Bankers are Biggest Mis-Sellers

By
Hemant Beniwal
49

Bankers are undoubtedly biggest mis-sellers across world. But the latest Rs 400 crore scam by CITI bank manager shows – in mis-selling even sky is not the limit.

Bankers are ‘BHAYANKAR’ Mis-Sellers

Way back on June 6th, 2008, one of the employees of Kotak Mahindra Bank, Jaipur posted a fake letter to the bank itself that the bank is under the target of terrorists and a bomb would explode in next 4 days. When this employee was arrested, he confessed that he was under severe TARGET PRESSURE and he was not able to meet his on time. Hence he thought that since the bank would remain close for a week due to security purpose, he would get time to meet his target. This is the reality as far as Banks and National Level Financial Intermediaries are concerned.

Bankers are Biggest Mis-Sellers
1.       The top level management of Banks etc. takes huge targets from Insurance Companies, Mutual Funds etc. Then employees of the organization are put under severe pressure to meet the targets.

2.       Since, the employee carry a SO CALLED BRAND name, they just make Investors fool by making any false commitment.

3.       Since the employees get the remuneration and incentives from the Management and any good performance would mean their increment or bonuses, they hardly care for investor.

4.       The attitude for the Banker is too short term and hence they don’t feel scared cheating the investors. In fact, we have not seen many banker carrying the same mobile numbers for more than a year.

Must Read: Confession of a mis-seller (Business Today)

Please find the few of the Sales Pitch used by banker to make you fool.

Insurance Mis-selling Tactics

  • Selling a Regular Insurance Plan as One time Investment Plan so that he get maximum incentive.
  • Selling an Insurance Policy as an Fixed Deposit and misleading investors by saying that it is a Guaranteed Return Product.
  • Selling ULIP before you actually avail any other service like Home Loan, Mortgage Loan etc.
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Mutual Fund Mis-selling Tactics

  • Churning the Portfolio would give you better return.
  • Asking Investors to invest in new funds as New Fund is recommended by their so called Research Team.
  • We get reports from our Management about the Future movement of Market and hence we can maximize your return.
  • Offering Loan so that you can invest in Mutual Funds. Double benefits for Bank.

Banking Product Mis-selling Tactics

  • Offering Credit card as you are a “Preferred Customer”.
  • Opening Savings Bank account by saying Zero Balance Account. But they don’t disclose that after a period of time, huge charges are levied as Minimum balance is not maintained.
  • Selling GOLD Coins which are very expensive in comparison of Market Rate.
  • Giving personal loan saying that interest rate is at 9-10% but it turns out to be 18-20%

Must Read –bank locker the games bankers play

Financial Planning Mis-Selling Tactics

These are just few tactics which we could list down though the list in endless & everyday it increases. We advise you to deal with such an advisor who can carry long term vision with you and would be happy when you grow rather than being happy when an organization grows.

Also Read: Metlife Monthly Income Plan – Mis-selling

Quotes & Sound Bites on Mis-selling

RBI Bulletin “It is genuinely believed that the recent financial crisis is largely precipitated by rampant financial illiteracy or the lack of transparency that financial literacy is supposed to bring into the model code books of financial service providers.  We have a plethora of instances of mis-selling and customers undertaking financial contracts without understanding the risk import of such transactions leading to unforeseen volatility and unsustainable business.”

Romesh Sobti, Managing director and CEO, IndusInd Bank Ltd “There is endemic mis-selling in the system. The issue is that there is no sales culture in banks. As a bank, for instance, we have thousands of people from different institutions. They have different ways of selling. Somebody who comes from a foreign bank has a different way of selling. Public sector banks have a different way of selling. The question is: Do we have a common approach? There must be manualized sales processes with stringent guidelines on what you will sell and what you won’t. You must have guidelines and training. You must have surveillance and you must penalize those who mis-sell. If you are selling insurance, don’t position it as a fixed deposit product. The whole system is based on incentives. The point is that if you sell insurance, you must look at lapsation. Lapsation rates are a clear indication of mis-selling”

Must Read – LIC Wealth Plus NAV – are you feeling cheated?

