'Like a fixed deposit': Here are few ways to spot mis-selling

FP Staff • December 21, 2014, 02:28:31 IST

And mis-selling isn’t new in the financial system. According to a story published in Business Standard today, “Mis-selling instances occur more often with ignorant individuals and with those who trust their bank representatives blindly.

'Like a fixed deposit': Here are few ways to spot mis-selling

Investopedia defines mis-selling as, “The ethically questionable practice of a salesperson misrepresenting or misleading an investor about the characteristics of a product or service. In an effort to make a sale to a potential customer, a financial products salesperson could leave out certain information or describe a financial product as something the investor urgently needs, even though sound financial judgment would come to the opposite conclusion.”

And mis-selling isn’t new in the financial system. According to a story published in Business Standard today, “Mis-selling instances occur more often with ignorant individuals and with those who trust their bank representatives blindly. Though there is no solution to ignorance, there are some basics you could keep in mind to identify being pitched a wrong product.”

For instance when a salesperson is introduced to you by a friend or a family member, the salesperson uses your relationship with that friend to influences your financial purchase. Since your friend or family member has bought a policy for him, you should do so too.

Then second indicator is when the salesperson see his product calming it’s “like a fixed deposit”. Remember a fixed deposits is not the same thing as “Like a fixed deposits.”

Then the next tip to spot is to see if your salesperson is selling you tax savings instruments, even when you’ve exhausted your tax savings 80 C limit via Employees Provident Fund.

The article quotes, Kartik Jhaveri, who said, If an investor has a horizon of one or two years, that means s/he cannot take high risks. Suggesting equity or balanced funds to this person is mis-selling. At the same time, if one has a five- to eight-year horizon, suggesting debt funds is also mis-selling," he explains.

Also keep in mind that there’s only a 15 days free-lookup period for insurance policies, if that period gets over you cant cancel the policy. So before buying your policy do read the fine print.

Read the whole Business Standard story here.