First Things First

Indians Mostly Save in Low Risk

In our previous article (Read Indians Want Long Term Low Risk Investments) we had shown that Indians save money for the long term and for the short term needs. For long term needs they save in life insurance endowment, provident fund and pension. For short term needs Indians save in low risk investments (such as banks, post office, etc.) and a small percentage (less than 10%) of their savings in high risk investments (such as shares, debentures and mutual fund). We had learnt that 33% of all savings is invested by Indians in low risk, long term investments.

One of the important lessons that this data teaches you is that Indians want low risk investments for their long term needs. So when a customer tells you that he would like to invest in say a mutual fund, what is intention of the customer?

Is it the customer’s intention to actually invest in a mutual fund? The chances of that are very remote, in fact almost non-existent. The customer has no intention of investing for his long term needs in mutual funds. Proof of that lies in the RBI data (Read Where Do Indians Invest?   and also read Reserve Bank reconfirms that Indians save in low risk ), where the data tells us that over 90 % of all savings is in low risk. When 90 % of all savings in in low risk and less than 3 % of all savings is in mutual funds, the chances that the customer you meet will actually want to invest in mutual funds is very bleak or remote. Almost non-existent.

Stalling Objections

If the customer does not have an intention to buy mutual funds, why is he telling you that? In life insurance selling all of you selling know that customers have many objections to buy life insurance. Some objections are genuine in the nature of wanting more information or more discussion on needs. But many objections are in the nature of stalling objections. They are a smoke screen to hide their genuine objections.

Without understanding your product or the need it will satisfy, if a customer says he wants to buy mutual funds, the objection is in the nature of a stalling objection. If you go back to the same customer after one month, the chances are that he would not have invested in mutual funds.

Why Do We Meet Stalling Objections?

It is important to understand the nature of these types of objections – the stalling objections. The objections are raised with the singular objective of stalling your sales process. There could be many reasons for this. The customer may not be mentally prepared to discuss long term needs, or you have not discussed long term needs adequately with the customer, or you have not engaged him in a professionally satisfying manner, or he does not understand your proposition or proposal, or he does not believe what you have told him, etc.

The correct thing to do when you are faced with a stalling objection is to re-conduct your sales process more professionally and more sincerely by discussing the customer’s long term needs.

One way for you to overcome a stalling objection is described below.

Suppose a customer you visit says he wants to buy mutual fund, what should our reaction be? Should respond to the customer by telling him that mutual funds are risky, while life insurance is safe? Or should we respond to the customer by telling him that mutual funds do not offer life cover?

I hope you have said no to both the questions. Our response should be appreciative of the customer, while ignoring the objection raised by the customer. One of the best responses would be to tell the customer:

Sir you have made a valid point. More and more persons are thinking that mutual funds offer better returns. We should consider your point when we take up your financial planning. For financial planning we need to first note down your long term and short term needs ……… (Read  Indians Want Long Term Low Risk Investments   )

Go on to note down on paper the customer’s long term needs and a few typical short term needs (you cannot make a full list of short term needs, as they keep changing from time to time). Show him from data given in this Blog (Read and Download the RBI data by clicking on this link   Where Do Indians Invest?  ) that 33 % of investments made by Indians on an average are in long term instrument such as life insurance, provident fund and pensions. Since 33 % is an average for the whole country, ask the customer whether he would like to invest more than 33 % or less than 33 % Discuss the advantages of investing in life insurance. One of the main financial advantages of life insurance over provident fund for long term planning is that life insurance investment is not liquid. That is to say the [policy holder cannot easily surrender the policy, due to low paid up values. Due to low paid up values, policy holders are discouraged from, surrendering their policies. This ensures that the money invested in life insurance remains intact for the duration of the policy and on maturity the money received ensures that daughter’s marriage or higher education takes place as planned.

Please note that nowhere have we argued with the customer nor have we agreed with the customer. We had noted his point and built our subsequent presentation to him from the point he had made. We expanded his line of thinking by classifying needs as long term and short term and thereby got his attention to financial planning.

Our job is to be on the same side as the customer, not oppose/ reject or otherwise turn negative. By keeping on the side of the customer, the customer will allow you to go through your sales process.

Please write and tell us (email: ashok@iistpune.in) how you have handled objections related to mutual funds, we will share it on this Blog for the benefit of other agents.