Mis-selling of financial products is rampant in India. Basic financial literacy among common people is highly inadequate irrespective of educational background, profession, age. This is exploited to the hilt by agents, bank relationship managers, personal bankers and others in mis-selling financial products to gullible people to meet their own target or earn hefty commission.
- NFOs are sold to naive customers in place of existing mutual funds which are having great track record over long term. Reason given – NAV of NFO is Rs.10 and is thus cheaper than existing mutual funds having higher NAV.
- Endowment and money-back insurance policies are pushed instead of term insurance policies, even though sum assured in term insurance is much more than other policies for same premium. In case policyholder outlives the term of term insurance policy, he doesn’t get back the premium. At first this fact is a bit hard to digest and is used unscrupulously by insurance agents to sell endowment and money-back insurance products.
- Then there is Unit Linked Insurance Plans (ULIP), by far the most mis-sold financial products in India today. ULIPs embodies all ill traits that you can have in a financial products, they are complex, non-transparent, exorbitant charges (mortality charge, fund management charge, policy charge …. List goes on and on).
The list can go on and on. A lot has been written about this malice in personal finance. Recently I came across a write-up from an ex-personal-banker who was himself involved in mis-selling financial products to his customers. He is one of those rare soles who could not put up with the guilty feeling for long and quit.
Read Confessions of a mis-seller in MoneyToday. Though the article is a bit dated, the incidents mentioned in it are still rampant.
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