Whose 1-800 number is on your ULIP?

Today’s column in The Mint by Monica Halan touches a topic close to my heart and warrants a comment, even if it is to spit out what has been bothering me for over a year now.

End of 2008 I quit my job as VP at one of the largest Financial Products distributor in the country. I had spent close to two years at the firm and having worked in Retail and the more exclusive Private Wealth Management group, I had by then seen the whole spectrum of what it takes to get people to give you their money to grow it. Yes, the pitch and the clients in Retail Insurance and Private Wealth Management could not be any more different, but essentially in both cases you are asking someone to believe you that you know of the perfect place for them to park their money and where it can grow.

But that is not where the similarity ends. Both situations are wide open to fraud and sales spin. And this is where my comment on Miss Halan’s column comes in – unlike her I believe that the burden of rectifying this sordid state of affairs cannot rest squarely on the shoulders of the regulatory bodies alone (we have seen what little good audits and checks did in the case of Satyam!). The consumer is not just a victim of the corrupt Distribution system, but also of manufacturer apathy and their own unwillingness to learn. And we must attack all three sources of corruption at once if we are to succeed.

Let us first look at Manufacturer apathy. Distributors are but agents and therefore by definition simply extensions of the corporations that design and manage these financial products ranging from the deceptively simple ULIPs to the certainly more complex derivatives. A Distributor is a distributor whether they are selling you shampoos, cars or in the case a financial product. Just as you would expect that a Toyota would train its dealers to give you accurate information on its cars, as a consumer you should expect that these corporations such as ICICI Prudential, HDFC, Reliance Life Insurance, would ensure that their agents are not mis-selling their products. After all the cheques you write at the time of purchase are made out to these companies and not the agents and also the 1-800 number you see on top of your document is for the manufacturer not the agent! But as an insider let me say- this rarely happens. If a Distributor is showing remarkable sales success, a Relationship Manager from the Manufacturer is happy to “overlook” some of the shortcomings. After all his sales target at the end of the quarter is not going anywhere.

We are underestimating the moral responsibility and also the power that an honest manufacturer can have in correcting and errant distributor. By truly linking incentives to training, regulatory adherence and dedicating resources to regular investigations, a manufacturer can provide the much needed grass roots correction for this problem. And this will happen only the day the Manufacturer realizes that it is ultimately their responsibility to ensure that their product is sold correctly. After all the ULIP I have bought is not an ABC agents’ product but one belonging to ICICI Prudential.

Finally let us not absolve the consumer in all of this. If Indians can spend hours haggling with a vegetable vendor on the quality of a single tomato, why can't they spend a minute questioning the if not irrational but almost unrealistic promises of the sales people touting these instruments? Surely we must take responsibility for the safety of our hard earned money. The recent success of ULIPs as instruments of vestments had much to do with the meteoric rise of the stock market and the innate human trait to want to make a quick buck. Greed has driven us to abandon our better judgement and we must pay the price for it. So let us not treat investments with the same ignorance as we would if we bought medicine from a road-side “khandani dawakhana” set up under a tent and promising to solve all our medical woes overnight.
The manufacturer, consumer and the regulatory bodies must form a holy trinity to kill this devil of false information on financial investments.

Shame! Shame! Shame!

Was the demolition of an already crumbling structure worth the lives of two thousand people who died a heinous death following the Babri Masjid incident? That is a question we must ask the Sangh Parivar, the BJP, the Bajrang Dal and all those mouthpieces and stalwarts of Hindu religion in our times. We must also ask what part of the religion were they holding up or promoting when they drove the nation to the brink of civil war in their efforts to build a structure of bricks and mortar?

Hinduism at its very deepest level promotes inner spirituality and oneness with God over any other physical manifestation of worship. So it certainly wasn’t religious fervor that drove them. Then it must be a greed for personal fame and gratification that lead them to do this. And now as a nation we must bear the shame of their actions.

It is with deep sadness that our nation must turn to respected leaders like AB Vajpayee and LK Advani. Being in the positions that they were, they had a moral obligation to safeguard the nation. They violated the deepest trust and their actions left a scar on the history of this country that will never go away.

