April 5, 2011

Selling is not a bad word…Stop feeling guilty

Sadique Neelgund

It might surprise you that I am a personal financial advisor, a species which is getting extinct fast. I was doing reasonably well in my BPO career, till I decided to move into personal finance, which has always been close to my heart.

It was not forced on me by circumstances. Like so many other souls, I too have been inspired by the wit and wisdom of Warren Buffett. I believe in his view that doing what one loves is the ultimate luxury and a person’s standard of living is not equal to his cost of living.

In other professions, to survive, you need to sell your services. While in personal finance, you need to sell both your services and products.

Swinging between mis-selling & no-selling

Some years ago, mis-selling was rampant. People who sold certain products like ULIPs (unit-linked insurance plans) or close-ended NFOs (new fund offers) made more money in a month than what some one else of the same calibre would take atleast a year to earn through a salary.

The mis-selling was unethical although not illegal, because all these products were cleared by the regulatory authorities! Then, suddenly, a lot of action was taken to curb mis-selling. At best I can say that the intention was good, but the implementation was lousy.

Again, I wonder, why create a product structure, or environment, that creates mis-selling, and then go to the other extreme of making a livelihood through selling itself difficult. I think we like to swing between two extremes-mis-selling and no selling. Not only that, selling itself has suddenly become a bad word.

Selling is not a bad word. Mis-selling is

Selling is not a bad word. Mis-selling is. The whole world revolves around buying and selling. In the regulatory zeal to eliminate mis-selling, selling itself is being eliminated. This, however, is valid logic! There cannot be any mis-selling if we abolish selling altogether.

I come across many advisors who are ethical but are pushed to the point where they are now feeling guilty about the word ‘sales’. The repeated emphasis we keep hearing from sections of the media is that selling financial products is bad. I’m curious. Like everyone else, the media too sell themselves, right? Then why this advisor-bashing, that advisors should not sell?

Without monetary incentives, why should someone take the pain to take the product to the customer and service him? If the expectation from regulators or sections of the media is that advisors should not look at financial incentives, then this profession can be left only to enlightened souls, if there are any, and if they are keen to take up this job.

Let’s  speak statistics

Next to banks, in financial services, only Life Insurance Corporation of India (LIC) is able to penetrate across different geographies and income groups. Ignoring the fact for the moment, whether combining insurance and investment is wiser, this reach is made possible only because of LIC’s sales force.

The irony is that despite this success, the life insurance penetration in India is barely 4%. It is reported that only 1% of Indians have medical insurance coverage. Around 1% of the population invests in capital markets, both through mutual funds and the direct equity route. The abysmal 1% again!

I read that equity as a percentage of household savings has actually come down in the last 15 years. If you remove the mark-to-market effect, I don’t think the equity corpus of mutual funds have grown at all during the past decade.

Technology cannot substitute the human factor

This contradicts the claim that the National Stock Exchange (NSE) and National Securities Depository Ltd (NSDL) have made big inroads and achieved penetration. They are not able to reach with technological power what LIC has done with its human power.

Though I have a vested interest in saying this, human interface and long term relationship gives more comfort to people while dealing with their money. Technology can complement, but cannot substitute the human factor.

Now NSDL is campaigning that ‘demat’ing the mutual fund units which are already in demat form is the next best thing that can happen to investors. I’m amused by this concept of demating a mere account statement. Extending the same logic, the demat statement issued by DPs (depository participants) also needs to be demated. Does this sound illogical? There is no difference between an account statement and a demat statement. Both merely indicate your holdings and are not the certificate of your holdings. NSDL can try doing something meaningful.

Focus on market development

Our focus should now be to increase the reach of financial services and products. How to bring 350 million people into the system? The rest of the 850 million are simply forgotten ones and cease to exist except at the time of elections. I’ve to write a separate piece about them.

We should be giving as much focus to development as we give to regulation. Otherwise there would not be anything much left to regulate. Continuously trying to regulate without any efforts to develop would amuse even Mohammed Bin Thuglak.

Since so much is spoken about lack of employment opportunities in this country, why cannot we create around 1 million advisors who would take products and services across India to all income groups?

A proper incentive structure is a must. Incentive includes reward for good behaviour and a penalty for bad shows. An advisor should have confidence that he can make a living out of selling products and services. Otherwise no one would want to take up this profession.

Do a reality check of noble intentions

There is a line of argument-“why not make advisory a fee-only profession?” A noble thought indeed. If practical, this is a better way to service customers so that there is no suspicion of conflict of interest. However noble intentions ought to be checked with ground reality.

People who read personal finance portals, informed investors, NRIs, HNIs-who are willing to pay for the value received, are an insignificant portion of the current investible population, which itself, as seen above, is next to nothing.

The huge segment of population which needs to be brought inside, does not belong to the above category and is not confined to the financial hub like Mumbai or other metros and Tier I cities. They are spread across innumerable cities and towns.

In-build pricing a better option for India

My opinion is that the general Indian mindset is to prefer inbuilt pricing rather than paying separately. Even in the case of mutual funds, inbuilt transparent pricing which encourages long-term investments is far better than re-introduction of entry load or variable load. Relationship managers at institutions, by the very nature of their job profile which focuses on short-term targets and performances, may be tempted to misuse this.

