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Opinion | Can regulators urgently look into mis-selling?

Reading up is the only way to protect oneself against unscrupulous advice

Mis-selling has really gone out of bounds and so often I come across stories of people who have been duped. Here is what I have seen, heard and experienced myself. A 72-year-old was called by the bank manager of a private bank on maturity of his fixed deposit and recommended to move it to a scheme that could give him “10% guaranteed" return. Thankfully, he checked with me and he was stopped from investing in an insurance product. In my own case, the few times I visit the bank, turns out a sour experience. The aim of the people working in the branch seems to be to sell insurance policies. Forget the service managers, even the teller will ask you for investments. Since when are tellers qualified to give investment advice? I wanted to open a locker and approached a public and a private sector bank. Both wanted me to buy a “five-year investment scheme" in order to open the locker and quoted these as being “bank rules". I would like to ask the Reserve Bank of India (RBI) if it is mandatory to buy an insurance product to open a locker?

Of course, even equity mutual funds are now being sold as products which will fetch 12-15% guaranteed returns over 2-3 years investment periods. I have had many individuals ask me how their investments will turn from negative to 15%? Many participants are not willing to believe that insurance does not give a high guaranteed return. There are so many people who have invested a large part of their savings into insurance products believing the agents lies of 15% guaranteed return.

Gold schemes from jewellers are still a big hit with even the branded, listed companies promoting such schemes. Investors don’t realise these schemes are nothing but lending money to the jeweller.

Recently, I did a session for teachers from rural areas in south India and was surprised to hear about the number of cases wherein people have fallen prey to phishing calls and have given out their PIN numbers or account information.

While awareness has been created through various media forms about phishing, it could be augmented by direct messages to users. For example, a short video on safekeeping of account and PIN information could be sent regularly to customers. Similarly, short videos on the risks associated with gold schemes, chit funds etc. could also be sent to customers.

I am still without a locker simply because I refuse to buy an insurance plan to fulfil the banks sales target. I have the option of taking up the issue with the ombudsman but how many people can actually do this? Is there a way for consumers to share these wrong practices online with the regulator? And even then, is there any action being taken?

The mis-selling in insurance has gone on for just too long and nothing has been done. Firstly, can we have a common disclaimer for all market-linked instruments, i.e. for investment-linked insurance products and mutual funds? This itself can help reduce mis-selling as consumers will realise that insurance returns are also subject to market risk.

Can the regulator consider a single certification for a financial advisor? Today there are mutual fund agents, insurance agents, registered investment advisors who are allowed to distribute different products. This causes confusion for the investor. The insurance agent is only interested in pushing insurance and down-sells every other product because he doesn’t make similar commissions. This is a huge conflict of interest. Further, there are chartered accounts, bloggers etc. who also provide investment advice even though they are not certified or in some cases qualified to do so. A single combined certification along with standard fees (like mutual funds) on various products, including insurance, would go a long way in reducing mis-selling.

Finally, customers need to protect themselves. How many investors really research an investment product before investing? Consumers cannot keep blaming the system for their own ignorance. Reading up is the only way to protect oneself against unscrupulous advice.

Mrin Agarwal is a financial educator, founder director of Finsafe India Pvt. Ltd and co-founder of Womantra

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