Here is what a qualified financial adviser told me:

Subra, you have no clue at what price HUL makes soap, Colgate makes toothpaste, Jet Airways is able to create the flying service….SO THEY ARE ALL MIS-SELLING.

If hospitals, banks, airlines, manufacturers of all products are mis-selling what is wrong if there is mis-selling in financial services? (his high standard of living and complete lack of understanding of the product not withstanding!!).

He felt there was nothing wrong if there was mis-selling. He said we do not know the price that a shop keeper buys most of the things, we just buy at MRP….so why should Sebi tell AMCs should sell one set of schemes at a particular price and another at a differential price….IT IS UNFAIR.

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  1. Dr M Chandrashekhar

    Every one is out there in the market to make money- so do brokers, con agents, bank managers, financial planners etc !

    Even NGOs make sly money –given an opportunity !

  2. Well for one there can be no comparison of the consumer goods market and financial products as the consumer has no downside for the product purchased.
    When he purchases a soap or a toothpaste he is making an informed choice and is sure that the product will not harm him in any way.
    Moreover he can choose from a variety of brands and the benefits offered by each according to his budget without having to worry about the basic function the products are designed to perform.

  3. Difference is those products are an “expense” and for consumption and we willingly pay a price if we like or afford. In finance it is a “investment” not a expense. We expect it to grow. Agents hide about hefty commissions taken out of investible amount and if people knew it they wouldve opted something else (like FD). That is why it is mis-selling.

  4. Simple counter argument to the HUL/Colgate example: While we don’t know what are the costs of making a soap/toothpaste, the quantity and MRP is clearly printed and applicable to EVERYBODY regardless of who they are. Hence, we have a concept of standardization. There is no standardization in the Life Insurance/MF industry.
    An even stronger argument: When you are buying toothpaste, you get toothpaste…not an after-shave. When you buy bath soap, you don’t get detergent inside! A huge number of Financial industry products are totally different inside than what is advertised outside. In fact, its not just mis-selling, it’s outright fraud. But unlike the old consumer product companies who indulged in fraud are now bankrupt, the FI’s that indulge in such fraud continue to operate happily!

  5. A financial product is more like a pharma product, too many customers arrogantly think they understand wealth and health. Actually they do not understand BOTH, will not ask, buy the product and then wonder what happened.

  6. Subra,
    A nice retort would be any one of the below reasons:
    1. HUL or Colgate sell small packs (not in multiples of Rs.1000). Even on such a small pack they print quantity, MRP, ingredients clearly.
    2. After I buy them, I have the option to switch to a different product without filling forms.
    3. I can buy 1 pack of toothpaste or a 10,000 without filling out KYC forms and showing ‘proofs’.
    4. The cost is same when I buy my first tube or my 100th. They don’t say buy the first tube or pack for Rs.1000 and we will reduce the cost of subsequent packs.

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