Why you should not buy financial products from your banker?

The simplest answer to this question is that, more often than not, the banker is more interested in the product than he is interested in you. To illustrate this better, we have discussed a few examples below: Say you have been a customer of a particular bank from 2008 tillBelow is what you would have typically experienced over this period of time. Your first job, 2010: Sir, along with your salary account, we are offering you a credit card, free of cost. There will be no annual charges and you can enjoy a credit limit of INR 50,000. Along with this we are offering you this "Investment product" which gives higher than market returns, especially for our customers. To make it easy for you, you can pay the yearly premium in 12 equal interest free installments using the credit card. (With this, he introduces you to the world of credit cards plus has latched you on to an investment product mostly a ULIP product (link on ULIP article) without you properly understanding the product. What he doesn't tell you is the charges involved in delayed payments on the credit card, neither does he guide you as to how you can be a disciplined credit card user!) 2008, with the markets soaring or currently when the markets are doing  very well: "Sir, XYZ Mutual Fund has come out with a New Fund Offer (NFO). The new Fund promises very good returns since they are focusing on the Infrastructure theme which will give very high returns over the next few years." "Sir, ABC Mutual Fund has come out with a New Fund Offer (NFO). The new Fund promises very good returns since they have a "new strategy" where they will identify "superior growth" stocks and generate superior returns." (What he doesn't tell you is the risks involved in investing in equities and that he is selling you a product which doesn't have any track record of good returns!)
                                                                                                                                       Take an informed decision
Immediately after the 2008 crash: A period of silence from your banker. Obviously, he doesn't want to bring up the returns from the ULIPs and NFOs he sold to you earlier in the year! 2009, post ban of entry loads on MFs: Sir, this is a unique investment product. It not only gives you high returns by investing in Equities, it also gives you an insurance cover. (What he doesn't tell you is that ULIPs hardly take care of your insurance requirements. Neither does he elaborate on the various charges on the ULIP products!) 2010, post reduction in commissions on ULIPs: Sir, you should invest in this product. If you invest INR 25,000 per year you will get INR 13,70,000 tax free after 25 years and also an insurance cover of INR 10,00,000. (What he doesn't tell you is that the rate of return is a partly 6%!) I guess many of you (irrespective of your age group!) will be able to relate to the above experience. It clearly demonstrates that your banker is more interested in selling the product that earns him the maximum returns with no consideration to what is the right product for you. He sees the immediate short term benefits for himself from the sales made to you. Why think like your banker and look at the short term? Think long term. Hire a Financial Planner, pay him a fee to give you the right advice and invest in the right investment product. Over a period of time, the benefits from investing in the right financial product far exceed the fees you pay your Financial Planner. Again, think long term. Educate yourself! It is very important in today's time, when there is a pool of information everywhere but no good data, learn and understand and take an informed decision, rather than just following someone blindly. It is your money, if you will not treat it right, why would a banker do that. PS: There can be exceptions to the above kind of bankers. But, more often than not, the story is the same everywhere.
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