Chandrakanta Makhija broke down several times during her photo shoot with MONEY TODAY. The 64-year-old former Delhi University reader is still trying to come to terms with the fact that she signed away a big chunk of her lifetime's savings to a bank representative who has ended up defrauding her. Last October, the representative deliberately mis-sold a Ulip to Makhija, promising that her investment would double in three years.
Imagining a retired life with absolutely no financial constraints, she gave him almost all her savings — and he put it into a product that's definitely not meant for the elderly and risk averse. Eight months down the line, her investment is down by 20% and she's not sure if she'll ever see her money again. In Bhopal, 56-year-old Ajit Harshe faces a similar situation, thanks to an agent who was looking for his commission and not at the investment.
Years ago, Sir Hugh Dalton, then Britain's Chancellor of the Exchequer, spoke about how much society owed its seniors. "Those who have borne the heat and burden of the day must be fanned in the evening," he said. Unfortunately, our financial system is only fanning the flames of resentment and frustration of senior citizens like Makhija and Harshe. But since we are a democratic country, mis-selling is not confined to the vulnerable greying population.
Almost every Indian investor has made at least one investment that he definitely does not need. As our cover story shows, these are not investors who deliberately bet on a risky stock or mutual fund for quick and large gains. These are investors unable to distinguish hardsell (an enthusiastic salesperson) from mis-sell (an unscrupulous one). The result? Crores of rupees lost, and more important, financial insecurity. It's not as though this is breaking news. Mis-selling is something the regulators know about but are powerless to stop.
Though the regulators, finance companies, distributors and courts have an obligation to curb this trend, nobody can stop it. Nobody, except you. And this is the biggest irony—investors have to do very little to prevent being cheated, yet they don't do it. The solution to this raging problem is small and simple: Know what you are investing in and why. If more investors were more aware, cases like those we have featured will be the exception rather than the rule. The power to eliminate misselling is in your hands.