It’s no secret that the broker community has more rotten apples than good ones. But it’s difficult to make out who is who till it’s too late. The arguments forwarded by unscrupulous brokers are so well conceived that it’s difficult not to believe them. Yet, there are ways to avoid being taken for a ride. Here are six things for investors to do:
1. Get it in writing
Ask the agent to write down what he is advising and put his signature on it. That way, you will have evidence of what he said or promised. This is a litmus test: if he refuses, then he was probably mis-selling.
2. Take notes
When talking to a broker, note down his answers to your questions. It not only records what he said but also gives the impression that you are no pushover. He is less likely to mis-sell if he knows you mean business.
3. Second opinion
Need help? Contact these investor education centres. After all, awareness is your best bet against mis-selling. • http://www.money4you.in/index.htm A financial education initiative by Mastercard International and Indian Banks Association • https://www.online.citibank.co.in/portal/newgen/creditwisely/ho me.htm A credit card awareness guide from Citibank • Abhay investor counselling centres from Bank of India have branches in Mumbai, Wardha and Chennai • ICICI Bank runs the Disha investor counselling centres in seven cities, including Mumbai, Chennai, New Delhi, Kanpur • Ahmedabad, Ludhiana and Hyderabad. E-mail: info@dishafc.org • Sebi: http://investor.sebi.gov.in • NSE: nseindia.com click on ‘Assistance’ and then ‘Investors’ • The Investor Education and Protection Fund (under the MInsitry of Consumer Affairs) www.watchoutinvestors.com/default2a.asp • For information on ombudsmen and redressal channels, read our previous issues dated 18 October and 1 November 2007. |
Tell the agent you will be consulting an expert (a financial advisor or chartered accountant) before you invest. If he knows you will be discussing the plan with somebody else, he is less likely to mis-sell.
4. Take your time
Don’t go by impulse and close a deal in the first or even the second meeting with a broker. Ask for some time (7-10 days) during which you can compare the planned investment with similar products.
5. Seek professional help
Salespersons from a bank, fund or insurance firm will only discuss, recommend and sell their own products. This limits the choice and often leads to a wrong decision. Go to a financial planner instead.
6. D-I-Y research
Nothing like do-it-yourself when it comes to finance. Trawl the Internet for information on products from different companies and compare their features and costs. Also, see how well they fit into your financial goals.
Don’t think that you are on dry ground merely because you have the broker’s promise on stamp paper or he has shown you a pamphlet from the company. A promise given on stamp paper has no legal validity unless it is registered with a local authority. Without that, it’s just a precious piece of trash. So the next time you come across a broker ready to “give it in writing on stamp paper”, take it with a pinch of salt.
Be equally circumspect when it comes to pamphlets on a scheme or policy. It is routine for LIC agents to get leaflets printed with the company’s logo to lure customers with promises of high returns. Check whether the printed material has been indeed issued by the company or whether it is being circulated without authorisation from the company.
