How a fake Financial Planner Puts his Investor into Trouble

Sometime back when medicine was at its initial stage in India there were many quacks that used their half-baked knowledge to treat people & people were exposing themselves to huge risks. Even now you can find such quacks in smaller cities or towns. These quacks mushroomed as there were loose regulations and checks.  In another Industry, financial planners in India are facing a similar situation… any one can make a claim about himself/herself being a financial planner. There are no regulations about who can actually be a financial planner.

How a fake Financial Planner Puts his Investor into Trouble
Agents sell financial products like Washing powder or Soap. A wrong washing powder or soap may not cause too much damage… but you cannot say the same thing about financial products; wrong financial products have the power to ruin your family’s future.

There are lots of Madoffs & Puris in India who can easily destroy a financial life. These can be some of the troubles that a fake financial planner can bring to you:

  1. If he doesn’t suggest you to build a 3-6 months emergency fund – you will always dip in your long term investments & that can be disastrous in situation like bear market.
  2. If he doesn’t advice to repay your expensive debt before starting investment – you will always be in danger if tide goes out.
  3. If he misjudge your insurance requirement or suggest an expensive endowment or ULIP policy as a solution rather than term plan – you will probably not be able to achieve your financial goals.
  4. If he suggests you to trade in equity or take leveraged position in the markets – high probability is that your capital will be wiped out.
  5. If he is showing you the moon about how he can generate highest returns by churning your Mutual Fund portfolio – actually he is talking how he can generate highest income for himself & your fund will never grow.

There can be n number of examples that can be quoted here but before we publish this there will be a new list ready.

Can you identify a fake note??

Is it important to identify a fake note? Yes because it is not going to add any value & sometime it will also invite trouble. 🙁

So check these points before & after hiring financial planner:

  • Trust but always verify.
  • Always take advice in writing.
  • Ask what he will be earning from implementing a plan – you can take this in writing.
  • Do not sign any blank document or cheque & always ask for a copy of final documents submitted.
  • While taking insurance always fill the form rightly – don’t allow agent to just play checkers in the form.
  • Never give unlimited access to your money to advisor that includes full power of attorney.
  • Be suspicious of pressure selling techniques like time deadlines & best investment.
  • Always ask for negative side of every product – if there is nothing negative better don’t invest as you are going to get shock at some later stage.
  • Always check that any product fits or helps you to achieve any of your goals – just don’t invest anything for the sake of investment.
  • Consider timing of the proposed transaction. May be the product manufacturer is motivating the advisor be it month end, year end or some through a trip that he will get if he achieves his targets.
  • If you don’t understand something ask again & again – put your hard earned money only when you have clearly understood that thing.
  • Always take a second opinion – every 3 years get your advisor’s recommendation audited by someone.

It’s always Buyers Beware & Buyers Be-aware.

Would you like to share your experience??


  1. Good article Hemant. I think usually good financial planners never suggest products. Instead they suggest strategies. One common trick I use to see among fake planers and insurance agents are that they use the time pressure. ie, they will advice you that this product is the star of the town and will go out of stock soon.. so hurry up. This will make the investor to think that he will be losing something if he is not putting money immediately. And also it will eliminate the chances for the investor to think and research about the product.
    LIC (I am not sure if it is LIC or any LIC agents association) use to give out training to new agents. The key points of the training are not about financial planing. Its all about how to cheat the common man and how to use tricky (and dirty) strategies so that maximum policies can be taken with maximum commission. I hope if LIC had taken a small effort for financial literacy, or at least the real need of insurance, from the time it started, India would have been a better country.

    Thanks and Regards,
    Shinoj Jose

    • Hi Shinoj,

      Financial Planners suggest products but that comes at the end. Plan>Strategy>Implementation. Time pressure strategy is very common & very powerful – all Mutual Fund NFO crap designed around time deadline & Rs 10 myth.

      Yes you hinted it right there is one institute which teach tricks to mis-sell insurance & they charge close to Rs 10000 for 1 day training.

    • fully agree with Shinoj they have not spared the trtaining arena as well being a consultant trainer myself I have encountered situations where even trainers r misleading new recruits regarding product knowledge.. with sales pressure almost everyone is cheating…and poor customer is himself to be blamed for being so illitrate..GOD SAVE CUSTOMER..

