A consumer showed me a complicated product. It involved placing a fixed deposit of $30,000 with a bank to earn a special promotion interest rate. To qualify for this promotion, the consumer had to place some money in a 15 year product, with the promise that it carried no investment risk.
This 15 year product turned out to be a life insurance policy with an annual premium of $10,000. This is shocking. The wealth manager of the bank, that promoted the product, did not give the consumer any benefit illustration for the life insurance policy and did not tell the consumer, who is an elderly housewife, that the life insurance policy required an annual premium to be paid for 15 years. How is the housewife going to afford paying this annual premium?
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The wealth manager did not tell the consumer that if she could not pay the annual premium, the life insurance policy could lapse and she would lose all of her savings during the first two years. If she lapse the policy after two years, the cash value could be much less than the premiums paid. She also did not tell the consumer that the life insurance policy could take away more than one year of savings as distribution cost.
I find it a deplorable practice for a reputable bank to be pushing a life insurance product under misleading circumstances. There is a wide scope for such misleading sales practices in this manner, especially when it is packaged with a bank product.
I will be asking the Financial Advisory Industry Review (FAIR) panel to consider banning banks from packaging life insurance products with the traditional bank products, to prevent this type of rampant mis-selling.
This 15 year product turned out to be a life insurance policy with an annual premium of $10,000. This is shocking. The wealth manager of the bank, that promoted the product, did not give the consumer any benefit illustration for the life insurance policy and did not tell the consumer, who is an elderly housewife, that the life insurance policy required an annual premium to be paid for 15 years. How is the housewife going to afford paying this annual premium?
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The wealth manager did not tell the consumer that if she could not pay the annual premium, the life insurance policy could lapse and she would lose all of her savings during the first two years. If she lapse the policy after two years, the cash value could be much less than the premiums paid. She also did not tell the consumer that the life insurance policy could take away more than one year of savings as distribution cost.
I find it a deplorable practice for a reputable bank to be pushing a life insurance product under misleading circumstances. There is a wide scope for such misleading sales practices in this manner, especially when it is packaged with a bank product.
I will be asking the Financial Advisory Industry Review (FAIR) panel to consider banning banks from packaging life insurance products with the traditional bank products, to prevent this type of rampant mis-selling.
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