In a current scenario
when many players are looking for larger market share in financial products
markets, Incidents of false commitment occur on frequent basis. I have
personally seen some agents making false commitments. The latest one happened in
the leading private bank. In the bank premises I was approached by one staff
member who came to with a scheme in equity MF that offered guaranteed returns. He
was hardly aware about my domain knowledge in equities.
I asked him, who
is the fund manager? He provided me the name
and I immediately called the Fund manager as he was known to me. He completely denied such guaranteed returns
and asked the concerned persons to take action against such false commitments
being provided by the sales persons.
What I want to
suggest is, these sort of practices do exist and especially in the smaller
cities where the people are relatively un-aware about the investment in MF and equities.
I have seen the agents committing Moon,
just to achieve the designated monthly targets.
In one case, one
of my neighbors was sold one ULIP Scheme stating that in just three years the money
would be doubled. The day arrived, and he was horrified to see the figure.
Forget the doubling of money his investment had witnessed a loss of 12 percent.
When inquired, he was told that, it was written in the offer document, that it
returns are not guaranteed. Though he came to me, as he had signed the
document, hardly we could do anything.
Now these sorts
of incidences are rampant in smaller towns. But it could be avoided if we
follow simple principals.
1)
Never ever sign the document
unless and until you read it carefully. Just because the documents are too
lengthy, we tend to sign the documents wherever the agent has put the cross
mark. Avoid that, please always read the documents carefully to understand the
hidden clauses.
2)
Always read and try to analyze
the past performance of such financial products. If it is a newly launched
product, try to understand the complexity of the same.
3)
Though I am asking to review
past performance, the past performance does not mean it would be repeated in
the future.
4)
Do not purchase the product
blindly just because your friend or relative has purchased that. Please do
remember their risk appetite and your risk appetite is different. So do not
fall prey to such gimmicks that, your friend, relative has purchased the Scheme
and hence you should also buy.
5)
Try to understand what is your
need, not falling prey to what agents gets higher commission for. Usually the
agents tend to recommend the products that offer higher commission to them
rather than considering what your goals are. Though it looks odd, always cross
question, how much commission he generates through the product sold to you?
6)
Always keep the track of the
investment. Usually people invest and tend to forget about the investment. Always
Track the investments and if some changes happen act accordingly.
Last but not the least- always opt for registered
agents and registered portfolio managers with SEBI. This always provides a
comfort level.
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