  2. Sir, congrats for such a nice article, now we require regulation on who should be an Financial Planner, currently many JHOLAACHHAP advisors are calling themselves as Financial Planner. Banks and brokerage companies are having position as Financial Planner and these all are just ruining their client’s future.But everwhere greed plays an great role- client thinks of those higher returns shown to him and the so called Financial Planner thinks of his commission. so dikhawe pe mat jaao apni akal lagaao.

    • Hi vikas,

      You rightly said every “Banks and brokerage companies are having position as Financial Planner” & that’s adding to confusion.

      See, right now people don’t know importance of financial planning but actual mess will start when they will realise its importance & will reach some split-personality.

  3. Good One and Rightly pointed.

    Moreover, the investor also need to understand their responsibilty.Its their prime duty to check in whose hands they are giving their hard earned money to manage.

    The more investor understand this the less he can be misguided.

    • Hi Jitendra,

      I think that this has already been started when Bhave shouted “Ban on ULIP” but it will take lot of time to reach bottom of pyramid.

      It was really “sach ka samna” for maximum people.

    • Hi Sumit,

      I think Manshu helped you on this query.

      I would like to add something regarding LIC High Premium:
      1 LIC’s claim settlement ratio is highest so they can charge something extra.
      2 I don’t think they are serious about their term plan – they don’t want to compete in this category 🙁

    • sumit try quote of icicipru and hdfc online term plan they r one of the cheapest and trustworthy. personally i feel ur premium will be around 10000.

  4. Dear Hemant,

    you hammered the nail on the head..Quite sheepishly, i want to add that my personal card also says that DHAWAL SHARMA, CFA (Certified Financial Advisor) 😉

    But then, another point of view from my side is an insurance guy like me, giving different options of INSURANCE PLANs to prepare for CHILD EDUCATION, FINANCIAL SECURITY, or PENSION PLAN and not needlessly offering other services like investment in PROPERTY through my CHACHAJI’s FRIEND and MUTUAL FUND investment through my friend’s brother is a better option..I think rather than be JACK OF ALL TRADE, its better to try to be PERFECTIONIST OF ONE..

    Misselling is altoghter a different issue..But if someone asks me that i want to invest or make some planning for child’s future and i am advising him for certain CHILD PLAN from KOTAK (Of whom i am an agent), i dont think it would be wrong, simply because i am not advicing him to invest in MUTUAL FUND, GOLD, and PROPERTY as well..To me or according to my knowledge (Limited knowledge might be), a child plan will serve him quite good if continues his policy for 15 or 18 years, it will give return as good as EQUITY FUNDs plus provide hedge against untimely death of the father because policy will pay SUM ASSURED immediately and policy will continue and company will pay the remaining premiums so that a good amount of fund is created and provided to the chlid..This example might look like i am pushing INSURANCE POLICY and nothing else but because my field of expertise is insurance and so i am talking about insurance and nothing else..

    ..And i hope this example will say that yes, INSURANCE AGENT/ADVISOR is not fake or misselling cheat..client is free to choose the option i have given by me or policy from another company or any other aveaneu of investment..

    • Hi Dhawal,

      Thanks you shared this – good part is you understand that you are expert in one field only. You don’t qualify as a financial planner & I have limited it for FPs.

  5. great advice, Hemant !!! Instances of mis-selling –whether MF schemes, ULips or Insurance policies are quite common nowadays –planner’s claim of any investment offering an abnormally high return (maybe in excess of 12~15%) should be analysed in detail–the best way wud be to ask an agent of a competing product. thanks and regards

  6. Good article. I was wondering-Can we wash our hands by blaming the financial planner or the investor also needs to share the blame? Why do we buy a financial product or for that matter any product. I bought an endowment plan because a)my friends bought it -saying it’s a great plan b) for the security of my child c) my parents suggested it d) the insurance guy sold it to me.. We tend to have herd mentality-oh stock market is doing great let’s buy stocks, gold is going up let’s buy it. We buy because we have no IDEA, as we don’t have a plan , a financial plan. So all we need it to get IDEA!

    Sadly our school and college education does not prepare us for the real world especially w.r.t money. We need to take more responsibility of our financial lives, become more financially literate. Sites such as yours are doing a great job in explaining the ABCs of finance. If we plan our financial journey then if someone says buy this we can say “Thanks for offering but I don’t need it!”. Keep up the good work.

  7. a real bad timing to read this article.
    Just now i checked my mail a prospect asking for the financial advice by disclosing all her details, i m not cfp but know the basics very well, now i m afraid of advicin her.

    • Hi Pramod,
      You can share your scope of engagement or circle of competence and provide your advice accordingly.

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