The way a bank or insurance company sells in India is much like a trap, with companies, regulators, agents and staff colluding to defraud you of the hard earned money.

The process is usually as follows: you have a bank that you have banked for years. As soon as there is any credit (salary, bonus etc.) in your account, the trigger is generated and sent to your account relationship manager.

As soon as a trigger is sent to your Relationship Manager, he would call you to fix an appointment. This manager pitches a product to you.

The pitch is verbal. The merits of buying this product are explained with great enthusiasm. However, the same merits will not appear in the product brochure.

The excuse will be that the brochure is not updated. Words like ‘guaranteed’, ‘surety’, ‘historical returns’ and ‘mutual fund with free insurance’ are commonly used.

Next day your RM will follow up again and probably even pressurize to decide quickly. You will get convinced because after all you are dealing with your own bank. You would have bought something for which you either have no knowledge or half-baked knowledge.

One of the two things will happen after few months. Either you will find out that the product you bought is not the one that was described to you. Or you wait for few years to see that market is performing well but the product has not delivered any return.

When you approach your bank with your concerns, you will find a different manager who would be your new relationship manager.

He will either say talk to the relevant department or you should return back the policy and invest in a better scheme with the same company. You will land up sending emails to 100 different departments or get sold for the new product with new features.

These scams are very common irrespective whether you are dealing with a government agency or a private company. All these relationship managers are sales agents and do not have any knowledge of the product.

They are assigned targets and they are simply chasing those targets. Neither do they have any understanding of your financial objectives nor do they care.

A rampant practice among banks is to cross-sell insurance and mutual funds of their respective insurance and asset management companies to customers who approach them for a loan.

Customers taking a home loan are sold mortgage redemption insurance or term insurance policies of their insurance subsidiaries. Similarly, when a customer wants to get a locker in a bank branch, he is made to invest in a fixed deposit.

Bank personnel selling mutual funds or insurance plans are usually not even certified by AMFI and IRDA to sell the respective products.

How can you avoid becoming a victim of mis-selling?

  • ­You must have your own basic understanding of the financial product.
  • ­You must understand how the financial product helps you achieve your financial objective.
  • ­Do not accept facts as suggested by the agent, investigate.
  • ­Any time is a good time to start investments so take your time to perform due-diligence.
  • ­Please read offer document before signing it.
  • ­Make sure the agent is registered with relevant regulator, ask for licence details.
  • ­Ideally deal with a fee-based SEBI registered investment advisor.

If you don’t care about yourself, no one will care about you. So take charge of your personal finance and avoid becoming victim of financial product mis-selling.

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