Is your Insurance agent a thief?
If there’s one thing you have to remember when you are being sold insurance, it is this: If you are not careful, your agent will most probably lie to you and steal from you.
The following are 2 true stories.
The first is the story of something that happened to one of our readers.
“The other day, I walked into IEGD Bank (bank name changed) for some work. As I was waiting my turn, a bank employee came up to me and started chatting with me about my investments. It was a friendly chat, it seemed like this employee was on the sales team but was genuinely looking to provide me with only something that I might require.
I am a financial advisor myself, but didn't mention this to the salesperson, out of curiosity to see what they might try to sell me.
The conversation was very simple, with questions such as 'Do you invest in equity?', 'Do you have any long term investments for your children?' and 'Are you adequately insured?'
From the tone of the questions it was obvious what the salesperson was leading up to.
Then came the inevitable sales pitch:
'Madam, we have a product that is ideal for you. It is a short term investment plan where you will also get life insurance cover. All you have to do is invest Rs 1 lakh for 3 years, and after 10-15 years your money will have given excellent returns.'
I asked 'This sounds like a ULIP – is it?'
The agent replied 'Ma'am, it is a short term investment plan that also has life cover'.
Notice how my direct question was answered with an indirect and misleading response.
The honest answer would have been 'Yes ma'am, it is a ULIP, and it is not a short term product, but a very long term product with high charges'. But with all the heat on ULIPs these days, advisors have been told not to use the foul four letter word, and to call it an Investment Plan instead. Short term, that too.
I indicated that I wasn't interested and stood up to leave. That's when the advisor pulled out the last and most desperate tool in his belt. 'This product is managed personally by Mr. Shah (name changed)! It is an excellent product ma'am!'
The person that the advisor named is in fact the Chairman of a well known housing finance company, a sister concern of the bank in question. He certainly does not manage ULIP portfolios and I wonder how he would react, knowing that his name was being used this way.
I was amazed and disgusted. Sometimes people really say anything, with no qualms, to cheat you out of your money.”
Very few advisors will stop and think of what the life situation of the 'target' client might be.
Do you have a loan?
Do you have an ailing parent for whom medical bills are high and not covered by health insurance?
Do you want to gift your children something special this year?
Agents need not be concerned with these things. For them, you are a sale, and the sale value is simply how much commission they can earn from you.
There is another story, this one is a new website visitor, who wrote in to us with an innocent query, coincidentally about a product being sold to him by the same bank in Story #1.
"IEGD agent said that if I invest Rs 1 lakh every year for 5 years, I will get guaranteed Rs 8.43 lakhs post tax at the end of the 5 year period. Is it true?"
Congratulations sir, for having the good sense to question what your agent has told you.
In order to give you Rs. 8.43 lakhs post tax at the end of 5 years, your investment should earn a guaranteed rate of 18% p.a. That's an 18% guaranteed annual return – highly unlikely. If anyone knows of such a product, please do inform everybody so we can all benefit from it!
The number of write-ins we receive on this theme are mind-boggling. We at PersonalFN have written articles on this before, and it looks like we will continue to write such articles in the future. Until all our readers know exactly what to expect from their bank advisors.
It's you versus your relationship manager / advisor / agent and your best defense is to educate yourself.
PersonalFN is a Mumbai based Financial Planning and Mutual Fund Research Firm.