Buying a financial product: using an agent

There are many people who prefer buying mutual funds, medical and life insurance and many financial products through an agent. Normal reasons why people use an agent are as follows:

  • He helps with filling up the form
  • He knows what is happening in the industry and will be able to give some useful advice
  • He will co-ordinate with the fund house or the insurance company – and most clients find that pretty painful.
  • He will handle the claim if it comes to such a situation
  • He is authorised and qualified so he must be adding some value in the transaction
  • His services are FREE!! HA HA
  • He might actually share his commission, will he not?
  • He chases, comes home, does all the paper work, reminds…what more can I want? LOL

All this is perhaps true, but let us look at the risks:

  • He might give a sub optimal product based on his limited understanding
  • Most agents do not understand insurance – medical, life or even simple risks
  • The agent may go out of business soon – and you will again be looking for a new guy/gal
  • The agent may die before you do…:-)
  • If the agent switches loyalty, he may not service the older products he has sold…
  • He may fight with the main company – and put your product in a jeopardy!

so be careful in buying a financial product…

 

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5 Responses to “Buying a financial product: using an agent”

  1. Blind faith on agents is very dangerous. One dear friend of my father cum insurance agent sold a child plan of HDFC to my father for the benefit of my younger brother. The age of the child in this case is 20 years. When I asked my father about it he said he is not aware it is a child plan. All he was told is ” This is the best plan, you just buy it and I am there so you need not to worry”. When we contacted him to seek help in surrendering the policy or some other way to get out of it his reply was classic, “Sharma ji, the company is a chor, I have left them, You must surrender the policy and buy the best product from XYZ compnay with whom I am working now. They are the only honest guys in the business.”

  2. wow, you still referred to him as ‘dear friend’, surely your family must be having a very large heart :)

  3. Pramod and Param

    Sellers fault or buyer’s fault? We have spent too much of our time blaming the seller…will the buyer start accepting responsibility? Will we spend time, effort and money in knowing what we need and how we should buy or will we continue to say ‘my agent cheated me’. Time we said ‘I allowed the agent to cheat me’.

  4. Exactly …. this is a nation where people survey 3-4 locations before deciding on the place for buying vegetables but when it comes to personal finance, the who;e attitude takes a turn around…

  5. You people always blame agents but you never try to find a good one.Always people in general prefer their relatives as agent rather than the good one that can be found very easily. But people dont try to learn about the need and objective of the product.They will give more time for everyday vegitable purchase but not give an hour for a lifetime product of insurance and saving.Good advice is costly but people still want cut from the commission.many times i have adviced people that they should look at MF and thay have adequate insurance or term insurance with MF(Mutual fund) and that also sound ones like Hdfc equity top 200 etc but 90 % time investor is negative and seems som rat in this proposal.
    There are cerified people like CFAs . cfps who are trained well but as the planning is not paid , they are selling MFS and Insurance and try to be very clear(Not looking at commission but long time customer relation) but very few people prefer them over relative or friend as agent.
    There are misselling agents (in big no offcourse) but who is choosing them?

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