Mis-Selling Tricks by Mutual Fund & Insurance Agents

Top 10 Mutual Fund Mis-selling tricks

1st April is celebrated as FOOLS Day & we all enjoy playing tricks and pranks on our near ones. But, most of these tricks masterminded on this day are usually harmless. But few of the agents keep fooling investors for of their  whole life & this could prove to be very harmful. We wrote regularly about how insurance agents are mis-selling & we got many queries asking – Does Mis-selling happens in Mutual Funds? Our answer is Yes. Let’s Check.

Trick is…. & Truth is….

New fund offer (NFO): It is best for distributors but seldom for investors. Agent normally gets double commission than existing funds. Earlier it was as high as 5-6% and that use to come out of your pocket.

Investing after dividend Announcement: It is from your own invested money. And the value of investment goes down to the extent of dividend paid.

Churning from one fund to another: Agent gets commission in every transaction and you land up paying the loads & taxes in every transaction. Who cares…

Market Timing: If agent knows when the market can go up or down, he is even better than fund manager. Why the hell is coming to you? He can earn better managing his own money.

STP through MIP: This is Double Maja for agent. For same amount he gets double brokerage. Aapke kharchon se kise matlab.

Tax Fund When no tax saving needed: Agent gets more revenue so he sacrifices your liquidity, assest allocation & returns. Chalta Hai….

With change in RM’s job, your portfolio changes: Every Relationship Manager wants to show his new organisation that he has got fresh business and takes you for an expensive ride.

Many applications in just one fund: Logic pata nahi … But he will get extra per application commission. And you get some extra confusion managing multiple statements.

Showing Short Term performance: This is basically to misguide you to buy a product so that he meets his traget hich will give some extra incentive. You must watch for Long Term Performance and Consistency of the fund.

Low NAV: High or low has nothing to do with the future performance of the fund. Also more number of units is not equal to more returns.

We at TFL, believes Mutual Funds are one of the best investments that an investor can make . The schemes in Mutual Funds are designed to meet different needs of investor. Identify your need and then invest. Buying on the basis of above recommendations/sales pitch cost a lot to you.

Your Insurance Agent is Mis-selling if

We at TFL thought of giving you a simple way to understand whether the Agent who is knowing your door to sell an Insurance policy is a friend to you pretends to be a friend. Following are few of the common mis-selling tactics used by the Agents to lure you to buy a policy. (We wrote this article on 1st Jan 2010 for our First Quarterly Journal. Few of the things can change from 1st Sep 2010 but always remember for few of the agents mis-selling is the only way of selling. They will find new ways of doing it.)

What agent claims… & what is the truth…

Pay for just three years and then you will be covered through out the life

Utter nonsense, insurance will remain until there is some units available to deduct the mortality charges.

Pay for just three years and the product will double your money

For God Sake, sell such policy to Reliance Brothers. Even they could not double their money like this.

Last Chance – If you miss the last date, you will not be entitled to have this “Kohinoor Heera”

Last dates are ment so that the agent can push hard at you so that you can take wrong decisions.

No allocation charges are there in this policy

There could be name for charges like Policy Administration Charges, Maintenance Charges, Fund Mgt. Charges, Other Charges etc.

Past Performance was great

There is a difference between the policy performance and that of investment performance. In maximum cases, the policy holder’s return are far less than that of Investment return.


Don’t be emotional when you buy insurance, Think with BRAINS and not with HEART.

Minimum Return “Itna to Milega hi”

In reality, this is no where written on the policy document. this is just a sales pitch which is verbal.

Insurance is Free

There is no free lunch, Mortality Charges are always part of every insurance.

Guaranteed Returns

The returns that they guarantee are even less than that of given on your saving bank account… is this called Guaranteed?

Would you like to add few more tricks from your experience.


  1. A common man doesnt understand the hardcore financial lingo and jargons while signing the financial documents and eventually gets miguided by the malpractices of agents selling these policies. There are so many hidden charges with so many variety of names that you cant avoid them no matter how much fo you try. There is a need of simpler charge and tax code which can be understood by common man as well. It will bring transparency to the system and will put a stop of mis-handling of customers by the agents.

    • @ Ashish

      Completely agree with you but “Don’t wish it were easier, wish you were better. Financial world is not that ‘easy’, you need to improve yourself.”

    • @smgupta

      Confusion is the first step to knowledge. 😉

      Conclusion: Remember these tricks & wait till someone plays them on you.