Mr KN Vaidyanathan, Executive Director SEBI “It’s true that banks alone enjoy the trust of investors and some of them have been abusing that trust. Maybe the fund distribution will be done by a different set of banks, provided the fund companies get their product right.”

HN Sinor CEO of Association of Mutual Funds In India(AMFI) “The most predominant problem is the mis-selling of schemes by distributors. Then you have the AMCs stating that they find it difficult to control them. I have been a victim of mis-selling myself.” 🙁

Be-Aware & Beware

Would you like to share your experience on mis-selling? (Mis-sold or Just Survived)

t is genuinely believed that the recent financial crisis is largely precipitated by rampant financial illiteracy or the lack of transparency that financial literacy is supposed to bring into the model code books of financial service providers.  We have a plethora of instances of mis-selling and customers undertaking financial contracts without understanding the risk import of such transactions leading to unforeseen volatility and unsustainable business.

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49 COMMENTS

  1. you nailed it, mate.
    Indeed bankers are the biggest missellers. I know of umpteen cases where ULIPs were sold people who had no business getting into one. Anyway, ultimately it’s our own responsibility to educate ourselves so we are not cheated. Afterall, if we are foolish, we will be looted. I don’t blame these bankers. The whole incentive structure is designed against the common investor.

  2. Hi Sumant,

    I fully agree with you.

    KN Vaidynathan also said “To a lot of people in this country it is very unfortunate that mis-selling seems to be the only form of selling”

  3. Rightly said Hemant.

    The banking has been missing in banking Industry. There are numerous instances which if downloaded, the internet will have to be replaced by some new technology.

    I remember a competition in a private bank where i worked. The competition was for SIP. 60 SIP in a day, a cash price of RS.3000. No cheque for SIP. A form and auto debit form bank. The bank in a region did 3500 SIP in a day From which 3000 were of duration of 6 months. All RMs in the region got the cash price. 🙁

    The problem in my view is TOP management. The grassroot can be corrected if the top has a clear vision. But most of the banks the top is interested in targets only which ultimately drop down to the bottom and forcefully misselling happens. In my view its a kind of culture which is inculcated in the banking industry now. WILL REQUIRE A CULTURAL CHANGE TO MAKE BANKING INDUSTRY SHIFT TO REAL BANKING.

    • Hi Jitendra,

      Have you read Confession of a Mis-seller in the end of the post.

      “The branch manager was very forthright. He told us to aggressively sell insurance policies and mutual funds. By hook or by crook. “Your focus should be on generating business by selling as many policies and mutual funds as possible,” he said. We were not to be concerned whether the customer required insurance or whether the equity fund being sold was performing well. Our entire sales strategy was to revolve around three simple words: sell, sell, sell.” 🙁

      What can one expect from such bankers??

  4. I just stumbled across your post tody..

    Nice and TIMELY article..

    I too have very bad experiences where the bank ‘relationship managers’ abuse your confidence..last month 3 such men from the same bank tried to fool me into buying an ULIP calling it a fixed return scheme..i realized when they talked about tax deductions..even when i asked whether it was an insurance plan…they evaded for a long time and tried to divert me…ultimately i left

    therefore it is better to check in the internet before buying ANY product..1 day on the net will save THOUSANDS!!!!!

    • Hi Dr Frioz,

      The way bankers are working is a serious concern.

      Sometime back I read this Joke –

      A person went to the bank cashier and kept the gun on his head and said – “I just want to en-cash this cheque & if anybody dared to sell me a ULIP, I will shoot the person.” 😉

  5. Recently got a call from kotak mahindra bank regarding some bullshit insurance policy. Usually whenever marketing calls comes to my mobile, I use to say “sorry, Not interested”. But this time I decided to elaborate why I am not interested by telling a lie. All I told was “Actually I was interested in this product and had fixed appointment with your relationship manager on last friday. But he dint came. So not interested.” The marketing guy replied that he will check back. After two or three minutes i got a call from them again. “Sir we are extremely sorry. We called that relationship manager. He was not able to come to you because he met with an accident that day. shall he come today?”
    See how instantly they are framing lies to cheat people.

