Zerodha Founder Nithin Kamath Exposes Bank’s Mis-Selling Tactics: Mutual Fund Seeker Pushed into Insurance

Nithin Kamath, the founder of Zerodha, shared a disturbing incident where a 40-year-old woman seeking to invest in Mutual Funds was allegedly mis-sold an insurance product by bank staff. In a post on X, Kamath narrated how the woman, despite insisting on index mutual funds, was coerced into investing in a regular plan of index funds.

Key Points:

1. Initial Request for Mutual Funds: The woman visited her bank to invest in mutual funds, but the bank manager allegedly pushed her towards an insurance product.
2. Persistence for Index Mutual Funds: After researching, the woman insisted on index mutual funds in her second visit, but the manager reportedly displayed reluctance and rudeness, eventually getting her to invest in a regular plan of index funds.
3. Lifetime Trail Commission: Kamath highlighted that even though the commissions on index funds are lower than insurance products, the bank earns a trail commission for a lifetime, despite allegedly steering the customer away from the initially sought investment.
4. Mis-Selling Practices: Kamath emphasized that despite the popularity of direct mutual fund platforms, some investors are still pressured into purchasing high-commission insurance products, raising concerns about mis-selling practices in banks.
5. Commission Discrepancy: Commissions on certain insurance products can start as high as 50% of the first-year premium and then reduce to 2% or lower. Kamath stressed that insurance should primarily serve its purpose, such as health and term coverage.

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