Only time will tell if any legal action can be taken against them and if either of them will be alive to see through to the end of any trials that may ensue. But certainly such a public declaration of their guilt will serve as a warning to the nation that a blind trust in communal forces can never come to any good.
Ironically the most controversial parts of this report, while damning to individual leaders, are also a slight consolation to the nation. By saying that the demolition was a result of a planned conspiracy, executed systematically rather than just brute mob mentality, it rescues the common Indian from the brink of becoming a blind religious fanatic. It is our chance to see what we were almost capable of and take a vow to never repeat it again- whatever our faith might be.

To dry or not to dry, that is the question

The view from our dinning table is a commonplace Mumbai scene- a tall building, beginning to lose its brightness as the omnipresent dust and moisture take their toll, enclosed balconies and of course lines of laundry put out to dry in the fleeting sun. I have to admit that till this morning I viewed these clothes as ugly intrusions on an otherwise nice facade. “A lack of sophistication” to be absolutely blunt. And then I read that I wasn’t alone. There were actually people just like me around the World crusading to save our suburban lifestyle from the scourge of sun-dried clothing. How shameful!

People like them and me belong to a group who are willing to pay the huge electricity bills that a dryer rakes up. We have the money we say, and we are too sophisticated to mar the looks of our communities. What we forget is that when adopting this point of view we are committing a near criminal act of ignoring the environmental impact our actions have. We forget what we “urbanized” individuals know so well, that in the Sun we have a natural source of heating that is both free of cost and environmentally safe.

On the other hand I have to admit that dryers really are useful. In the monsoon months they can actually be a real boon when you need all the help you can to get those clothes dried and need to ensure that the sticky dampness is sucked out of your clothing. Given the cramped spaces that most urban Indians live in, dryers can actually improve the look of homes and give a sense of better living. And in all honesty who will say that those rows and rows of clothes in the windows (whether it be Mumbai or Tokyo) actually look good?

So the question still remains- to dry or not to dry? Perhaps the solution lies in a combination of both options. Those who have the luxury of space and conducive weather should go Au natural and for those of us who are not so fortunate let us hope technology can soon make dryers more efficient and environmentally friendly.

When the World lowers its bar

Every financial newspaper has a column dedicated to the road to recovery from the worst economic crisis most of us have seen in our lifetime. It is amazing to see what is being classified as recovery. It seems that after the crisis the world has decided to lower its bar of what success is. Today it is merely the ability to not fail miserably, rather than actually achieve something.

This morning’s headlines talk of how GM is expecting to make a loss of just a “few” hundred million Dollars and that it would use the American tax payers’ money to start paying off it’s commercial debt. Publications are rife with similar tales of large Corporations across the world sending out signals of recovery because instead of billions they are now losing “only” millions.

None of the stories of recovery, perhaps other than those about India or China, are really about a rebound in demand or consumption. Stuff that would actually mean that value was being created and the wheels of the economy were not running due to a downhill momentum but rather because they had fuel in the vehicle!

But perhaps what is the most ironic about the state of affairs in our times is that while Corporations are allowed to flunk and are given bucket loads of money to stay afloat, the individual is being increasingly submitted to a higher and higher standard of success. Anyone who buys vegetables these days knows that the hundred rupee note buys you one third of what it used to just six months back. So with the same job and pay, we as individuals are expected to become more and more efficient while the Corporations can blow millions and still stand in line with begging bowls for more.

Economic Crises are just bad habits at a large scale

The history of Citicorp and the several rescues it’s many Avatars have seen over the past eighty years has appeared in detail in today’s edition of “The Mint”. It makes for an interesting story and if you read between the lines you will find the tale of a nation that is constantly setting itself up for failure.

Every time the bank has failed starting as early as 1929, the cause has been too liberal a lending policy, insufficient risk management and the need to win market share irrespective of profitability. And by doing so banks such as Citi have created and constantly strengthened the great debt culture that is prevalent across most of the world’s so called developed economies. And ironically enough in doing so have been victims of a system that is of their own creation.

The balance sheet of the average American household is always in the negative. Given the high credit card balances and large mortgages, most people owe far more than they will ever repay given their ability to only make minimum payments. What used to be said of the Indian farmer is true of the average American- they are born into debt, live in debt and will died in debt.

But why does and average American household have all this debt? The simple answer is that the high standard of living that most Americans have come to accept as mandatory can only be serviced by high debt. A television, a car, air-conditioners, a telephone line, even processed and expensive food such as bread and tetra pack milk are considered a norm in every household. You just have to look at the movies- even a guy living in a trailer home will have a telephone and will have a refrigerator and a pantry stocked with cereal and milk and a carton of juice.

