5 Hacks to Avoid Financial Misselling ?

In recent months we have heard of a lot of financial misselling cases. A vast majority of the anecdotes have the same contours – an elderly user, in-person visits or calls, and an overzealous salesman trying to meet stretched revenue targets.  Author and economist Vivek Kaul argues that since banks are awash in liquidity their is increased pressure to sell anything but an FD.

Most financial misselling also happens in person because it is easier to do so – at home by the broker, at a bank branch by the RM or on phone by either. Private conversations are not recorded and are thus not audited – there is no proof of misselling. The advice or product pushing that happens within four walls, stays within four walls till it is too late.

It is the age-old “15% to mil hi jayega” – always promised in person, never given in writing.

In-person a lot of things can be insinuated without ever having to take responsibility for the outcome. It is selling the dream but without guarantees. This is also the primary reason why the elderly are more often missold as they still visit bank branches or make financial decisions on the phone.

The other difference in the online space is that if an error is made, it is caught early and quickly and it is rectified in record speed too. This is unlike offline misselling which can continue for decades as the agent just keeps finding new marks. When such errors by online platforms are reported social media thinks of it as a weakness of such online platforms. In reality, though this rapid feedback cycle is a strength – both for the users and the platform. Platforms get better faster and all users, even the less financially savvy, are secure that their interests are checked and guarded by the most financially savvy.

With this context what should you do? How do you ensure that your elders are not taken for a ride by a few bad actors trying to maximize revenue?

1/ Teach your elders to use the relevant online financial apps – banking or otherwise. The learning curve to use an app may be steep, but the price you sometimes pay just to show up at the bank branch or pick up a broker call is really high these days

2/ If they absolutely have to do in-person meetings or calls then ask them to get everything promised in writing and from an official email. Only sign up for the product once you have this email. Once you frame it as such they will understand that any promise that the agent is not willing to give in writing is just that – a vague promise.

3/ Elderly also happen to be less financially savvy making them easier targets to spin tales of security around. Spend some time explaining to them why mixing investment, insurance and a long lock-in is not right for them. Trust me, if you break it down in simple terms they will understand and get over ULIPS.

4/ Explain to them that any product that has a strict lock-in, i.e money is tied and cannot be withdrawn, is not right for them. That means no FMP. ELSS can be looked at for tax saving only and only if there is enough liquidity available elsewhere. In general, forced lock-in is a good concept for the young, and a bad one for the old.

5/ And finally and this may be the hardest, keep reminding them that it is ok to say no to friends and family members if what they are trying to sell to you is not in your best interest.

None of the above is easy – it will take time commitment from you to make this happen. But it will be time well spent. We built the family account and manage account feature to make it easier for you to help the elderly in your family.  And we are slowly adding more and more products that can be managed completely digitally by you –  for yourself and for your family!