The path to your wallet is through your heart

Which of these sales pitches do you find more appealing?

1. A product which proudly states that had you invested in it since inception you would have earned a Compound Annual Growth Rate (CAGR) of 17.82%, thereby giving you a ‘Real’ return of 9.27%.


2.A product which vividly depicts what it can do for you in the future if you purchase it today. This could involve images of you gifting an expensive cycle to your nine year old grandchild, you beaming with pride at your child’s graduation ceremony, etc. 

Most would prefer the latter mainly because they can connect better with it.

This is not a hypothetical case. This is the actual difference between how mutual funds and investment oriented life insurance/pension policies have been marketed over the years.

Mutual funds are perennially distraught over how retail investors are not signing up in hordes despite them offering low cost products and giving reasonably good returns for nearly two decades now. While their marketing departments are scratching their heads on how to redress this, I feel that the advertisements put out by most of them are not helping much. They often highlight the returns given by the scheme more prominently as compared to making emotional pitches. While I believe this is the best approach, apparently prospective customers do not.

On the other hand life insurance companies have been laughing all the way to the bank (even though the bottomlines of most companies are still littered with ‘red’)

While the lack of distributor incentives is a pertinent reason, I feel that consumers are already pre-sold onto an insurance product as a result of the emotion laced advertising undertaken by the companies.

If one critically assesses these ads one will realise that they hardly contain any relevant product feature/s which may help a prospect arrive at an informed decision. In fact the ads disguise more than they reveal.

Products such as Unit Linked Insurance Plans (ULIPs) are complex, multi-layered products with several embedded costs which are not easily discernible at the outset. Other traditional policies, such as money-back, are even worse in terms of opacity. Hence prospective applicants are compelled to rely on insurance agents to explain the same, which in turn opens the door for mis-selling.

I hope IRDA reduces the latitude for life insurance companies by strengthening the provisions of the Advertising Code just as SEBI has done for mutual funds. After all, the purpose of financial product advertising should be to educate as much as to entertain….


  1. Rightly said so. Two emotions that control humans are -fear and desire. Insurance companies effectively use it for heart rules over mind. You have rightly brought out in your books and articles about how EQ precedes over IQ and why people in general and investors in particular make common errors in their financial decision making due to their emotions, the basis of behavioral finance.
    Sir a humble suggestion from your fan. A picture is worth 1000 words and readers are pressed for time, if you would have added some pictures here I feel it would have had a bigger impact.

  2. Well said. But let’s not forget that Insurance is becoming a necessity. So it’s questionable, to what extent marketing plays a role in selling insurance products. Although life expectancy is increasing , the uncertainity (due to terrorism/ accidents / corruption etc) of living is also increasing. And hence it’s becoming imperative that one buys an insurance.

    Mutual Fund on the other hand is not yet seen as necessity by masses.

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