How relationship managers cheat you

This story was first published on January 3, 2011. They story holds true for the times we live inIt took a little over 30 minutes. She asked four questions, filled a page with squiggles and gave me three forms to sign. My financial plan for the next 10 years was ready. This is why my friends had been gushing about the efficiency of bank relationship managers (RM). Of course, I seemed to have hit upon a finance wizard . Her speed made sloppy fools of advisers who take several meetings to come up with a plan.She didn't bother me with intrusive questions either. I was posing as a newly married woman, eager to kickstart wealth creation. For this, I had conjured a fictitious husband with a salary of 1 lakh a month and a list of investments.I should have put my imagination to better use. The RM did not ask anything about my husband. When I tried to offer the details, she cut me short: "Madam , it is your financial plan. There is no need for your husband's details ." One up for women's liberation. I felt sorry for experts who have penned books on the importance of aligning the investments of spouses.The plan itself was simple and short. I claimed to save 30,000 from my salary of 65,000 a month and told her that I wanted to buy a car next year.Her first advice was to squirrel away Rs 6,000-7 ,000 a month in a recurring deposit: "The interest rate is just 6-7% but the liquidity is high," she said. I was impressed. She was going by the textbook rule of financial planning: for short-term goals, invest in debt schemes.But my happiness bubble burst soon after. "The rate is low. We advise mutual funds for the short term as well. They are equally liquid. But this deposit will act as a saving that you don't have to monitor," she added. Mutual funds for the short term? Was she referring to liquid funds? "No , equity funds which give 12-15 % returns," the RM clarified. We shifted to a quiet corner to discuss long-term investments . "I suggest you opt for an equity-oriented plan with an attached life cover," she said.I interrupted her with information she felt no need for: "But I have no dependants. Is that not why people buy insurance ?" Her reply was quick: "You earn 65,000 a month. So your life has some value for your parents and husband." To think so long I had assumed my parents loved me for reasons other than my salary. Will I also land a husband with mercenary motivations? The RM started listing the products I ought to invest in. No guesses, a Ulip was the first suggestion . "Our company launched this scheme which is a huge hit. Let's say you invest 50,000 as premium. You get a life cover of 5 lakh and earn returns. The lock-in is for five years.If you invest for seven years, there is a highest net asset value guarantee ," she said. It was the word I was dreading - guarantee. I asked her to explain the concept of highest NAV. "Let's suppose the NAV is 10 when you invest. During the seven years, the market reaches a peak of, say, 21000 and the NAV becomes 20. Your profit will be booked on that day. Even if the market goes down and your NAV declines, you will get the returns as per the NAV of 20," she answered.It sounded like a dream deal. Unless you knew how insurers fix the highest NAV. The link to the market movement was as much fiction as my marriage. (see What is wrong). What about returns? "At least 15%. The company launches these products regularly . The word 'guaranteed' is there. You will at least get 15% return if you stay for five years," she said emphatically.Trying to sound evasive, I mentioned traditional insurance plans. "I can offer them, madam, but they give low returns. At your age you can play with your money . So invest in the market. Also, in moneyback policies, the bonus depends on how the company performs. You can't predict how much you will get. Ulips are the best insurance," she concluded.Assured returns from equities and uncertain returns on endowment and moneyback plans? As I stared at the RM in incredulity , she continued: "I think you should invest 1 lakh in the Ulip. Your tax saving under Section 80C will be done. Then if you have money left, invest in a mutual fund."Poor funds, extolled by experts as worthy to be the core of your portfolio. Meanwhile, she took out forms of the Ulip and two funds. Why these two? "They have given more than 20% returns in the past year," she said.I promised to call after discussing the plan with my husband. The RM nodded and quickly moved on to the next customer. I was at the bank's entrance when, on a whim, I returned to hover around her cubicle pretending to look for something. She was engrossed in her explanation to the young man, "....the lock-in is for five years. After seven years you get the highest NAV..." medium91373695Is it right to keep money secrets from your partner? medium91373703