When selling costs you trust

Aggressive product peddling by financial entities doesn’t help in building investor confidence


Many find investing complex. There is too much jargon or a fear of lack of control or often genuine concerns are brushed aside as problems of financial literacy. As a professional who teaches finance, I feel the real problem is lack of trust, that needs to be addressed.

Many of us have been driving a car knowing nothing beyond the brake, accelerator and steering. This confidence in driving arises out of the fine predictability of superb engineering. With the exceptions of two situations—insurance claims and the used car market. As they call for are sharp practices that can fool us. In both situations, the problem is aggravated by the unbridled eagerness to sell. A good salesman will convince you to buy and his incentives depend on how much he sells.


When banks began to offer deposits to the public, they did not say that these are borrowings of the bank. Instead they told the public that money kept in the bank would be safe, and can be accessed at any time. Depositors looked up to the bank as a custodian, felt trust when they accessed money and confident with the transparency of statements and interest payments.

That is the power of trust built by consistent and predictable outcomes. When banks overdo the selling and extend it to loans, cards, etc, they chip away at that trust. There are also cultural underpinnings to how trust is built. In India, historical dependence on the benevolence of the king and a post-independence preference for a socialistic model, have meant that people trust the name, or the ownership. This orientation has sometimes led to outcomes that are harmful to investors.

Consider the contrast between the insurance and the mutual fund industries. The former uses an army of agents to sell products that have come under fire for being misrepresented and mis-sold. But the common investor is fed sales pitches. The incentive schemes in the insurance business lure a million agents. At the apex of the insurance industry is a government-owned behemoth. Every sale of failing businesses by the government to its investment account raises concerns. But life goes on. New products are launched and in the 25 years of opening up the business to the private sector, the benefits have been mutual. The sales pitch of the private sector has enhanced the product penetration for the government entity; and the trust invoked by the government entity has helped in breaking barriers. Presence of the big brother means sharp selling practices don’t receive the regulatory rap.

That stricturing is reserved for mutual funds. Here is an industry with a useful product, high efficiency and low costs. But it has struggled to gain trust and respect. Three things work against it: One, it is dominated by the private sector; two, it has no big brother with a Delhi connection; three, it practices exploitative selling at every given opportunity. Building trust has only gotten tougher.

Selling is rampant across businesses. However, there is huge conflict between selling compulsions of a business and the trust-inducing conduct investors seek. We cannot just assume investors are financially illiterate or that investing is unduly complex. Sales pitching as an identity of financial services sector must end. What use is growth if it does not foster ethical conduct? Of what good is a brand if it does not invoke trust?