So institutions such as Citi have come up with various methods over the years to give people the spending power they need without necessarily worrying about the consequences. So if back in the 1920’s people were able to invest through the then Citibank by putting in only 10% of the money needed to trade (thereby essentially lending them 90% of the rest of the money) in most recent times it was the “unlocked values” of their homes in the form of HELOCS and second mortgages.

Till the habit of over spending does not change, America and the rest of the developed world will always be emerging from one cycle of downturn only to enter another. And this is where the economists in India and other developing economies need to learn a lesson. Measures of development such as the amount of household debt or household income invested in the stock market cannot be used as markers for growth without also understanding the risk involved in increasing their levels.

Language is for communication and not for oppression

The news out today is that the body that regulates web addresses (ICANN) will now allow web addresses that can be in scripts other than Latin or what we commonly know as English letters. Also out is another news that in Maharashtra it is going to be mandatory for all commercial establishments to put up bold Marathi signage on store fronts.

While the world is beginning to accept that language must be a matter of personal choice and no boundaries must be put on it, here at home we have decided that the only way for our people to achieve regional identity is to curb their use of language.

There can be little doubt that a language spoken by a majority of the region’s population should be used for as much of the official correspondence and in Government offices as possible, but surely all commercial establishments should have the liberty to choose how they project themselves? The whole idea behind storefront signage is to inform customers about the business. So if an establishment felt that it would lose business by not having signage in the local language it would ignore that fact at its peril. If the shopkeeper felt it would improve his business no Government dictate would be needed to put up shop signs in Marathi or any other language that the shop keeper felt necessary.

Unfortunately this drive by MNS and like has very little to do with their love of the language or their concern for the average Marathi speaking person. It is just another tool they are using to stir up a people who are looking to find their place under the sun. Yes, regional identity is one part of the over all identity of a person. But the MNS would do much better to use the resources it has to push its followers to better educate themselves and eradicate such social evils as drinking, gambling and lack of education- all of which are a far greater of cause of poverty and misery than the lack of Marathi signage.

Innovation will always be the best weapon

“ It is impossible to break through all the clutter and noise”, this is what most frustrated marketers feel and genuinely face every day. And added to this is the fact that consumers these days have access to several un-official yet strong networks of information such as social networking sites, forums and blogs. In this kind of an environment what is a marketer to do? Well the answer is the same as has been since the beginning of commerce- innovate.

And this is precisely what marketers of goods and services are doing in India now more than ever before. Co-branding, in-programming product placement, cross promotions have suddenly seen a spurt. Gone are the days of the vanilla media plan where you bought ad space and air time and hoped to God that the viewers would catch your ad and not switch to another channel at the flick of their remote’s button. The need of the hour is to find a greater emotional re-connect with the consumer and communicate in a way that it is perceived more as a recommendation than an advertisement.

Keeping this in mind many television channels are cashing in on a new asset. They have realized that there is a deep emotional connect between their audience and the characters of their favourite television shows. So when Star Plus wanted to launch its new serial “Sabki Ladli Bebo” it placed mentions of it in its already popular “Yeh Rishta Kya Kehlata Hai”. The same channel also regularly promotes its live award events using its existing fiction series. Similarly Zee TV recently promoted its finalists of “Sa Re Ga Ma Pa Lil Champs” in an innovative yet awkward episode of “12/24 Karol Bagh” which is already growing in popularity.

These kinds of promotions are not limited to television serials alone. Lux just launched its new range with beauty oils. And while they roped in India’s first cine-couple (Ash and Abhi) to do the regular commercials, they also have all the doe-eyed leading ladies of their most popular soaps selling it to all the beauty hungry young girls of the country.

Faced with an ad crunch even the print industry is being pushed into innovation. Femina, a leading women’s weekly, tied up with HUL to cross-promote a range of its products this festive season. The idea of course being that the promotions would be perceived more as an unbiased recommendation by the publication than a push by the manufacturer and the consumer product manufacturer would promote the Femins name in reciprocation. Thereby crossing the boundaries of the usual promotion.

Only time will tell how succesful these tactics are. But they sure indicate a mature marketing environment where the marketers are not caving in but using innovation to reach out to the consumer.