-mail ID.
    As much as possible, I try to buy in schemes of Quantum AMC. I had some feedback/suggestions about new schemes, but could never reach anyone of substance inside. I just got the standard copy-paste type of “thank you for suggestion” email from their customer care.
    Still, I prefer them, but I feel it would help if they could become more reachable.