Beware of your bank representative

Beware of your bank representatives..!!!

It is seen, we Indian have very much trust with our banks. Fixed deposit in bank gives us peace of mind and a sense of greater safety. We give much importance to safety of our capital than real return. As we enter in bank branch, we totally surrender ourselves to the bank representative. A bank representative with skilled communication push to the other financial products like insurance, ULIP, endowment, money back policy and many more other products for complete their monthly target.  

I tell you here, a true event which happened today inside the bank branch which is very famous brand in banking industry. Although it is very common in our country but I still want to share it with you. I was in Axis Bank branch in the morning to make a demand draft. I have submitted the request for the same and waiting for collecting my DD. The process to make DD takes 10 - 15 minutes usually. A 25-26 year approximate age girl in the banking counter was explaining a fix deposit plan to a client. She was promising 24% fix return from a mutual fund scheme if he deposit money for 3 years and repeated it thrice with very confidant and smiling face. The surprising thing was that customer had got convinced from that girl who was representing the bank for invest in that scheme within 30 seconds. I was shocked that the customer had not asked any question about the risk associated with that scheme. When customer asked about the tax benefit in that scheme, she had smiled with moving her head and said “No, Mutual Funds me koi tax benefit nahi milta hai” (There are no tax benefit in mutual fund at all).

I was very shocked and surprised for that the witty communication by that bank representative. It was a clear example of mis-selling by that bank employee. In realty, a bank customer was cheated by that bank employee. A thousands and millions bank customer was cheated by such representatives of the banks. I am not against any bank or and bank representative but yea I am against their faulty communication with the bank customer. Anyway, I am giving you below some points which every investor should always keep in mind when they make an investment decision.

• In mutual fund, there is no assured and fixed return. The return is totally depends on many factors like market movement, interest rate, inflation rate GDP growth and many more.

• The promise of 24% is unrealistic return in such current economic condition when govt bond offer around 8%. I am not saying it is impossible but you cannot commit it to anyone.

• There are tax benefit exist in mutual funds scheme which I have written in my past articles. When you promise such a high return, you should also talk about risk associated with such schemes whether mutual fund or any other asset class.

• As an investor, it is also your responsibility before making any investment decision understand the risk and return properly.

• Do not believe on any agents, bank representative do your own research from many other sources. The agents are not your friends. They also have some sales target. So next time, beware from such agents and representatives.

 For more detail and any other query related investment, you can contact me through my email.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

www.artofinvest.com

www.arvindtrivedicfp.blogspot.in

Are your   investment agent cheating you?

Yesterday, I was my in area’s neighbor shop for my hair cut. He had narrated one incident with happened with his relative who is not educated and never went school. His relative’s main profession is agriculture. One agent had come to him before 5 year’s back and promised him 2 times return whatever amount he deposit. He had trusted him and deposited Rs 45,000 with the hope that after 5 year he would get Rs 90,000. After completing 5 years when he had contacted his agent, the agent was not available. After contacting to the concern office when he had knew the value of his investment. It was shocking experience for him. Can you guess the value of his Rs 45,000 invested after 5 years? The value was only Rs 17000 !!! only. Such huge wealth destruction he had never imagined. His agent has cheated him by making false promise and hot informed about the investment product. 

Till now many of you may guessed, yes it was ULIP product. A product designed by mixing insurance and investment called ULIP.

I am sure that you also here such type of cheating incidents regarding investments. I always write in my blog and during the meeting with investors that never mix your investment with insurance need in one product. Avoid such products.

I think insurance product sold by more in emotional sense and less in real need sense. The agent finish conversation in very hurry and their large focus on sign the document quick. They only tell you what you want to hear like “promise” and “guarantee” type words. They often do not talk about product in detail never tell you about the risk of that financial product. My friends keep in one thing in your mind that there is not a single financial investment product designed in the world without risk. Every investment product comes with a type of risk. Now the question how to avoid yourself being mis-sold. I suggest you some point here.

