How Mis-Selling is done in the name of Financial Advising ( Story Adapted from PersonalFM Blog)

This article showcases the investment story of a doctor, Dr Aman Shah (name changed), who fell prey to the tall promises of his financial planner cum insurance agent. Read on… Here is what happened:
The Case:
Dr. Aman, a 35 year-old Orthopedic surgeon, has little time to manage his finances. Every minute he spends at his hospital is very important to him. Since the hospital is a well-run hospital, founded by his father, he was not very concerned about investing his surplus. However despite his busy schedule, he records his expenses and savings and Fixed Deposits formed most of his investment portfolio. Apart from that, he had taken a loan to buy a residential property recently. His financial planning exercise ends there.
Then, about a year ago he was blessed with a baby Boy. As it happens with responsible parents, he began to take his financial matters very seriously. He decided to seek professional help to streamline his expenses and invest surplus funds in more rewarding avenues, other than fixed deposits.
One fine day, he received a telephone call from an unknown number and that’s how the tragedy started. The person on the line introduced himself as a representative of a financial planning company and requested for an appointment. When Dr. Shah enquired about the source the representative had acquired his number from, the answer he got implied that the good doctor had shared his details with some loan aggregator. Although Dr Shah was a bit annoyed in the beginning; he agreed to meet the financial planner the following week.

Peep into the kaleidoscope of cold-blooded looting…

When Dr Aman met the financial planner Kamlesh (name changed), he was impressed with Mr. Kamlesh style of presentation and the manner in which he made his points. That day Dr Shah learned quite a few things about financial planning for the first time. Like most lay persons, he did not know how much insurance he needed. Mr. Kamlesh gave him a ballpark figure. Initially, Dr Shah was hesitant to divulge personal information, but Mr. Kamlesh friendly nature eventually made Dr Shah more comfortable sharing his financial goals.
As elaborated to Mr Kamlesh, Dr. Shah had four main objectives:
• Saving for establishing another hospital
• Giving his Son a world class education
• Buying a villa in plush locality in his town in next 10 years
• Saving for his retirement
Shrewd Kamlesh actively listened to Dr Shah with complete attention; but he knew what he was going to pitch irrespective of the Doctor goals. Mr. Kamlesh was very sharp and to sound more realistic and honest, he explained his inability to help Dr. Aman build a corpus fund to establish another hospital. This impressed Dr shah. By now he was convinced that Mr. Kamlesh was a brilliant and a reliable financial planner.
Here is what the unethical insurance agent sold Dr Shah:
• A pure insurance plan for taking care of insurance needs
• A childcare plan
• An endowment plan for generating secured and tax free long term income (earmarked for retirement)
• A retirement plan

How to read a dishonest agent mind?

This is what was very interesting (and sad too) about Mr. Kamlesh product pitch. He sold a term insurance plan with an option of return of premium facility. If the insured doctor outlived the term of insurance, he would get all premiums back. Such plans are generally more expensive than those which do not return your premiums, if you survive the tenure of the insurance policy. Pitching this plan was an easy task. He sealed the deal by empathizing that the Doctor should receive something in return, as he was most likely going to outlive the policy term. As soon as consent was acquired, the ticking meter on commissions started here.
Pay attention to this dear reader to understand exactly what mis-selling is and how it is done.
Moving to the next goal of child education and her wedding, the agent recommended an expensive Unit Linked Insurance Plan (ULIP). While recommending an expensive ULIP, Kamlesh didn’t reveal it was a ULIP and sold it as a mutual fund. Can you believe this could happen to you? For those who have little information about ULIPs, these are investment cum insurance plans. Besides providing insurance cover, ULIPs give you different investing buckets (often known as funds); for example, fund -A will have maximum exposure to equity; fund B have moderate exposure to equity and then there is Fund C, D, so on. Please note these are NOT mutual funds schemes.
Mr. Kamlesh directly jumped to these options calling them funds (thus, giving a false impression that these were mutual funds). Doing this was very easy. The ULIP was from a financial institution that also has a presence in the mutual fund business and the doctor was not aware of the difference.
Suppose, XYZ is a conglomerate and owns a life insurance business in the name of XYZ Life and also has a mutual fund business, XYZ Mutual Fund. Then, selling an investment fund provided by a ULIP of XYZ Life as a product of XYZ Mutual Fund is not very difficult for a scheming, dishonest agent. Mr. Kamlesh did just that.
Similarly, Kamlesh recommended a conventional endowment insurance claiming that it would help Dr. Shah earn tax-free returns, superior to those earned on fixed deposits.
Mr. Kamlesh is an insurance agent portraying himself as a financial planner. A financial planner is a professional who helps you design a portfolio in line with your financial goals and risk taking ability. He is a wolf in sheep clothing. There are countless Mr. Kamlesh in the industry.
Dr. Shah received a rude shock soon after he learned the truth. His financial goals wouldn’t see the light of day. It was too late. He had already signed the documents (without reading them) and the free-look period (the time given by the insurance company to return the policy in the case of buyer remorse) had elapsed.
Today, he has no choice but to continue paying for these policies, at least for some more time.
Keep sharing your stories. Let us take a pledge to root out mis-selling and other unethical practices from the entire gamut of financial advisory businesses. The worst consequence of mis-selling is your financial goals are not achieved


1. Relevant experience
While the number of years put in is important, it does not mean that only an experienced person can be a good planner.
2. Professional background
Check if the planner past performance has been good and if his clients are satisfied. In case of an organisation, check the management credentials.
3. Fees & commissions
Most planners charge for their services. They are also paid commissions for selling products. These commissions can sometimes influence their recommendations.
4. Continuity factor
Check if the planner is doing this on a temporary basis or is serious about the business.

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