Beware of the bank employees
Rajiv got a credit of 2 lakhs as refund of the rental deposit by his previous land lord. He is planning to keep the amount for his daughter’s school admission next year. He got a call from the relationship manager of the bank asking him to visit the bank and invest the amount for better returns. Rajiv told her that he is keeping the amount in savings account because he may require the amount after 8-9 months. The relationship manager is asking him to invest this in a new fund offer by a mutual fund company.
Why banks are interested in selling insurance and mutual funds?
Most of the banks are acting as agents of insurance companies and mutual funds. With the huge network of branches banks are in a position to do huge business for these insurance and mutual fund companies. With high volume of business, they are getting huge commission from the insurance and mutual fund companies. In addition to these the bank employees will be compensated by way of liberal vacations abroad and attractive incentives.
Are they selling good products to the bank customers?
In most of these banks, each of the employees have personal target to complete every month. The target is based on the revenue (commission) generated from the sale of such financial products. This is the reason why these employees are pushing such products. They are not looking at the suitability of the products to the customer. That is why they are trying to sell mutual fund to Rajiv when he want the money back in 8-9 months!
Banks are getting huge income as commission. It is a known fact that new fund offers (NFO) from mutual funds are not attractive for investors. But banks are selling these plans in bulk. This is because there is a chance to get higher commission in such schemes. The other product is endowment policies of insurance companies. Such policies are offering 4-5% returns to the policy holders with very less flexibility. But banks are selling these policies due to the huge commission of 30-35%.
Buy a policy, if you want business loan!
There are instances where banks are insisting on buying insurance policies with huge premium, if you want a business loan. Such unethical practices are happening in many bank branches.
Home loan insurance – another trap
Many banks are selling home loan insurance as a packaged product while sanctioning the home loans. Such policies carry very high premium and you pay interest on the premium because it is bundled with the home loan. Better avoid such policies and buy online term policies which are very cheap.
Use the bank only for banking transactions
If you are offered any other products by the bank staff, better avoid. Use the bank only for banking services. Don’t invest as per the recommendation of the bank staff, because they have their targets to achieve. Your goals are not important for them.
Melvin Joseph
SEBI registered Investment Adviser
SEBI registration number -INA 000000342
Finvin Financial Planners
10. Ground Floor, Olive Excel CHS Ltd
Plot No- 16, Sector 42, Nerul, Navi Mumbai – 400 706
Mobile: 91 9820843739
Website : http://www.finvin.in
.
