“You can fool some of the people all of the time, and all of the people some of the time, but you cannot fool all of the people all of the time.” -Abraham Lincoln
Financial Innovation: What Happens When You Believe in Things You Don't Understand- Robert Shiller
Absolutely wrong! Just go and ask any CEO of a bank, mutual fund house or an insurance company. They can tell how easy it is to fool all of the people all of the time. The ULIP programs launched by government (e.g. LIC Market Plus I, II, SBI Life - ULIP etc) is the latest example of this growing phenomenon where people rushed around to get the product without full understanding of pros & cons.
In today’s scenario you have many options to invest & manage your money/assets in financial products. However, the root question is: why the financial products such as loans, credit cards, insurance or mutual funds are getting more and more complex with each passing day? Is the complexity for the benefit of consumer / investor, or is there something else behind it?
Answer is confusology. Confusology means to confuse the customer to such an extent that it’s not worth the time & effort involved to decipher the product or service and virtually impossible to make a comparison with other similar product or services.
“A confusopoly is a situation in which companies pretend to compete on price, service and features but in fact they are just trying to confuse customers so no one can do comparison shopping.
Cell phone companies are the best examples of confusopolies. The average customer finds it impossible to decipher which carrier has the best deal, so carriers don’t have normal market pressure to lower prices. It’s a virtual cartel without the illegal part.”
Read more about Confusology in the following articles:
Confusology not only applies for financial products, indeed applies to all scenarios where sales come into picture. Have you also encountered confusopoly while buying financial products & services? Air your views by posting a comment.
Many appear to think that the increasing complexity of financial products is the source of the world financial crisis. In response to it, many argue that regulators should actively discourage complexity. ... They do have a point. Unnecessary complexity can be a problem ... if the complexity is used to obfuscate and deceive, or if people do not have good advice on how to use them properly. ...
But any effort to deal with these problems has to recognize that increased complexity offers potential rewards as well as risks. New products must have an interface with a consumer that is simple enough to make them comprehensible, so that they will want these products and use them correctly. But the products themselves do not have to be simple.
Ultimately everyone wants simplicity in their life…J
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