BELIEVE it or not, cream made me realise I might be being taken for a ride with my investments.
Here's what happened. I was at my local grocer's, buying cream to make Risotto, a traditional Italian rice dish. The grocer asked me not to buy packaged cream and that fresh cream was now available a short walk away. I was touched. This man had given up a sale at his shop in my best interest!
Back home, while relating the incident to my mother, I was given a small dose of reality. She said the new shop was, in fact, owned by the grocer's brother.
My lesson for the day: There is a vested interest in everything you are asked to buy. So when my relationship manager told me interest rates on deposits might fall and I should quickly shift to mutual funds, the new cynical me was suspicious.
Why was the relationship manager recommending another product in favour of his own?
Sure enough, I learnt that banks have now morphed into Jacks of all trades. When they sell products other than their own, they earn a fat commission. They make more money through commissions than on deposits.
So the next time your relationship manager praises a new insurance policy, you would best take it with a pinch of salt. But then, since your agent also earns commission on your purchase and there is no cost change for you, why not just buy from your bank?
We list some pros and cons if you want to buy insurance from your bank.
The downside
Service: Your banker will not pamper you with doorstep services like your agent. But if you are a priority customer for your bank, you can expect the works.
Trust: If you have a child, an agent is more likely than your banker to know about and advise you how to invest for the little one. Your agent and you are likely to share a closer relationship of trust.
Variety: Sometimes, your bank may not offer you all the policies that an insurance company has in its portfolio. Insurance expert Rajesh Relan says, "Some banks select a few products from the product basket, depending on the needs and suitability of their customer segments."
Decide whether the policy the bank offers fits your requirements. If it doesn't, you are better off with your agent.
The upside
Simplicity: A transactional relationship already exists between you and the bank, so paperwork and payment processing will be simple.
One-stop shop: Your bank can offer you the entire range of financial products instead of buying from multiple places. This gives you a single window view to your investments.