    • Hi Shinoj,

      Then what you replied or just banged the phone. 😉

      You will be shocked to know one of the telecaller called Pranab Mukherjee to take loan.(At that time he was sitting in parliament)

      • Actually I was planning to invite him to my office and hear what he is telling by acting as I don’t know anything, in case they going in a better way. But their response made me to hung the phone.

        Yes, I read about the indecent. Even Pranab has no escape. 😮

  6. Hi Mr.Hemant,
    You said it right. I was also a victim of Bajaj Allianz ULIP for TAX saving.
    but i feel the root cause of the problem is…. we people dont have minimum understanding of Financial planning. In India, we have excelled how to earn handsome money in rightful ways. But we have no knowledge on money management.
    Another reason for mis-selling is also the Greediness of some people, who want to put ten rupees and earn 1000/- in overnight.
    That’s why one should have good understanding on how money works, whatsoever the profession one is in. Even mis-spending of money is also a SIN as per our Hindu Mythology.
    putting it in nutshell, my point is, as long as one is not educated on good Financial planning and Moral & Ethical values, mis-selling of any product keeps happening.
    Hemant! Kudos to you….
    Mohan

    • Hi Mohan,

      Thanks for sharing such lovely views.

      You have rightly said main reason for such mis-selling is that people are not financial literates.

      I am writing one article on Financial Literacy in India – will share it soon.

      • Bajaj Allianz,

        Thanks for copy pasting a message – which has no relevance in this situation.

        Can you really help a guy who is victim of Mis-selling?? If yes please let me know the process.

        Regards,
        Hemant Beniwal

  7. Hemant and Readers,
    What are your views on SEBI’s moves in last two years?
    Do you think that abolishing entry loads on mutual funds and forcing IRDA to tighten ULIP norms were examples of good regulation?
    Or do you think that these well-intentioned moves did have negative consequences?
    Thanks

    • Hi Adheesh,

      Any change in short term pinches – bcoz no one like change. 😉

      I think it is a damn positive step taken by SEBI – it was really needed.

      • I don’t want to say that SEBI has done all good things at all the time. But at least they are a kind of entity who have the patience and ethics to think and view things from the consumer’s (investor’s) part. A rare expectation from government bodies. But donno what will happen after leadership changes in SEBI.
        Any comments..?

  8. The Insurance companies are caught by JFM fever every year.Now it has affected banks also because premium growth will lead to increase of their fee based income.Insurance Companies sales staff indulge in misselling with full knowledge but banks staff indulge in misselling without knowing it because this is an effective USP adopted in Insurance companies.Hapless investors are happy because they have saved for 80C before 31st March.

    • Hi Prakash,

      I agree with you but why you are saying “banks staff indulge in mis-selling without knowing it”

      • Dear Hemant,
        (1)I worked in Bank for 22 years and thereafter worked in an insurance for 4 years.I worked under a MD& CEO who takes the bunch of daily complaints for home work.Next day morning the steno can not read the drafts because it got blurred due to drops of water on it.Later we discovered it was not water but the tears of the CEO who weeps everynight on going through the complaint .He was a banker for 35 years.(2) Bankers feel lucky to get exposure in insurance.Before they understand the products, very high targets are alloted and they are motivated and directed by Top marketing Heads of the Insurance Companies.For Top marketing Heads, targets are sacrosant and have to be achieved at any cost(3) Bankers can get foreign trips not by doing bank’s work but by selling(Misselling?) insurance.

  9. I don’t agree with this view beacuse i have been dealing with them for quite some time now. It’s infact the IFA’s/agents who have cheated me by seeling me those funds which give them highest comission. I think SEBi should IFA’s all together since these people are mostly uneducated some class 12 pass or just bare minimum gradute and a few mba holders form low rung institutes but act as if they posses all the knowledge and are bigger scoundrels. I suggest sebi to help poor investors like us to permamnently ban these agents.

