Is Your Agent A Thief?   Jul 26, 2011


The following are 2 true stories.

The first is the story of something that happened to a YP reader.

'The other day, I walked into IEGD Bank (name changed) to get an account statement. As I was waiting my turn, an employee walks up to me and starts chatting with me about my investments. It was a friendly chat, it seemed like this employee was on the sales team but was genuinely looking to provide me with only something that I might require.
I am a financial advisor myself, but didn't mention this to the salesperson, out of curiosity to see what they might try to sell me.

The conversation was very simple, with questions such as 'Do you invest in equity?', 'Do you have any long term investments for your children?' and 'Are you adequately insured?' From the tone of the questions it was obvious what the salesperson was leading up to.
Then came the inevitable sales pitch:

'Madam, we have a product that is ideal for you. It is a short term investment plan where you will also get life insurance cover. All you have to do is invest Rs 1 lakh for 3 years, and after 10-15 years your money will have given excellent returns.'

'This sounds like a ULIP – is it?'

'Ma'am, it is a short term investment plan that also has life cover'.
Notice how my direct question was answered with an incorrect and indirect response.
The honest answer would have been 'Yes ma'am, it is a ULIP, and it is not a short term product, but a very long term product with high charges'.
But with all the heat on ULIPs these days, advisors have been told not to use the foul four letter word, and to call it an Investment Plan instead. Short term, at that.

I indicated that I wasn't interested and stood up to leave. That's when the advisor pulled out the last and most desperate tool in his belt. 'This product is managed personally by Mr. Xyz Abc! It is an excellent product ma'am!'

The person that the advisor named is in fact the Chairman of a well known housing finance company, a sister concern of the bank in question. He certainly does not manage ULIP portfolios and I wonder how he would react, knowing that his name was being used this way.

I was amazed and disgusted. Sometimes people really say anything, with no qualms, to cheat you out of your money.'

It's true. Very few advisors will stop and think of what the life situation of the 'target' client might be. Do you have a loan? Do you have an ailing parent? Do you want to gift your children something special this year? No. They don't care. It's all about what they can earn from you, what use you are to them.

There's another story, this one is a new Yours, Personally reader, who wrote in to us with an innocent query, coincidentally about a product being sold to him by the same bank in Story #1.

"IEGD agent said that if I invest Rs 1 lakh every year for 5 years, I will get guaranteed Rs 8.43 lakhs at the end of 5 years. Is it true?"

Congratulations sir, for having the good sense to question what your agent has told you.
In order to give you Rs. 8.43 lakhs post tax at the end of 5 years, your investment should earn a guaranteed rate of 18% p.a. That's an 18% guaranteed annual return. If anyone knows of such a product, please do inform everybody so we can all benefit from it!

The number of write-ins we receive on this theme are mind-boggling. We at PFN have written articles on this before, and it looks like we will continue to write such articles in the future. Until all our readers know exactly what to expect from their bank advisors.

Remember, it's a commission driven game where the only rule is that there are no rules.
It's you vs. your relationship manager / advisor / agent and your best defense is to educate yourself.

If you've faced such situations, please write in to us, we would love to hear your story.

Add Comments

Aug 14, 2012

It is true that advisors tend to sell products with an eye on the commission relegating  the importance of protection. But my experience shows that IRDA laid strict rules to explain the full details of the product that includes the commission they earn with acknowledgement to the effect that the same is explained before processing the issue. Unfortunately people are not interested to know the details and buy products out of obligation which is en-cashed by the advisors. Majority of people emphasise on investment but not  on seeking protection. The provision to check the policy in the fifteen days time (free look In period) is not known or not bothered . Similarly minimum payment of three annual premiums is a must for getting back the premium is also kept under wraps. But I find, during the training, advisors are taught these things as per the IRDA guidelines, many fault in the practice. The need of the Insurance is to give  wide publicity with emphasis on the importance of PROTECTION  among the public by IRDA on the lines of training imparted to advisors. 

Jul 26, 2011

This is such a true story. Today's RMs are all commission driven. I had a similar experience from the biggest private sector bank in India (I hope you got it). Their new trick is that they assign a Relationship Manager to each client (I think it's based on the amount of bank balance). Each of these RMs will call you up and sell "products" that are either ULIP or in the name of Pension Plans (again sort of ULIP) with so many false commitments that any person with little common sense will understand that it's not an achievable promise. When I asked him to give me a written document confirming what he said in the bank's letterhead, he refused. None of his questions were about how much debt I have, what are my personal commitments, do I have a family, a kid, parents, what are my liabilities... none of this. Simply starting with... Sir, We have a great investment option for you. I have only one suggestion for such RMs, Get an education in your domain, gain expertise and have a little compassion for your clients. We are not here to lose our hard earned money to cheaters like you who are just worried about making some quick bucks. Learn and Earn Honestly. If you are an ethical person, business will come to you.
Jul 27, 2011

All Relationship Managers, Agents, Advisers and all other persons such as Business Development Managers are appointed by the banks and Associated Life insurance firms to bring in more and more new business and they get paid for that. it is for us the private retail investors to be more prudent and selective in our investment plans. We have another set of people known as sales managers attached to several realtors and these people get hold of gullible persons, especially the young ones in the mid thirties and mid forties and if they find that both members are earning, they dump properties at exorbitant prices and this is one prime reason why the real estate prices shoot up in cities like Bangalore, Hyderabad, Delhi and other small towns in North.

People have to be far more informed especially when they dole out money in lakhs and crores and have to be very prudent and not fall a prey to any persons either in person or through media portals or investment advisers and magazines.

I am sorry to be a little brusque but the fact of the matter is that people at large are there to drag the gullible persons and cheat to the extent possible
Oct 09, 2012

What can be done to bring this kind of mis-selling to the notice of RBI and IRDA? I am sure the Banks are fully aware of the mis representations, but they are only concerned with their revenues.