Overcoming Cross-selling Made by Bank Staff

Privatization in the Indian Banking Industry has revolutionized the financial markets. In the previous decade, our Banking was limited to nationalized banks. Although the service levels were below par and paper work required long processing time, life and banking were simple. However, with the arrival of private banks, your banking might have become simpler, but banking has become riskier. One of the main factors for it is: Cross Selling made by banks' staff. The act of that of selling an additional product or service to an existing customer is called as cross selling.

Why not to blindly trust a bank's staff?

As it is said "Never judge a book by its cover," the same way you should never make decisions on any investments based on the presentation given by the banking staff. However, it requires significant self discipline and keenness to research on the offer in which you are investing your money. In addition, you need to overcome the human tendency to easily accept advice from confident individuals who might not be experts. That is, we humans, tend to accept advice of individuals who are not experts on the topic of discussion, but present their advice in confidently.

For example, consider that you want to invest in a pension scheme. To determine which bank offers the best pension scheme, you visit four banks in your vicinity. In the banks, you meet four different advisers, A, B, C, and D. If B is the most confident adviser, then you are more likely invest in adviser B's bank (provided the schemes in other banks are not significantly different).

This is also reflected in a research conducted at Emory University. During that research, participants were asked to make a series of financial choices between a certain investment and a lottery. Choices were made in two conditions.

1. During the first condition, participants were shown advices from experts


2. During the second condition, no advice was displayed

Behavioral results showed participant inclination towards choosing the option suggested by the experts. Further inclination was witnessed towards suggestions made by more confident advisers.

So, if you were to visit the banks (as given in the example ), you would not be aware of the level of expertise of the adviser. Hence, your brain maps the information such that a higher confidence level indicates a greater expertise. However, the confidence might not be the only indicator of a person's expertise. An individual might be parroting a script that they could have learned and thus fake confidence.

So how should you make your decision?

Every time you visit a bank (especially private banks), you are approached by various agents. They will present various schemes, credit cards, or other offers to you. Beware! Don't fall for their lucrative offers without taking some time to ponder over the schemes. In addition, even if you inquire about a Life Insurance, they would make attempts to sell their Mediclaim, Pension Schemes, and god knows if they would come up with something like a Funeral Scheme that would take care of all your funeral expenses and give you an excellent farewell from the world. :-)

While making a decision about investing with banks and other financial institutions:

• Ensure that you don't blindly follow the bankers' suggestions. It is their job to win you as a customer so they might not have your interest at heart.


• Be selfish enough to determine what's best for you.


• Get off the couch and use Google to compare various schemes offered by different banks and investment firms.


• Consult friends who have made similar investments.


• Think over several options for at least a day. Do not make a decision right then and there.


• Use various scoring models to determine where each scheme stands against each other.


• Assess your present and future liquidity requirements. Investments are a liability while you make payments for them. As a result, if you need to maintain high amount of liquidity in your account for personal reasons, do not invest in a high-payment investment option. If you do so, you might end up seeking personal loan to make committed payments into your investment schemes.

Finally, take the pain of reading each and every line on the offer document. It has very critical information related to the fees and charges associated with investment schemes. In the name of service, bankers just ask us to sign the forms on certain marked places. However, never fall into such a trap. Be careful. It is your hard-earned money that you are giving someone to keep. If you don't care about the money, then be sure to meet me. I could do with some money that you don't need. :-)

Do leave a comment :-)

Lokesh