A banker and author of three best-selling books, Ravi Subramanian explained how bank relationship managers often hustle and cross-sell to meet stiff sales targets—compromising service at the customer’s expense
He is an insider who isn’t afraid of talking openly about how and why you should be wary about relationship managers of banks. Speaking on ‘How to see through the hard-sell of banks’, at a Moneylife Foundation event, Ravi Subramanian, author and former banker, grabbed everybody’s attention with his very first slide which said how a banker becomes bhayanker (scary) when he is driven by the need to meet stiff sales targets and forgets to deliver what he promised while selling a financial scheme or product. The extremely popular and interactive talk was organised by Moneylife Foundation on 22nd March.
Mr Subramanian, whose three best-selling books are all thinly fictionalised accounts of the goings-on in multinational banks, then proceeded to take his listeners through a detailed account of how the only relationship of so-called ‘relationship managers’ is with the commission on products, the push with a focus on their internal sales targets.
Mr Subramanian’s books: If God Was a Banker, I Bought the Monk’s Ferrari and Devil in Pinstripes are all an insider’s perspective based on nearly two decades of working with top foreign banks including Citibank and Hong Kong and Shanghai Banking Corporation (HSBC).
Mr Subramanian explained how relationship managers (RMs) at banks are a harried lot and can keep their jobs only if they meet extremely stiff sales targets month after month. He also pointed out how all banking processes are geared to maximise sales and profits. For instance, he asks: have you wondered why there are such long queues at bank counters when their systems are super efficient? It is because they use the opportunity presented by a customer withdrawing cash to pitch for credit cards, loans, unit-linked insurance plans (ULIPs), etc. This is at the cost of the other customers standing in the queue. Similarly, a phone banking customer is also forced to listen to a sales pitch for various products. Mr Subramanian confirmed the complaint of thousands of bank customers that they had been sold ULIPs which fetch high commissions for banks, as akin to fixed deposits with high guaranteed returns.
Earlier, new fund offers (NFOs) of mutual funds, which fetched margins of 5% to 6%, were dumped on gullible customers by their relationship managers. That ended when the Securities and Exchange Board of India (SEBI) scrapped entry-loads on mutual funds. But many banks have quickly encouraged customers to consolidate their holdings and have found ways to charge for services; even today, AMCs (asset management companies) continue to gratify sales agents with foreign junkets.
Here are some interesting tips and insights offered by Mr Subramanian for dealing with banks:
• Don’t buy gold from banks—the only advantage is the purity certificate; if you are price conscious, you will get it cheaper elsewhere. Gold coins are 4.5% cheaper if purchased from a branded jeweller or 14% cheaper from the neighbourhood goldsmith. That is why (unlike jewellers) banks never buy back their pure gold coins from customers. It is not a two-way deal.
• Be careful about documentation—he pointed out that direct selling agents (DSAs) often ‘promise’ a certain interest rate, say 8%, but the loan document says 9%. False commitments on rates, re-pricing, disbursal patterns, documentation requirements, prepayment penalty—these are things which happen all the time in almost all banks.
• Do you know why banks offer to upgrade credit cards from ‘silver’ to ‘gold’ or ‘gold’ to ‘platinum’ and ‘platinum’ to ‘titanium’? The answer is part psychological—customers like to ‘show off’ gold and platinum cards and may end up spending, but the real story is that the upgrade fetches higher commissions for banks from the big two card companies, Visa and MasterCard. For instance, if the bank earns a commission of Re1 per transaction of Rs100 on a gold card, it gets Rs1.60 on the use of a platinum card. It is pure business.
Mr Subramanian also offered interesting tips on how customers can get the better of their bankers.
• “Try calling banks from the 1st of the month to the 22nd for a loan or service and banks won’t bother. But if you call during month ends, you will get what you want. The closer you are to the month end, the more intense the hard-sell. The best time for you to negotiate is on the 28th, 29th and 30th of the month, when there are month-end targets to meet and you would get the best interest rate possible.”
• Do you know why product recommendations change when your relationship manager (RM) changes? Because the commissions out of the sales by the previous RM go with him and the new RM has a new set of targets to meet which he can achieve only if you buy new products and churn existing holdings.
• Mr Subramanian explained the psyche of RMs—they are all young and fresh graduates who make a decent amount of money but are under intense pressure to meet sales targets which are monitored on a daily and weekly basis. They don’t have sufficient knowledge of the products and learn quickly on the job that the only thing that matters is the sales target. So they just learn to make money from gullible investors.
Mr Subramanian’s advice: Don’t trust your RM blindly. If you don’t understand a product, ask questions. Do your research about the product, check for cheaper options and then make a decision. Above all, be firm with the RM.
• Another important tip from Mr Subramanian was that you need to know your RM well; but it is not enough, since they tend to switch jobs too easily. Ask the RM to provide references of at least two other senior persons in the bank and get their contact numbers and email IDs. Otherwise, when in trouble, you won’t get past the bank’s IVR (interactive voice response) system or call centre.
• Don’t ever fall blindly for bundled propositions—for instance, a recommendation to get credit protection on loss of credit card or bundling mortgage with insurance or a savings account with an accident cover—it is only aimed at earning commissions for the bank and not really to protect the customer.
• Investors should maintain some written records of their meetings with RMs. He explains, “It is better to note down all the transactions between you and the RM, and send an email to him on his official email ID to confirm the same. This works as a strong evidence in case of fraud.” He also pointed out that banks rarely contest claims when there is evidence and documentation such as exchange of emails.
• Mr Subramanian strongly advised that investors should not sign blank forms. One should not give banks more authority than is required. Only ‘completed’ forms should be signed.
• On portfolio management, Mr Subramanian said that investors need to keep track of statements provided by the fund managers and also ensure that no investment is made without a specific consent by the customer. He suggested that investors who don’t have the time to keep track of investments nor have a high risk appetite would do better to invest in mutual funds. And finally, remember—greed is the mother of all scams, says Mr Subramanian. So if you want to avoid falling into the hands of mercenary bankers or not become a victim of mis-selling, then empower yourself by reading about the products you plan to invest in.