• ·         Do read carefully before sign any form or documents.
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• ·         Understand about the product which offered by your agent.
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• ·         Contact the company’s call centre and cross check your agent.
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• ·         Never give and bank cheque or sign the form in first meeting.
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• ·         Collect all detail about agent like his office address, contact, employee ID, job tenure, some little background about him and cross check by calling his office
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• ·         Use internet to know more about the offered product
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• ·         Focus on real return after cut taxes and expenses.

There are many more points worth discuss which we will discuss again sometime.

For more detail and any other query related investment, you can contact me through my email.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

www.artofinvest.com

www.arvindtrivedicfp.blogspot.in

Banks Role in Insurance Distribution Business

Banks role in Insurance Distribution Business

As the financial year 2013-14 is approaching towards its end. People are rushing for tax saving investment options and for tax saving insurance product is very popular among the investors. However, in my personal opinion it becomes very toxic product if you mix your insurance need and investment. Insurance mainly sell by individual agents, brokers, direct selling and banks.  

Banks are the main contributor in the sells figures of private insurance companies products. In India, people have immense faith on banks. They still prefer bank FD even the net inflation adjusted post tax return is very poor. Due to this blind faith on banks, common investors become a victim of mis-selling of these products. I met a lot of cases almost in every investor meet of mis-selling by the banks. The complaints of mis-selling by banks are increasing. Due to this mis-selling complaints, bank regulator RBI has proposed the new guidelines for selling of insurance products. The main RBI proposal as given below:

• ·         A bank’s NPA should be less than 3%
• ·         It should have made profits for last 3 consecutive years
• ·         A bank’s net worth should be at least Rs 500 crore

The government is also planning to mandate multi insurance companies sales for bank. At present banks are selling only one company’s products. The insurance regulator IRDA has also capped a bank’s sale of joint venture partner’s products at 25% of the overall.

In fact the aim of insurance sales by bank is to increase the reach among the maximum people as banks have wider branch network across the country. The above mentioned proposal by RBI, IRDA and govt are not fully implement. We hope that after implementing these guidelines mis-selling would be stop to some extent. However, insurer would not allow implement these guidelines in very smooth manner.

For more detail and any other query related investment, you can contact me through my email.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

www.artofinvest.com 

Beware…!!! Stop and think again before any investment

It is my 100^th blog. Thanks to all of you for your great support. Without you it was not possible to reach this figure. A lot of readers has given valuable suggestion and compliment. I have got lot of energy and material for thought during this journey. This journey is not only mine, in fact it is a “revolution of investor awareness” with the help of your participation.

Often, we rely on our friends and relatives for our investment decision. In most cases, these are bank agent, CAs, insurance agent, or so called advisors. For investment decision you don’t need only information, you should understand it better. You should plan for your financial plan yourself with the help of expert. Keep in mind, there is no investment product in the market which can guarantee for high return and zero risk. There is reciprocal relationship between in risk and return.

At the moment when you expect high return, you should also the analyze risk. If any product promises you for high return, then definitely there would be high risk. I request to all of you that never invest with close eye on the basis of trust. For sales agent commissions and targets are more important than you investment return. We often, trust our bank relationship manager and purchase the product on the basis of trust and brand name. After mis-sell the product which you had not required really, they earn huge commission and as the result your return get reduce.

I would like to share with you recent example. One of my clients have HDFC bank account. Client did not want any type of risk and wanted  to fix deposit for 1-2 year. Bank representative suggested him HDFC classic assurance plan for 20 year with insurance and promised 3% of sum assured bonus every year and after maturity there would be terminal bonus. According to the bank representative it was guaranteed benefit but when I had personally met the bank person and senior persons they were not able to show me any brochure about this promised guaranteed benefit. They were only showing me excel sheet on computer and only false oral promise.

Finally, client has also realized and refused the suggested product by the bank. As he was in the higher tax bracket so I suggested him some bond mutual fund it would be beneficial him as a tax point of view as compare with bank fix deposit. At the end, bank representative have also agreed with me that debt fund is better than FD.

