How to avoid tax-saving traps
Money managers lure you into tax-saving traps
Wealth managers and distributors use half truths to lure taxpayers into bad investments and tax-saving traps. Here are the escape routes from these.
Don’t rely on verbal promises
Never believe a scheme or an offer till you see it in paper. Also, make sure that the brochure or table shown to you is authorised by the company. Agents often get promotional material printed with promises of lofty returns. Check the credentials of the seller. If he is promising high returns, ask him to write it down and sign on the paper. This can nail his lies later and he won't be able to justify.
Don’t rush yourself into buying
Anyone who tries to rush you into investing within a deadline is probably mis-selling. An investment is not an FMCG product that can be purchased without a second thought from a street vendor. Don’t close the deal in the first or even the second meeting with the broker. Ask for at least 7-10 days to study the plan and its features. Tell the distributor you will compare the plan with other investment options before taking the final call.
Take a second opinion
Before you invest, discuss your plan with a friend or relative who has the expertise. If the agent knows you are consulting an expert, he is less likely to mis-sell. The worst mis-selling happens at banks, where relationship managers try and push high commission products to unsuspecting and unaware customers. Better yet, go to a financial planner. He may charge a fee but gives objective advice.
Do your own research, paperwork and scrutiny
Missellers succeed when the investor is unwilling to spend time to understand what he is buying. Most of the time the buyer just signs on the application form and leaves the paperwork to the agent. If you don’t want to get bogged down with paperwork, let him fill the form for you but do insist on seeing it before you finally pen your signature on it.
Exploit the freelook period
If the policy document does not mention the promised benefits, return the policy within the 15-day freelook period. Agents try and buy time till 15 days are over. The policy document should reach you within 2-3 days of issuance. Before that, you will also receive a phone call from the company. Listen carefully to the policy features and raise a red flag if you find that something is amiss.