What if a person whom you trust the most betrays you? It’s a horrible feeling to even think of. It would be worse if the betrayal leaves you with a financial loss. You would be shocked to hear that the very own banks we visit in our daily life have been doing this time and again.
Until now, we were quite happy that we got to buy various financial products such as mutual funds, insurance, FD’s, etc under one roof. However, banks have taken us for a ride. Before getting into tips to help us from this mis-selling phenomenon of banks, let me first share with you a real life incident of how banks can cheat us.
Ajay (name undisclosed), is a 50 year old guy who had a very good relationship with a popular bank. He invested in a few FD’s and had also taken a traditional life insurance policy recently with the bank. They had called him a few times for payment of premium. He visited the bank whenever he had to pay the premium for the policy, which was Rs. 10,000.
Bank used to take his signature on a few documents when he went for the payment. This happened 3-4 times. Due to his immense trust in the bank, he never bothered what these documents could be. He just kept paying premiums and signed documents.
One day, his son who arrived from U.S, was going through the investments made by his father. He saw that there were a lot of documents from this particular bank, each document denoting a separate policy. When he enquired with his father about having so many insurance policies, his father replied by saying that there is only one insurance policy for which he is paying the premium regularly. Then they visited the bank for clarification and after a long argument, they finally realized that they were “cheated”.
Ajay is yet to receive proper justice for the financial loss and mental trauma due to this mis-selling. Had this been done in U.K, the story would have been slightly different for him. Similar complaints were registered in U.K and the banks were slapped with fines worth £ 1.3 billion from the central bank. Sadly, RBI which is believed to be having stringent norms is yet to levy fines of such order on Indian banks.
Well, this is the story of just one individual. There have been tons of individuals who are still suffering the loss due to mis-sold products of our dear Indian banks. Some of us have realized and others haven’t. Now that we know about mis-selling from banks, we also need to know how to tackle it. Let me share with you a few tips which might be useful for you while buying financial products from banks or any other financial institution:
Do your own Research
No matter which bank approaches you with a financial product, first do a preliminary research on what the bank wants to sell you. Check out aspects such as past returns, track record of fund manager (for mutual funds), tax benefits, tenure of the product, etc. This research will also help you in assessing whether the agent is lying to you or not.
Ask for a written declaration
Often, agents approach us with a high returns promise from the product being sold. There has been one such case where the agent has promised on the invested money being doubled in just 2 years. If you convert it into returns offered, it becomes 36% CAGR. Such returns are next to impossible. However, greed might lure you into purchasing such a product.
You can do two things if an agent promises such things:
1) Ask for a written declaration on the same.
2) Enquire with him where this money is invested so as to generate such returns.
What if you have been mis-sold already?
It is mandatory for any insurance product sold to have a free look up period of 15 days. In case, you have already been mi-sold an insurance product, you can surrender it within 15 days of receiving the documents. The premium paid will be returned to you after deduction of medical, administration charges, etc.
If you have realized about the mis-selling a lot later, you can launch online complaints to the bank or approach IRDA grievance redressal (insurance related) or SEBI (Mutual Funds, Stocks, etc). As a final step, you can approach the ombudsman (banking or insurance or tax) near you.
There is no free lunch
Banks/agents have been luring customers into buying their products by stating that there is life insurance free for deposits, mutual funds, etc. Remember that nothing comes free of cost. You will be charged for it in some way or other. You may be paying hefty charges for the product being purchased. There have also been cases where banks/agents have told the customers that insurance has to be purchased as a by-product for sanction of a loan. There is nothing like this in the financial industry. We also advise you to stay away from the Invest-surance policies i.e. those which mix insurance and investment.
Ask for the agent’s qualification
It’s always prudent to ask for the seller’s qualification before having a word with him. There is a high chance that he may be advising you on areas where he is not really qualified. SEBI has also made a good move in this regard by segregating advisory and sales.
The best way to avoid mis-selling is to consult a qualified Certified Financial Planner (CFP). You can look for a fee based financial planner. He will advise you based on your risk appetite, age, goals, etc. There are also planners who will help you purchase products. You may or may not opt to purchase through them.
I am sure these tips will act as a shield against mis-selling of products from various financial institutions. Also, its better that we keep ourselves updated with the flowing financial information around us. So, what do you think of these malpractices from our trusted Indian banks? Share your views with us.