I had also mentioned in my past blogs that do not trust any oral promise by any agent, friend or relatives. They will first care their own incentive and not your investment return. It would be better to prepare a financial plan with the help of professional financial planner and then invest accordingly.

For more detail about any other query related investment, you can contact me through my email.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Some points to avoid mis-selling

Who will stop the mis-selling ?

Majority of us have experienced mis-selling at least once in our lifetime. Whether you admit or not but it is true. It is surprising fact that not only illiterate but also well educated people also victim of this trend. Now the question arises that how we can stop it. Before find the measure to check mis-selling, first we should find the reason behind this problem.

Who is responsible for mis-selling? Majority of people’s opinion believe that agent and financial institution like bank, insurance companies are responsible for this. The market regulator is also very serious about this and many steps has been already taken like ban on entry load in mutual fund, distinction between advisor and distribution, emphasis on honest and ethics based advice. Many financial forum advocate for ethics based advice. There are so many online websites are available regarding financial planning, investment product but still the problem is exist.

It is very unfortunate situation that the investor does not spent much time to get right advice and easily trap in false unrealistic false return promises. Investor should also alert before investing in any investment product regardless investment amount. After all, every penny comes from your hard work. I urge to all investor that they should be vigilant before any investment. It is wrong to accuse only one side for particular problem. Market regulator is doing well to regulate the financial institution and distributor agent but a lot of work still has not done.

During my meeting with investor, I have clearly observed that they do not give much importance to make financial plan. They easily rely on their bank relationship manager, agent or their close relative for the investment. After doing useless and wrong investment they only repent and accused to financial institution and distributor. I mean before taking any purchase decision like booking holiday package, purchase clothes, electronic products, you spend so much time for product details. But, when we invest in any financial product we sign the forms with close eye and even not read the prospectus. In more than 90% cases we trust on our agents or relative. You should keep in mind that these people or institutions prefer sell high commission products. They also have their sales target and search like you people to achieve their target. Due to this mis-selling your dreams and financial commitments remain incomplete. I wonder, when I ask about insurance sum assured to the clients around 90% of them had no idea about sum assured amount after taking insurance policy.

After reading the above paragraph, you would think that I am only talking about problem where is the solution? According to me, If you remember and follow some points during investment then there would be no chance to be victim of mis-selling.

·        First, do your own research or homework before meeting any agent or adviser.

·         List your doubt and ask them to your agent or adviser during meet.

·         Check the agent’s background like experience, qualification, business card proof and knowledge.

·         Be clear about your short term, medium term or long term financial goal and examine your risk appetite.

·         Discuss about proper asset allocation with your financial adviser.

·        Don’t rely on only one agent or friend, keep updated yourself about financial world.

·         Before investing in any product be clear about your investment period and product risk.

·         It would be better if you prepare financial plan with the help of qualified certified financial planner.

·         Always read offer documents and fill the form yourself.

·       After making the investment, keep your certificate or statement carefully and read properly.

For more detail about any other query related investment, you can contact me through my email.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Colour code for Mutual Fund

We often see the mis-selling of the financial products. Mis selling is a common thing in the financial industry that happens to almost everybody's life. To control mis-selling in mutual fund, SEBI has issued guideline for colour coding of mutual funds. The new guidelines to be effective from July 1, 2013, for all existing and forthcoming mutual fund products. Now onwards, product labels with scheme detail would be disclosed on common application form and advertisements. The labels would also include detail about the nature of schemes such as to create wealth or provide regular income in an indicative time horizon (short/ medium / long term)

There is also colour code for displaying the product risk. A blue colour coded box would indicate low risk, yellow box would indicate a medium risk, while brown box would be represent schemes with high risk. As per the guidelines, mutual funds would also have to include a disclaimer that "investors should consult their financial advisers if they are not clear about the suitability of the product".

These new colour code would provide investors an easy understanding of the kind of product/scheme they are investing in and its suitability to them.

For more detail about any other query related investment, you can contact me through my email.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Twitter id : @trivedi_arvind