Such articles usually start with a disclaimer which goes like “All the characters in this example are imaginary and the incidents are purely fictional”. But this is a real life case which happened to a close family friend and client last year and nothing about this incident is even remotely fictional!
One year back
Mrs. X is a creative writer by profession. She is 57 and due to retire next year. She finds a surplus of Rs 50,000/- in her bank a/c and since she doesn’t need it immediately, decides to block the same in a fixed deposit for her retirement needs and visits the branch for the same. The seemingly sincere customer service officer at the branch has a brief discussion with her, quizzes her on her background and investment objective and suggests an investment plan with features similar to fixed deposit but with superior returns. This is endorsed by the branch manager. Mrs. X being from a non-finance background and trusting them to be professionals in this field, fills up the required forms and hands over a cheque of Rs 50,000/-. The documents and receipt for the investment arrive by courier a few days later which are safely filed. Later when her friend and professional financial planner (me) visits her and has a look at the investment paper, they discover that she has been issued a Unit Linked Insurance Plan with a term of 10 years and a regular annual premium commitment of Rs 50,000/-.
- During the profiling Mrs. X had clearly specified that she is a single parent with a married daughter who is well settled and hence has no dependents. Yet she is given an insurance plan which is not required and has huge mortality charges for her age of 57 years. The word INSURANCE was not even mentioned once while the plan was explained to her.
- She had told them that she was due to retire next year and want to invest this surplus of Rs 50,000/- for a fixed return, yet her money was put in a plan where it is mandatory to pay this amount regularly every year for at least 5 years; which she will not be able to do from next year.
- She was given to understand that the product she was investing in was similar to a fixed deposit with superior features, which was certainly not the case.
Two months later
On repeated complaints both verbal and in writing, the organization offers to shift her funds into an alternate insurance product with a single premium option but is not willing to refund her money. But Mrs. X insists on a refund.
Six months later
She is finally directed to the Grievance Redressal officer from where it is escalated to the senior management. Someone from the organization contacts her and tells her that the amount would be refunded shortly.
Now, a year later
No sign of the refund. The concerned people avoid taking Mrs X’s calls most of the time and when they do, they maintain that the refund has been approved but till date there is no confirmation in writing. The sales person who actually sold this to her after the deliberate “client profiling” procedure has quit and moved on to greener pastures. Mrs. X is now retired and on pension income and would find it difficult to pay the annual premium and continue with the policy even if she wishes to do so.
Why such incidents happen
Employees and officers in private bank branches are given steep sales targets and the only way to achieve them is to try and sell an insurance policy to the majority of the customers who walk in. And when their goal is so clear, achieving it isn’t very difficult either. And a few clients become an easy prey.
And the “let the buyer beware” clause doesn’t help either. It puts the entire onus on the investor to take an investment decision only after fully understanding the product.
Moral of the story? Take your pick! (On a lighter note)
- Don’t trust anyone with your investments, manage them yourself.
- Do not believe anybody who suggests an “investment plan with attractive returns”.
- Do a crash course in financial planning so that no one is able to fool you.
- Do not invest anywhere and let the money keep lying in your savings a/c. After all, a bird in hand is worth more than two in the bush, right?