Articles - Is cold calling the real problem

We all know the scenario; the phone rings and the screen shows “No Caller ID”. Should we answer or should leave it to ring out, assuming it is yet another call centre either trying to elicit our opinions in order to monetise them or else trying to sell us something we didn’t realise we needed? Many people regard the intrusion of cold-callers into our private lives as the ultimate invasion of their privacy and swear never to buy anything from them.

 By Tom Murray, Head of Product Strategy for LifePlus Solutions at Majesco.

 Indeed, one of the key requisites of being a member of the tele-sales workforce is the ability not to take the level of rejection and even abuse too personally.

 Due to the number of financial scams that have been operated via this sales method in the UK, cold-calling has been banned for pensions. Far too many new-retirees were convinced to move their hard-earned pensions into ‘high-interest’ bearing investments in dodgy funds or schemes, that turned out to be completely bogus. As a result, the pensioners were left destitute after a lifetime saving for their retirement.

 Once the cold-calling ban was introduced for pensions and the public were made aware of it, the number of scams decreased. Now there is pressure coming on the UK government to ban cold-calling completely for financial products. The fear is that the scammers have changed tactic and many people are being targeted in the protection market. Phone calls from companies promising lower premiums for similar products to the ones that the householder already has are on the increase. However, in some cases, it turns out on closer inspection that these products have much lower coverage or have so many exclusions that no claim would ever be possible. Thus, the customer essentially has lost their premium without ever getting the insurance cover they believed they were paying for.

 Of course, it is in the interest of everyone involved in the provision of financial services that scammers be stopped. But we need to pause and consider what we would lose before we rush to make such dramatic changes. Financial products are still primarily sold, not bought. The government explicitly acknowledges this with its auto-enrolment (nudging) approach to getting people saving for their pensions. They are aware that without outside pressure, people would mean to invest but would never get around to doing it.

 Cold-calling works. Even though everyone complains about it, the fact that firms invest so much money into it as a means of selling shows that it is effective. So, when it comes to cold-calling, we need to be sure that by banning it completely, we are not throwing the baby out with the bathwater.

 It is true that banning all cold-calling for financial products would remove any further scams done by phone, but we must remember that scammers are already breaking the law. The ingenuity of the scammers means that it is likely that they will just alter their line of attack and find new ways to reach the customers with their fake offers.

 We don’t take the approach of banning alcohol, despite the fact that doing so would mean that all deaths due to drink-driving would immediately cease. Nor do we attempt to monitor postal deliveries in order to ensure that fake-offers can’t reach potential victims via that route.

 By banning all cold-calling, we are merely ensuring that genuine companies offering valuable services find it even more difficult to reach potential customers. Will this result in a major drop-off in people getting access to information on the financial services that are available?

 Financial products must be sold and there are many risks to reducing the ability of financial services providers to access their potential customer base. Therefore, we need to be careful of taking actions that might lead to unintended consequences, especially as the rights of those who are genuine sellers are being infringed, along with the customers who can’t get access to a wider range of financial products easily.

 When it comes to making changes which significantly affect the ability to life and pension providers to reach their customer base, we need to make sure we are not going to take such drastic action that the outcome is to make the situation worse rather than better.

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