Institute of Cost Accountants of India
WIRC Bulletin-May 2018

Mis-Selling of Financial Product …Where to Go and Preventive steps for Consumers series Written By Ms. Snehal Thakur

All the regulatory changes across the globe have mainly protected the investors, who fight against inflation and try to get some healthy returns on their investments. The common investors only know how the returns offered on various products. They are normally aware of the products since knowledge about the same lies with the people who sell the same. In India, we witnessed radical changes in the financial market including the imposition of stringent regulatory Law. In many places in India, there are cases where the common man are been cheated by the organizations, it may cheating with investor residing in Urban Area or in a Village. Mis-selling is misselling irrespective of place.

When products are being mis-sold the biggest hit takes the various dreams surrounding those investments. People invest their hard earn money and always want their money to be secured and earn a decent return. Selling of financial products is always a game of temptation played by the seller. On the other hand, there are many activities which have been developed to protect the investors as well as upgrade the knowledge levels regarding the financial products. Before we get into the same we need to figure out what type of misselling has happened and the after affects those investors due to misselling.

In my career, I have been fortunate to manage few misselling cases which I will share in this article. In these cases, Customers are running pillar to post when they realized that they have been mis-sold. Their life depends upon those investments. The biggest trouble and pain is that investors found themselves clueless about whom to approach and how to approach to complain against Mis-Sell.

Cases of Miss- selling

Case 1- Last year a 65-year-old senior citizen was given 2 pension products on the pretext of that she will get a regular income right from the month she starts investing till lifelong and every year bonus is fixed. As that lady was old and in need of a regular income a pension policy was sold which does not provide any such facilities. The organization helped her looking at her situation the free look period was over and as the special case the organization took special approval and the policy was canceled and the money was refunded. The Customer got a great relief and appreciated the organization

Case 2- Where a needy person on the pretext of high return was suggested a wrong product wherein his principal amount was also not secured and these type of conservative investors could not even recover their principal amount

Case 3- Where a senior citizen aged around 70 was given a closed-ended mutual fund scheme and when there was a need for money the customer could not withdraw it at that time. The customer was told he can sell the fund anytime as per his need

Case 4- The common problem what most of the customer faced where the customer did not know the concept of the beneficiary, the beneficiary concept policy was not explained to them at the time of selling the policy. Because of this lack of awareness the policyholder use to keep anyone as a beneficiary, at the time of surrender or maturity, the customers where facing the problem to redeem it and the policyholder did not want the corpus should go to the beneficiary account as it there money

We should not be under the impression that the products have been sold to uneducated investors. Educated investors also fall prey to the same. Lack of awareness about the product knowledge and proper guidance these are the reasons behind the birth of the misselling.

Most people come under the impression that every product suits them. When a product is released no product is wrong it’s just that. That particular product does not suit an individual customers needs. The problems lie where the customer is been sold a wrong product which is not as per there financial need. They have simply being goofed up. Understanding the need for the product within one’s life is the key to success.

Going ahead I find the following tips will be beneficial for the investors:

  • Always read the brochure and the terms and condition before investing
  • If there is a case of mis-sell raise the issue to the grievance team of the organization , if there is no satisfactory reply , raise it to ombudsman ( customer forum ) and if still there is no satisfactory reply raise it to the regulatory authority for eg Bank Grievance team no satisfactory reply – Banking Ombudsman no satisfactory reply –Intervene of regulatory authority ( RBI)
  • Always be vigilant
  • Don’t jump to conclusion. If a product is not performing well and it is based on the market condition and it does not give you the desired return it is not the case of missale as it can be a risk caused by the unfavorable market conditions which is highly volatile for eq Equity mutual fund schemes
  • 50% of missale is done by sales and remaining is well supported by the customer. customer blindly believe the salesperson, they don’t ask any question, on the basis of the trust they buy the product
  • If a brochure is not available with the sales team always go to the website and read about the product
  • Don’t believe others it’s your money always do the due diligence
  • It is very important to understand the concept of that product.
  • Just to save your tax does not burden yourself with another new product.
  • In every companies website, we have an option of raising our issue to a grievance. Which is a special team which takes care of all the customer’s grievance we have the option to escalate the matter to them and if we don’t get a satisfactory reply from them in a stipulated time we can always take the help of the regulatory body
  • Give a return complain submit it in the branch or mail it to the grievance team

Conclusion:

There are educated as well uneducated investors who just to earn a decent return fall into the trap hence it is very important for a customer to be aware and always think twice before investing in a product. Always analyze your need before investing. This does not mean that the entire product is been mis-sold and you will take all the matter to the grievance and the higher authority. Building trust and selling products and getting into trap have become amplified in the last decade. Investor awareness programmes act as a benefit for the investors. Common people only know their hard earned money and some income from the savings.

 

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