When the guy/ girl selling “financial planning solutions” comes to your house and you happily part with the cheque is it her fault for asking or your fault for giving?

This is a question I would like to ask all people who complain “I have been mis-sold to”. It is ridiculous that suddenly a retired petroleum engineer and his spouse (a home maker) have suddenly understood endowment, unit linked plans, mutual funds, real estate PMS, equity PMS, hidden charges, surrender charges, upfront load, bid-ask spread, and have then bought the product. Most of the people who sell do not know some of these terms, so the buyer knowing these terms is surely out of question.

So why do people buy?

Ego. Their ego does not allow them to admit that they do not understand the product, the suitability of the products, the structuring, etc. Also they convince themselves if a nice big organisation is selling it and the product is “approved” by SEBI/ IRDA (btw sebi does not approve any product) it must be a good product.

The other reason is “If I can decide to buy a Rs. 1 crore house, a Rs. 20 Lakh car etc. WITHOUT any advisor, why should I need an advisor for Rs. 50k a month SIP in a unit linked plan?” kind of attitude.

The third reason is they do not know whom to ask.

So God bless the uneducated (hurts?) buyer. Let him not crib about mis-selling. It is all about mis-buying.

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  1. I completely agree that investors should not blame financial product salesmen alone because they themselves are not doing enough for various reasons and you have captured the most critical ones.

    I just disagree with your last line which says “It is all about mis-buying”. I don’t think it is “ALL” about mis-buying. I think that a product mis-seller is to be blamed equally, if not more, because he/she is breaching the trust that the client has placed on him/her.

    People today are pressed for time and they want to outsource the hassle of investment product selection to an expert. While most investors need a trusted financial planner, because of paucity of honest and competent financial planners they end-up being served by incompetent and voracious salesmen who come disguised with fancy designations. Since this is the reality, the only choice for individual investors is to roll-up their sleeves and get educated. And hence I am really glad that you have brought forward this very valid issue of mis-buying, amidst a trend where it has become fashionable these days to blame the agent/advisor for mis-selling. But an investor’s inability to educate himself should not mean a vindication for a mis-seller.

    I’d like to end my comments by saying that it was really great to ready so many interesting and insightful posts on your blog. I look forward to reading more of them!

  2. very funny. You do not outsource your health to a doctor, do you? You take 2-3 views. Why even an astrologer’s views people double check. However, they will not attend any coaching class (do not know if it exists), will not read a book, but will expect a 24 year old who has only 1 years experience (same experience multiplied 3 times over) to help them with asset allocation, financial planning, estate planning, etc while keeping a bank job. Such customers are fodder. In fact, once we did a small local analysis and found that the retail investor (trader as an academician would call him) only loses money in 2ndary markets over a LONG period of time. If he gets ripped off by a rm, God Bless Him

  3. Sukumaran,
    The only point I want to make is that it is not “ALL” about mis-buying. An ignorant buyer is committing a mistake if he/she is not doing due diligence. But the mis-seller is also at fault. So whether a doctor or financial planner, if he/she exploits the clients intentionally by giving wrong advice then they are at fault and you cannot vindicate them for client being ignorant.

    Anyways, both of us are free to have an opinion and it need not match 🙂

  4. nice to see a discussion on this topic! Surely if people can take the whole family to a Reliance Digital or a Croma to buy a TV for 20k, they should also take the trouble of seeing what they are buying when they pay 20k per month for a ulip or a mf plan. It is speed with which the clients try to get rid of the financial product salesman that is scary. “Where should I sign” and “what documents do I need to give” are the only 2 questions that the clients ask. This is foolish. Learn or Perish.

    To think that Glaxo will pay salary to a salesman so that YOUR health is fine is being a little naive. In one case where an acquaintance had paid Rs. 9 L as a premium my advice to him was to buy the banks’ shares – that was the only hope of getting something out of that! It was a product with 50% upfront charges and was investing about 85% in DEbt instruments!!

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