Misselling Meaning Examples Prevention
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Contents
Misselling: Meaning, Examples, Prevention
What Is Misselling?
Misselling is the deliberate or reckless misrepresentation of a product or service to make a sale. It may involve omitting key information, providing misleading advice, or selling an unsuitable product based on customer preferences.
Misselling is both negligent and unethical and can result in legal action, fines, or professional censure. The former Financial Services Authority of the United Kingdom defined it as the "failure to deliver fair outcomes for consumers."
Key Takeaways
- Misselling refers to the misrepresentation of a product or service’s suitability.
- It can lead to fines and professional censure.
- An example occurs in life insurance, where policies are misrepresented as necessary to protect assets.
Understanding Misselling
Misselling is a significant problem in the financial services industry. Salespeople who earn commissions may prioritize their own earnings over the customer’s needs when selling financial products or services.
Misselling can occur with insurance products, annuities, investments, mortgages, and other financial products. It doesn’t require a financial loss; selling an unsuitable product is enough.
Misselling Examples
In the life insurance industry, a common example of misselling is when a salesperson convinces an investor, who has no dependent children or deceased spouse, that they urgently need whole life insurance or an expensive annuity to protect their assets. This misrepresents the product’s necessity.
If a financial adviser sells a complex and risky investment to an extremely conservative elderly woman, they would be guilty of misselling based on suitability. They can face liability, fines, or regulatory action.
Fighting Misselling
If you believe you’re a victim of misselling, collect supporting information and make a claim or complaint. Financial services companies have internal complaints processes that should be the first point of contact. If unsatisfactory, you can seek assistance from ombudsmen or independent investigators.
You may also contact relevant authorities or regulators. Compensation may be available even if the company is no longer in business.