Do you immediately trust bank representatives who cold-call you with offers of personal loans or credit card conversion arrangements, yet completely shut down when someone wants to talk about investing?
Many people come to me as they are seeking a safe space to talk about their debt. Often, it is not because they have debt but because they find themselves in a worse position after accepting a lender’s offer through a cold-call.
They feel embarrassed and humiliated when they realise they were misled into something other than what was explained over the phone.
The common experience goes like this. A customer agrees to the bank representative's offer in the belief that it is a great arrangement for them. They insist that the customer will save money and be better off financially.
However, soon after the arrangement is implemented, the customer is confused as they are worse off financially than they were before and don’t understand why.
It is a difficult situation to resolve as there is usually no paperwork involved; it was just a verbal agreement over the phone. When the customer tries to follow up with the representative for clarity or to challenge the arrangement, they are ignored, passed from person to person and become even more confused.
Many eventually give up as the effort needed to speak to someone who can or is willing to help is time-consuming, frustrating and they lose the energy to persevere.
Then the shame and embarrassment sets in and the customer feels they have nowhere to turn to for help. They do not want to talk to family or friends for fear of judgment or ridicule.
I know somebody who sought help from a family member but were made to feel stupid, as though it was their fault for not knowing the right questions to ask before agreeing to the arrangement.
A lot of issues stem from the fact that bank representatives earn their living through commissions. Many are so undertrained that even they don't understand what they are selling. The only information they understand is the percentage they will earn from the sale.
A customer in financial difficulty is coming to the conversation with different motivations. They are vulnerable and seeking financial advice and help. The bank representative is seeking a sale so they can reach their sales target and receive commissions to support their families.
Knowing this, how much do you trust that bank representative who, very convincingly, tells you that he or she is on your side and wants to help relieve your financial stress?
What is my advice? Always remember the seller’s motivation and, with that in mind, approach everything with an appropriate level of scepticism.
Do not accept offers on WhatsApp or verbally over the phone. Request an official offer, signed on a bank letterhead, with all relevant information such as a repayment schedule, monthly instalment amounts, interest rates, administration fees and terms and conditions clearly outlined.
If you do not understand the offer, speak to someone independent of the bank. Find a second opinion. Source at least one more offer from a different bank.
Most banks will offer better interest rates or discounts and deals to attract new customers. You can then either avail of the better deal or use the offer to negotiate a better one from your current bank.
In my experience, people tend to be much more trusting when they are seeking a loan compared to when they are speaking to someone about investing. They are wary and sceptical of everything and everyone connected to investing and will not sign on the dotted line unless they are 100 per cent certain they understand what they are signing up for.
Most do not invest their money at all or procrastinate for years because they do not understand and mistrust the adviser.
Yet, they will trust a faceless voice cold-calling from a bank, promising they have the answer to their debt problems without showing anything tangible to prove it.
Remember the banking golden rule: if someone is cold-calling you and offering a loan, a debt restructuring on your credit card or an amazing investment opportunity, politely decline, hang up and think of the potential thousands you have just saved yourself.
If you have fallen foul of such an unscrupulous cold-caller, go easy on yourself. They are skilled salespeople and we are often raised to trust banks inherently. You are certainly not alone.
People do not talk about their financial missteps as often as their financial successes. Consider it a lesson —and one to talk about so others can learn from your experience and avoid making the same mistake.
Carol Glynn is the founder of Conscious Finance Coaching