Mis-buying is independent of Mis-selling

Published: August 26, 2014 at 9:52 am

Last Updated on August 7, 2016

Every so often one hears the passionate refrain, ‘I have been conned into buying XYZ policy by my agent/adviser/relationship manger …., what should I do?, … how can we complain against such mis-selling?’

Do such people deserve our sympathy? Have they been mis-sold a policy or a product? Who is to blame? The buyer? The seller or the regulator?

First, some  reasonably clear distinctions.


The act or rather the science of making an informed decision. Understanding ones requirement, narrowing the category/class of product required and trying to choose one from it.


 The act or rather the art of persuasion. Projecting a product to ensure a potential client gets a “wow experience” as one self-proclaimed ‘financial coach’ put it.


  1. Buying products with a blindfold.
Blindfolded Venus. Photo Credit: Gastev

Examples include,

  • Buying for saving tax!
  1. Assuming a ‘packaged product’ like a ‘child plan’ or ‘pension plan’ will do the job.


 Persuasion with misinformation.

  1. When an insurance or mutual fund intermediary tells a potential client,  ‘this plan is well suited for retirement, children’s education etc. ’, it is selling. They are merely pitching a product. Even if they call it as ‘the best product for ….’, it is still selling. When the buyer wants the ‘best’, why can’t an intermediary suggest one?!
  2. If they use phrases like “guaranteed return”, “assured return” or  any specific feature that is not part of the offer document, it is misinformation and therefore mis-selling.

In both cases, if the investor buys the product without due diligence (meaning, without reading the offer document and evaluating their own need), it is mis-buying.

One can claim that the mis-buying is a result of mis-selling, but that won’t hold much water. If a buyer evaluates the need for buying thoroughly, it is nearly impossible to buy the wrong product.

People end up mixing insurance and investment because they do not recognise the importance of inflation. Are often clueless about how much they need for a financial goal and put tax-saving before goal-based investing.

Thus, mis-buying is independent of mis-selling or misinformation.

If a perfectly legal sales pitch, free from misinformation is not evaluated properly, it is mis-buying.

There is no point blaming the intermediary or ask what is the regulator doing.  The regulator can only lay down the rules. Enforcing them before the sale is not practically possible.

Mis-selling cannot be eradicated. If I were an intermediary, I would probably mis-sell too.  If were an intermediary, I will have trouble deciding where to draw the line when it comes to persuasion.

Mis-buying can only be avoided by getting priorities right:

Listing types of

  • risk (death, health, inflation, loss of income etc.) and
  • future expenses

and understanding the requirements of each

If we mis-buy in haste, we are guaranteed to leisurely repent it, with or without the delusion that it was mis-selling.

With that out of that way, let us consider yet another side of mis-selling/mis-buying.

How would you classify sales pitches like,

  • ‘equity is the only asset class that can beat inflation’, or
  • ‘irrespective of the state of the market, a SIP will always work, since it average risk’
  • ‘equity markets fluctuate but always tend to move up over the long-term’

Does this constitute mis-selling? Well, you will not find the above statements in the scheme information document. That is for sure!

Is it mis-selling or misinformation if a mutual fund distributor genuinely believes the pitch?

Is it mis-buying if the investor concurs with the distributor after reasonable analysis?

I don’t know how to classify this. What you think?

Do share if you found this useful

Use our Robo-advisory Excel Template for a start-to-finish financial plan! Now with a new demo video!  More than 640 investors and advisors use this!
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 2525 investors and advisors are part of our exclusive Facebook Group! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos in an exclusive Facebook Group! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 585 salaried employees, entrepreneurs and financial advisors are part of our exclusive Facebook Group! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos in an exclusive Facebook Group!   
My new book for kids: “Chinchu gets a superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both boy and girl version covers of Chinchu gets a superpower.
Most investor problems can be traced to a lack of informed decision making. We have all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, if we had to groom one ability in our children that is key not only to money management and investing but for any aspect of life, what would it be? My answer: Sound Decision Making. So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parent’s plan for it and teach him several key ideas of decision making and money management is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Did you know? We have more than 1000+ videos on YouTube to explore! Join our YouTube Community!

Want to check if the market is overvalued or undervalued? Use our market valuation tool (will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
We publish mutual fund screeners and momentum, low volatility stock screeners .every month.
About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored three print books, You can be rich too with goal-based investing (CNBC TV18), Gamechanger, Chinchu Gets a Superpower! and seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations based on money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association, IIST Alumni Association. For speaking engagements, write to pattu [at] freefincal [dot] com
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions, seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download)
Free android apps