Honesty is expensive, do not expect it from cheap people – Warren Buffett
One of the principles of World’s most successful investor Warren Buffett says that not everybody is honest, nor does everybody want to be honest. Honest advisers are difficult to find especially in Health and Wealth, be careful.
We will be exploring some of the most basic precaution one should take to safeguard oneself from honey traps of Financial advisors or Money or Wealth managers, by whatever name called. None of them explains the fineprints or T&C’s and you are made to sign on documents on promises of returns, which you may never get. To save yourself from bad investment and other tax saving traps one should follow the given precautions before any type of investments or insurance policy.
1. Avoid last minute buying or budge to pressure of time bound buying
Avoid last minute investments and always pre-plan your investment decisions. If any agent tries to rush you into investing within a deadline then there is high chance of mis-selling. An investment decision shouldn’t be taken in a jiffy, they are hard to reverse, as once the money goes out of your pocket it takes a lot of effort to get it back. People blame themselves at later stage, as “in what state of mind did I take the investment decisions”. To test the agent as well as your decision don’t close the deal in the first or even the second meeting. Take at least a week’s time to study the plan and its benefits suiting your needs. Straightaway tell the agent or seller that you will need time to compare the plan with other similar plans before taking the final call. Agent will try to convince you that this is best of all plans, but do not heed to his advice.
2. Do your own research, paperwork and scrutiny
Reading each and every small details mentioned on the form may seem tiring but don’t forget that how much tireless efforts you made to earn the money that you are about to invest without even reading the details. Many times the buyer just signs on the application form on good faith and leaves the paperwork to the agent. If you don’t want to get into the nitty gritty of paperwork, let him fill the form for you but do insist on verifying it before you finally sign on the dotted lines. Many times an insurance policy is purchased in your name but you don’t remember actually applying for it. This happens when you sign a document without going through the boxes that got ticked.
3. Taking a second opinion is a sign of prudence
When in doubt, taking a second opinion will not hurt. Discuss your plan with a colleague or friend or relative who has the requisite expertise it prior experience of investments. If the agent knows you will be consulting an expert, he is less likely to sell you a product which is not good. The worst mis-selling happens at banks, where relationship managers try and push high commission products to their own loyal customers who are unaware of these products. Go to a financial planner, he will give you advice worth more than his fees.
4. Never ever rely on verbal promises
Scheme or an offer promising tall returns should not be believed until you see it in writing. But ensure that the brochure or document shown to you is authorised by the company with contact and address details mentioned prominently. Selling agents often get brochures printed with promises of huge returns having no authenticity. Verify the background of seller by asking him/her directly. If there is a promise of high returns, ask him to write it down and sign on the paper and if there is any senior of his available, then ask him to countersign. This can nail his lies later and he may even spill out the true returns there and then.
5. Use the freelook period to test the waters
Always use the freelook period to verify if the policy you brought gives you the promised benefits or not. If not you are free to surrender the same within this period which is usually 15 days. But beware, agents try to buy time till the said 15 days are over and you get locked with the policy. The policy should reach you within 2 to 3 days of issuance and even before that a call from the company explaining the features to you. Listen carefully to the fine details as that will be considered your consent for going ahead with the policy. You can immediately red flag the terms which were not explained to you or are missing at the time of signing.
Remember that your hard earned money must work harder for you and provide you the necessary returns and security rather than giving you sleepless nights at later date. Matter of finances are very delicate, it’s like a game of cricket, you miss and the other will hit. So don’t get bowled out in your financial choices and make good use of your neuro cells.
