How to guard yourself against misselling
Financial products are usually “missold” to make an individual or company complete a purchase that does not properly suit their needs.
It’s a common story that many of us have experienced while reviewing our investments. Most of us realise that the returns are not anything near to what was promised while buying the product. The prime reason for this discrepancy is misselling.
What is Financial Misselling?
In its most simple form, misselling means misrepresenting a product or service to complete a sale. Financial products are usually “missold” to make an individual or company make a purchase that does not suit their needs.
So save yourself from the curse of misselling by finding answers to these three simple questions what, how much & why.
What are the risks involved in this product?
Before investing you should be well aware of the intrinsic risks associated with the product. The thumb rule of finance is higher the risk higher the returns and vice versa. So you need to ensure that in chasing higher returns, you don’t risk your entire capital. Search on the internet for the pros and cons of the product you want to invest in. Another simple way would be to ask your advisor or relationship manager to jot down all the risks of the product in simple language devoid of financial jargon so that you can easily understand the risks.
How much is the cost of the product?
While buying daily essential we always check the price. Similarly, while investing we should make it a habit to check the price of the product. The two prime reasons to find the cost of the financial products are it will directly hit your future returns – after all, it’s nothing but a portion of your money. Second, intermediaries are typically incentivised at higher rates to sell poorer, more complex products that aren’t the best solutions on offer. So be bold and don’t forget to ask your advisor about the costs.
Why this product only?
There are ample of alternatives in the BFSI industry with identical schemes offered by multiple companies. So the question you need to ask your financial advisor is why this particular scheme? If the reasoning doesn’t sound logical to you or is not in black & white then you can give that particular product a miss and look for alternative or an identical scheme.
Go forward with your investments only after getting satisfactory answers to the above questions.