    • Hi Alex,

      2 things that instantly came to my mind – I reserve my right to be wrong.
      1st you are a banker or
      2nd you are frustrated bcoz some “uneducated some class 12 pass” took you for some serious ride.

  10. Thank You for the article as it warns against prevalent misselling practices! In my experience telemarketing people also indulge in such things — a few days back, a MetLife agent called me on the pretext of informing me about the fund value of my existing policy and then “advised” me to exit from it after paying the third yr’s premium and take this new policy which “gaurantees” a 17% return with no market risk!! When I asked if she could email an info brochure which gives this to me in writing, she kept on insisting on fixing appointment with an RM guy because he would be my “life-long” direct contact. I was tempted to ask if this poor RM was a bonded slave to MetLife who did not have the freedom to change his job, but simply disconnected the line.
    One fool-proof method to check the sincerity if your new RM from anywhere: tell her/him about your existing insurance cover (which you know is sufficient) and ask innocently if he/she thinks you need one more insurance product. If their answer is “yes,” then yours should be a big “no” to any other financial advice from them.

    • Hi Madhuri,

      Yes call centers are also part of this game. Even if a client calls on toll free no. – there is no guarantee that information shared is true.

      IRDA should make it compulsory to record all calls & get them audited. (But IRDA is Kumbhkaran)

  11. Hi Hemant
    There is hardly any activity in financial sector where miss selling is not taking place.Unfortunately, it is not only the agents who miss sell but sometimes friends and relatives are also a party to it.In one instance a close friend of mine forced me to buy a kit of a multilevel marketing company.In the other instance a relative of mine sold me ULIP.The interesting part is that shortly after miss selling both my relative and friend have quit these activities.There is a long list of miss sellers. Recently I have resisted the attempts of bank relationship managers and credit card agents to sell me personal loans and ULIP products.

  12. Friends…

    Please do not put blames only on bank low level staffs and the relationship managers…

    The senior management of the banks are getting/taking heavy pay outs from the insurance companies and AMC’s during the finacial year start itself…..

    The senior managment then puts pressure on the RM’s and branch banking staffs to sell insurance and MF business… Or elase the employees are been humiliated by the senior managment & middle management if they dont sell these products… Its still continuing with the banks. Even in the worst part of this HR dept will not come to rescue the people… This is the reality in the Indian Banking system

    Why does the RBI & SEBI is allowing to sell Insurance/MF/Gold /Silver via branch banking system where customer potential base is very high. Let the customer visit to the respective places and let him choose what he wants..

    The RBI & SEBI has to come up with stringent norms /Ban stating that Banks should not sell MF & Insurance /gold/silver in any of the way to their customer and ask banks concentrate more on banking business alone.

    Will RBI & SEBI comes up with this stringent norms??? Will the RBI and SEBI bans banks to sell Insurance /MF/Gold/Silver Will this happen forever???

    There is a sea change required in the Indian banking System….RBI &t SEBI in join hands has to ban these products via selling through banks or else the reciprocation of this will lead to customer loose faith in the banks especially with private sector & MNC banks in India. Iam not sure about public sector banks and what are trauma undergoing by employess…

  13. Hi Hemant
    I agree with everything you have mentioned.I would like to share my experience.This happened much before I started reading your posts.One day I received a phone call from my bank.There was a girl on line who introduced herself as my relationship manager.She wanted to see me in connection with my account with the bank.She came to my house and talked to my wife as well as my daughter.She gave me my bank statements and asked me why I was keeping so much money in my savings and fixed deposit accounts and not investing.She impressed me with her smart talk and forced me to buy a ULIP product in the name of my daughter.After a few days I received an envelope containing the policy document which has not been opened by me till date.I have learnt my lesson.Even now I am getting a lot of phone calls from marketing people from Chandigarh, Delhi and Mumbai almost daily who want to give information about some ULIP product.I just refuse to take such calls.

    • Hi Anil,
      I came to that you keep your mobile phone switched off due to these calls. 😉
      But why you have not opened the envelope??

