This is a true conversation which happened to a friend

RM: Hello Sir Am I speaking to Mr. M C ?

MC: Yes

RM: Sir I am your RM from M….brokerage firm

MC: Yes

RM: Sir I see you have some Gold in your portfolio…Gold is not going to do well…s..blah…blah…blah…

MC: Please see properly I do not have any Gold in my portfolio…

RM : Sir this Goldman…

MC: Arre that is Goldman Sachs Nifty…..

RM: Sir Nifty is very high at 6200 – it is time to sell…

MC: But have you seen me ever sell?

RM: Exactly sir, you MUST SELL..I see you have bought the units at 5400, it is time to book profits…

What an amazing conversation! And so typical of a salesman.

The problem is MC is a very thoughtful long term investor with a small exposure to equity, but does not panic when the market goes down. Nor does he get excited when it goes up. He is a terrible client for the RM, and the RM keeps wondering how to make him trade!

Typical of a sales person to sell what they have. Exactly why? Hey their lives depend on that.

Recently met a lady who sells a lot of life insurance (apart from many other products) – and she was hard selling a short payment endowment plan. Obvious pitch?

Sir 9% return……

I said technically possible because of YOUR 40% commission (that number has not changed much especially in a 20 year product, no clue where the tweaking happens). She said of course possible..I have sold many products ….

So I said. Here I put in Rs. 5L as a premium, only Rs. 3L gets invested. She insisted that the commission was 15%. I said, fine, there are other costs….

So assuming 4L gets invested, the 10 year G sec is yielding about 8.5%, so assuming that you have a 2% Asset Management charge, at best you can give me about 6.5%.

She said: Yes sir.

So, I continued, In the second year assuming you get a 5% commission, only Rs. 95,000 gets invested. Now on this I get 8.5% – assuming interest rates do not fall. So again 6.5% FOR THE REST OF THE 18 YEARS.

Now from this you will deduct Mortality charges…

Yes sir…so my yield goes down even further, right?

By now she was panicking. She said ‘Sir Nobody has asked me such questions before, shall I get my Boss – the MANAGER at ……of india?

I said No girl, relax.

What I just did is a Reverse Engineering of the product, or breaking it threadbare to tell you why you cannot pay me 9% interest.

Most people will not do this. If you call 100 people 25 will give you an appointment. Our of that about 40% of the people will buy.

When you meet them tell them:

Sir this is a LIMITED PAY (only 5 years Sir!) and only Rs. 100,000 per year. On an investment of Rs. 5L (low voice) you will get Rs. 10 LAKHS (high voice) – and say ‘Sir it is GUARANTEED’

Client will ask “Is it a ULIP?”

As long as you say NO, THEY will buy it. Simple.

Sir my boss told me to tell all the clients ‘You will get 9% return’ – how is that true?

I said ‘No darling, that is not true. One way to make it true is to keep saying 9% – and it must be 9% of the Sum assured, and then, that number can be tweaked’.

Sir but the readers of your blog will not buy, correct?

No darling not true. Why do you think READING, and thinking are connected? Fallacy.

I know caustic mis sellers who sell this product while at the same time talking eloquently about mis-selling. It works.

MERA BHARAT MAHAN….