  2. dear all !
    i want to add one more trick,
    A new scheme for you kindly join another two persons only(OR) give reference once they also follow this LINK you sir/ madam will get your money back fully.
    You will be receiving money or royalty as long as the chain system goes on…..
    thanks for this service

  3. I came across Insurance agent who was claiming that multiple switches to and from equity funds are allowed and one can arrest the downfall and can have best of the both world. Too good to believe that policy holder will be able to do this successfully. It may happen that he may have worse of the both world. Telemarketers largely from Delhi from the call center may promise u want u want but nothing in writting. Beware of those telemarketers.

    • Hi Pankaj,
      Thanks for sharing your practical experience – if timing market was so easy, your agent would have been sitting next to Ambanis.

  4. Dear Hemant,

    I really appreciate your work because it makes clear most of the confusions that common people have.
    I have a quarry regarding surrendering the ULIP policy: I have a ULIP policy starting from 2007 & I’ve given 5 years premium. I want to surrender the policy. But the surrender charge is very high (50% in 6th year and decreases @10% in each year resulting 10% in 10th year & nil from 11th year). Somebody is given me the advice to stop giving premium now but withdraw the fund on 11th year. Is it worth to me? The term of the policy is more than 25 year & the charges are also very high even throughout the term.

    • Hi Samanta,
      It looks that you have whole life policy.
      Suggestion from your wellwisher looks good but I will suggest you to check other charges like policy maintenance charges – if they are on higher side like 2-3% of the fund value you can surrender it after 6th year else after 10 years it make sense.
      Switch this fund into equity or balanced category if it is invested in debt.

      • Hi Hemant
        i have a question regarding LIC’s Jeeven Anand Policy.
        have taken LIC’s Jeeven Anand Policy for 20 years in 2008. I am paying 27K from last 4 years and I have taken this policy when I was not aware about life insurance and investments. But now I as I better understand that clubbing Insurance with Investment is NOT good idea (as it is unnecessary expensive) hence I am thinking why I am paying 27K/Year for only 5 Lakhs of Insurance.
        Additionally I have taken 1 CR of Term insurance (LIC+Kotak) recently hence my Insurance liability is sufficiently completed.
        So now I am felling that paying 27K/Year for just 5 Lakhs of insurance is not logical and additionally even if I think of return I am sure that after paying 5.4 Lakhs (20 years*27K) in 20 years I won’t get more than 12 Lakhs Rs in Future.
        So should I stop this policy & start investing these 2700 Rs in MF SIP better? Will I be in loss if I stop this policy?
        I have enquired about surrendering my Jeeven Anand policy and I came to know that as on date I have paid 91000 in last 4 years and I will get only 46000 back if I surrender this policy. So 46000 Rs of net loss is there.
        So is there any other way you know to minimize this loss?

  5. Insurance , if really is so bad than we all should together write to GOI and IRDA to stop it with immediate effect.

  6. Dear Hemanth,

    Thanks for your effort to educate people like me about the insurance and investment.
    Hats OFF…..

    Like others, I’ve dont have fare idea about the investment. One of my friend, took HDFC SL Crest (Highest NAV ) plan and he told me to take the same. Since i dont have much idea about MF, I look and now I’m Paying 30K / yrs. Already two years i have paided. After start to explore and following ur blogs, i went to HDFC SL Crest plan, and it was debt market. So, the return would be less but guarented. My Query is should i stop paying the next year and but my 30K in MF (as SIP, across different funds) or shall i continue that has debt plan and start investing around (2K in Large and Mid cap), some where u have suggested “HDFC Top 200 Fund (G)” and equity explosure is around 97.93 and XIRR is around 17.

    Kindly suggest me.
    Thanks in advance and keep your good work.

    Note: After reading some of your blogs, now i started to tell my friends to explore a lot before investing in any form and before that asked to read some of ur blogs… So, once again thanks a many.

  7. I have approached by an insurance company for saving of 15years they will provide assured income @ 9.1% for 20years, although as per my knowledge the normal return from the insurance company around 6%, I approach the person and show my interested to invest if he prove the product generate return more than the PPF, simple math gives me the idea how , see how it works Investment Rs. 10000*15years, assured income starts from 10th year of Rs.9100 @K9.1% till 29th year and maturity amount around Rs.1.1L which comes around Rs.5.10L only if yearly return invested PPF assuming return of 8% . Other end if any one invests @10000 for PFF for 15years and fixed the amount for another 15yeard the total amount comes around Rs.8.61L

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