There are a few important questions to ask BEFORE you accept your Relationship Manager’s (or Advisor’s) suggestion to invest in a mutual fund or life insurance policy:

  1. Is the person selling you this product qualified, and licensed to sell this product – and when was the license first obtained. Even for a minute I am not saying that a licensed person will not sell you a wrong product, but, chances are he/she will be more vigilant assuming that you know what you are doing.
  2. Is the product approved / licensed by some regulator – mutual funds, life insurance, etc. are regulated. Bitcoins are not. Real estate is regulated, but giving loans to a builder – is not regulated.
  3. Is it possible to convert my current income to capital gains? This is very useful for people in the higher tax brackets.
  4. How long will it be tied up? -Is there a lock-in and if yes, for how long?
  5. What is the minimum term (number of years) that you will have to pay the amount (usually premium) to keep it valid?
  6. Do I really understand the product? Simple products do a good job too, why complicate.
  7. Why is the seller confusing me with a life insurance product that looks like an investment? Separate the two.
  8. How do the risks compare with the rewards? For example Gold gives returns like debt products with the risk of Equity.
  9. If you need help in understanding the product, or if you have a performance issue, where can you turn to for help?
  10. Can you speak to at least 3-4 people who had bought that product from this particular person over the past 3-4 years – even if he were in a different bank?
  11. What are the withdrawal penalties, if any, and for how long does it stay?
  12. Will the sales person explain the product to your spouse and 14-year old kid in simple words, without using any jargon?

Once you ask these 12 questions, you are surely putting off the salesperson who will baulk at the level of preparation that you have done. Of course the best get away suggestion is “I do think this is a good product, do send me all the details on Email, I will send it to my Brother-In-Law who works with SEBI/ RBI/IRDA and then take a decision. Works well, most of the time.

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