      • Hi Hemant
        It is not easy for one to admit mistakes. I know that I have done a mistake and if I open the envelope I am sure to call my relationship manager and say some unpleasant things to her which I want to avoid.

  14. please comment of the differebnce between flat rate and diminishing interest rate. How diminishing intest is more than that they are offering

    • Hi Narayana,
      Flat rate of interest is the simple rate of interest calculated on the entire loan amount without considering the amount of loan repaid by you. On the other hand, reducing balance rate of interest (even this is not the effective rate) calculates the interest for each period based on the actual outstanding amount of loan. Flat rate is misleading because it’s not the actual rate of interest you pay. It will reflect the true picture only if you repay the entire loan at the end of the period rather than making monthly repayments.

  15. Dear Hemant

    I dont understand why bankers are permitted to do non banking business? Today it is financial products, tomorrow it can be real estate or consumer durables or holidays etc.

    What will happen to economy when reputation and trustwortyness of the word bank is tarnished. Customers faith is their biggest asset and they have started eating it.

    If at all the bank is permitted to do distribution, it should be in the name of a different company with disclaimer that the bank has got no responsibility or gurantee for the third party product. It should also sign a declaration and obtain certificate from the client that the product or services has not been pushed as a precondition of providing banking services as providing loan etc.

  16. Dear Hemant,
    I doubt you having been worked for such a bank as your description is so vivid that it reminded me of my startup days at ICICI Bank from where I decided to go alone as ARMFA.

  17. Sir, you said right about Mis selling of insurance by the bank, this is going on because of target of Development officer/Top level management. I think i have told you we are working on a UGC founded project “Lapsation of life insurance” in this our finding is also saying like your article.

  18. Hello Hemant,

    I completely agree with you and we face same problems in Pakistan. I work for the leading AMC in Pakistan and we are committed to promote need based solutions to the client but believe me its very difficult to monitor the sales force which operates from every look and part of the country.

    Best Regards
    Tauseef

  19. A few days back one tellecaller called me and told that bajaj allienz have a good plan for you which gave you a vey good return which is gurranted. I told him if this is true, you might have taken it for you an your family so bring all those paper which proove that you have taken it for your own. after seeing the paper I will listen all your plan detail and decide for it, after this he just cut the phone.

  20. Hemant
    fantastic inputs & education to large sect of ignorant but pretending wise folks like me . thanx & keep it up

  21. Hi hemant ji.
    Nice article.
    I am writing my experience.
    I got a telemarketing call to buy some ulip insurance product. When i said that i am not interested then she replied ‘ are u not going to die’ and she hanged the phone..
    So i had to register my mobile number in ‘do not disturb registry’ for not getting disturbed by tele calls.

  22. If IRDA is serious about misselling then it should keep the banks from selling Insurance products. Kotak & Hdfc do more of it.

    • Dear mr Hemant,i m really devasted after my yes bank relationship manager n RM persuaded me to by ULIP of 50 lakh,5lakh each for my two kids for 5 years of max life insurance ulip plan.this is connaught place janpath branch.i am 59 years of age and at the verge of retirement that i informed them.they got all papers signed including ECS for 5years. they finished all papers within 30minutes and got cash transferred to insurance company n i gota message too.I repeatedily kept on telling the yes bank officers(two ladies) that i dont know anything about money management n not interested in ulip n so i m making only fds.this all happened on 28th july 2017 and really i feel devastated n i m worried from where i will pay the premium as i m going to leave my job n will retire.Really i m shocked n terrified n think how inhuman n selfish are the bank staff n the the bank i believed n kept major junk if money n they cheated me very smartly n fooled me.Its max superfast groth plan n they allocated money minus approximately 50thosand out of10lakh.now i plan to discontinue this plan n to take my money back n i dont know how much they will deduct.I m staying in middle easthence cant come back quickly n bond will go to the local address n i have been placed as proposer of insurance.Really i feel cheated n plan to change the bank also.I will be indebted if you give me some idea n solution.sincerely dr b n jha

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