INFLATION AND STRATEGIES TO BEAT INFLATION
August 30, 2019
MIS-SELLING BY INSURANCE AGENTS, BEWARE OF SMOOTH TALKING!
August 30, 2019
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MIS -SELLING BY BANKS, TAKING CUSTOMERS FOR A RIDE

Many Banks are notorious for mis selling of various products to customers. Some could be deliberate and many others are based on ignorance. Young officers simply follow instructions of seniors without realizing the financial impact that it will have on their customers. If you make a financial advice or sell a finance product without taking in to consideration, the following factors, it can be termed a “mis-sell”.
-Age of the investor
-Financial goal of the investor along with time frame
-Risk profile of the investor [ Risk attitude and Risk capacity]
-Tax and other implications
If I have an old diabetic patient, will I offer fruit juice laden with sugar and ice? NO. Similarly, I cannot offer finance products with out taking in to consideration above mentioned factors.

PUSHING BALANCED FUNDS

 

Customer request Fixed Deposit:  Wants to invest in FD with monthly interest option 
Bank official suggestion Invest in balanced funds instead ,”you will earn higher dividend”
Why it is a mis sell? On long term basis -5 year plus, the return from Aggressive balance funds could be higher than 10% .But, on a short term basis monthly dividend can not be guaranteed .
What is the impact? If the balanced fund has been booked at peak prices, the capital itself may show  erosion after few months . The dividend may not come about and the investor will be shocked . 

PUSHING FIXED DEPOSIT & ULIP

Customer request Wants to open SCSS account with Rs. 15 lacs corpus by a retired person .
Bank Official suggestion Bank 1 – Invest in bank FD for 3 years as only above years old people above are allowed into SCSC account.

Bank 2 – Invest in ULIP and it offers insurance and capital growth.
What is the impact? Bank 1:

FDI- (a) – you will miss the interest rate difference between normal FD and SCSS . (b) – Normal FD is not eligible for IT benefits

Bank 2 :

  1. Life cover offered by ULIP is too little. And for a retired person, life cover has very little meaning.
  2. ULIP investments go into equity market and above average returns happen only after 5-7 years with such investments

PUSHING ULIP instead of TERM INSURANCE

Customer request Wants to buy TERM INSURANCE for himself as he is only 40 years and has lot of loans
Bank official suggestion Invest in ULIP instead of a TERM INSURANCE
What is the impact?
  1. : Insurance content in the ULIP is very little and it does not adequately cover the life of the insurer.
  2. : On a 10-15 years period ,ULIP may give far less return compared to Multi cap funds.
  3. There are exit penalties for ULIP.

PUSHING GOLD COINS INSTEAD OF GOLD BONDS

Customer request Wants to invest in to Gold bonds for 7 years
Bank official suggestion Invest in gold coins it does not have “lock in “period

 

Impact of mis selling
  1. You will payout a commission while buying  gold coin. While selling the price may be up to 10% less.
  2. You will miss the interest of 2.5% PA available on gold bonds
  3. Gold bonds can be sold at exchange and it is not highly illiquid as claimed.
  4. You will miss the IT benefit under LTCG which is available to Bonds.

PUSHING ULIP & INSISTING OF FD WHILE GIVING BANK LOCKERS

Customer request Wants a bank locker
Bank official suggestion
  1. Take bank FD for Rs.1 lacs
  2. Take ULIP for Rs. 3 lacs
What is the impact?
  1. Pushing another product while giving bank locker is illegal.
  2. Both bank FD and ULIP will give far less returns compared to other options like Multi cap or Balanced funds.
  3. Insurance cover in ULIP is very little

PUSHING LIFE COVER OR THE PRODUCTS WHILE SELLING VEHICLE LOAN

Customer request Wants to take vehicle loan for Rs. 7 lacs
Bank official suggestion Take personal cover for Rs. 10 lacs
What is the Impact?
  1. It is illegal to push another product as pre-condition for vehicle loan
  2. If the person is already covered with a term insurance it is unwarranted.
  3. Premium changed is at “rack rates” which could be  available at 30-40 % less from online portals or from other insurance companies.

This blog is written by Simon Daniel, a double postgraduate in management sciences, Ex CEO and Director of leading Companies with 35 years track record .He has established two successful start ups too. In Quora [www.quora.com] , he went on to become World No.1 writer in Personal finance advice and investing advice topics, being called a “personal finance guru”
He is the author of highly acclaimed book titled:
ALL ABOUT MONEY BECOME MONEY SMART!
The book is a comprehensive guide to saving, investing, spending, borrowing and protecting-thefive key financial literacy competencies essential for all people.
Book is sold in all leading online stores in India and globally. It is sold through Author’s website Simon Daniel And All So Amazon or Flipkart

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