Insurance products and small savings have always had inbuilt pricing models. There is no such thing as a separate load or advisor charges. Of course, insurance companies need to work a lot more on bringing in transparency related to pricing.

People who talk about replicating a US model in India should compare the financial awareness and product penetration levels between both the countries. Simply aping the west without considering local realities would ensure that the growth remains stunted.

Comparing with other professions

Someone may argue, aren’t people paying doctors? People consider the medical profession as essential or critical. Do people consider personal financial advisory as essential as medical advice? I leave it to readers to decide.

Another profession which is cited as an example is that of an auditor. Speaking about chartered accountants, it has been made legally mandatory on various fronts to avail their services. It is not so for a personal financial advisor. So the comparison is not appropriate.

Like any other profession, grey areas exist even in medical practice and the auditing profession. Not that every one there may be making money purely through professional advice.


I’m not against regulations. Only an ignorant man would expect people to act perfectly without any checks and balances in place. As I said earlier, let us also give at least equal importance to development.

The motto for every advisor should be, in the words of Warren Buffett: ‘I don’t want to be on the other side of the table from the customer. I never was selling anything I didn’t believe in myself or own myself’.


Authored by,

Muthukrishnan Dhandapani

Chief Financial Planner
Wise Wealth Advisors

The article was earlier published in Moneylife

10 Thoughts to “Selling is not a bad word…Stop feeling guilty”

  1. Nice Article. 🙂

  2. Rohan Shah says:

    Nice Article.

  3. kailashmalpani says:

    I agree with the most of the points. I think regulation should work stingently at the product sanction stage to avoid mis selling. Secondly there should be penalties for both the advisors & the company for the misselling. The incidents of mis selling should be published in media by the regulator, to create awareness. Regarding Fee based practice, FPSB should run the campaign on regular basis to create awareness regarding benefits of availing fee based services & disadvantages of working with pure product seller advisors. This will bring recognition to the profession.

  4. In Italy this problem exists since many years ; nobody likes to be recognized as a seller so, tied agents do not want to be called sellers and they want to be called advisors and so on .
    My opinion is that the “pure” advisor is a seller , as well…he/she sells him/herself as a professional and if nobody “buys” his / her service he/she cannot exist.
    The problem is : this situation improves confusion so regulators should write clear rules (as to have a clear distinction between pure advisors/plannners and tied agents /product sellers) but, sometimes, these rules could be against the big industry of financial services and , may be because of this, clear rules don’t come (this happened and happens in Italy …I do not know how things are going outside but I think the difference is not very high) Best regards
    Giorgio Canella

  5. Chenthil Iyer says:

    Regulation is an ever evolving process. Only MF advisors are to blame for the sudden changes which happened in the industry and can be mainly attributed to continuous churning of the MF portfolio incurring repeated entry loads for the client. To think this was done in the garb of ‘advisory service’ and ‘booking profits’!!!

    Personally I believe ‘Selling’ is a noble profession, and without this no other profession can exist in this world. However it is regarded by unqualified public to be a ‘profession of cheats’! This mentality exists not only in the financial services sector but across all sectors, be it FMCG, Communication etc.

    But we need to understand the background of such a mentality to come up so strongly among common people. Experience. Personal experience is what shapes up such conditioning and negativity normally spreads faster than wild fire. How many of us ‘sellers’ have experienced mis-selling by some one or the other? I’m sure many of us have.

    I strongly feel the reason for this lies in the fact that it is a very easy to get into the selling profession! Not much of qualification required. If you are a glib talker and are presentable, you are in! Even in depth product knowledge is not expected out of sales people!

    So, more than the public or the regulators, it is the sales fraternity that needs to take the blame.

    If you are not still convinced, eavesdrop into some conversations that happen between sales people in any organisation at the canteen or any private area.. ‘Karna padta hai’ is a typical phrase which gets uttered in these conversations.

    I guess I’ve made my point 🙂

  6. Chenthil,

    I think the answers for your questions have already covered by me.

    Thanks for making your point. Welcome.

  7. askgeo says:

    Good one sir, unless regulation in financial planning, what are most of the financial planners doing leaving few, getting fees and selling products they have recommended, when they recommend products, it can be baised, so what is the difference between sellers and financial planners. financial planners if they are charging fees, they should only advice and not sell, more ever i like to sell product which my client can understand and if i charge fees i give back the commission. i believe the investment done by my client should be simple and understandable and should help in their financial goals. carry on the good work.

    • Hello Geo… most of financial planners who are charging a fees leave it to the client the option to invest through them… so this eliminates the conflict of interest to a large extent. Also one cannot wholly survive on FP fees in current times (I am sure it will happen in future), so its okay to have a combinition of commission and fees during this transition phase. .

      I appreciate your philosophy of simplicity in investments.

      • askgeo says:

        Thank you sir, i do agree with you, there are few financial planner who follow the rule, but still i feel there is no difference between a good agent and a cfp, leaving a few, the place where i live , i know only 1 or 2 cfp who follow the rule, rest are the same , there is no difference between an agent and cfp. so i am happy to be a seller. enjoy ur day. 🙂

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