A detailed thread on Have you been scammed by a Stock Broker in India? Which broker was it, and how were you looted?
-Sharing Kshitij Kumar real life experience and some tips to avoid
-Sharing Kshitij Kumar real life experience and some tips to avoid
1.Well if you want to know the exact truth about full service brokers in India I'll tell you that. But I request you to kindly share this answer to as many people as possible because I want to make everyone aware of this aspect which is rarely spoken about. But trust me this scam/cheating/misselling done by the so called professional and knowledgeable brokers is even worse than insurance misselling (as it completely wipes-out an individual’s lifetime savings). And in this answer I would be taking out the names of the brokers who have been responsible for eroding my father's wealth and on one of them I have lodged a case which I have won.
2.Who is a stock broker? An agent who earns brokerage/commission when his client trades/transacts in stocks.
Having said that your broker will earn through the trades and transactions in your demat account. So the more you trade more would be the brokerage generated for him. Now let me tell you the inside story. All these so called relationship managers are basically sales guys who are not even well spoken. They hardly or don't have any knowledge about equity markets but they still proclaim themselves as experts.
These so called self-proclaimed experts are given monthly, weekly and early targets of brokerage generation. Hence, there interest is to generate maximum brokerage even if they have to cause loss to their clients who trust them and invest their hard earned money on their request. Now let's take an example if I were the employee of a full service brokerage house and I have been given a target to generate 1 Cr brokerage for my company what would I do? I would simply induce my clients and give them n no of fake, unresearched and vague buy and sell calls and even misuse the power of attorney which I had induced my client to sign in the beginning. I will also place trades on my client’s behalf even without taking his consent on my discretion so as to generate more brokerage. Now what will happen after I place a trade? Either the stock will go up or down.
Having said that your broker will earn through the trades and transactions in your demat account. So the more you trade more would be the brokerage generated for him. Now let me tell you the inside story. All these so called relationship managers are basically sales guys who are not even well spoken. They hardly or don't have any knowledge about equity markets but they still proclaim themselves as experts.
These so called self-proclaimed experts are given monthly, weekly and early targets of brokerage generation. Hence, there interest is to generate maximum brokerage even if they have to cause loss to their clients who trust them and invest their hard earned money on their request. Now let's take an example if I were the employee of a full service brokerage house and I have been given a target to generate 1 Cr brokerage for my company what would I do? I would simply induce my clients and give them n no of fake, unresearched and vague buy and sell calls and even misuse the power of attorney which I had induced my client to sign in the beginning. I will also place trades on my client’s behalf even without taking his consent on my discretion so as to generate more brokerage. Now what will happen after I place a trade? Either the stock will go up or down.
3. Now let's take scenario 1 when the stock will go down
Since, I have targets to generate brokerage for my company so without waiting for the stock to go up I'll prefer it selling at loss so that I earn brokerage and client’s loss is not my loss.
Scenario 2 when the stock goes up
Again I will see that the stock has gone up no matter even 2–3 rupees now I can easily sell the stock and boast about myself to the client for the 2–3 rupees profit that I made for him along with generating brokerage for my employer.
The problem with scenario 2 is that if the stock is good to hold for long term or is in uptrend an investor could not reap full benefits due to the myopic approach of the broker.
Hence, it has been seen that if someone is dependent on such experts then he will lose more and earn less, thus resulting in huge losses for him. Also these experts generate brokerage at a better rate through trading in futures and options. Hence, they induce their clients a lot to trade in risky F&O which is nothing but weapons of financial mass destruction. But please note that the destruction is of investors wealth and not their brokerage.
Since, I have targets to generate brokerage for my company so without waiting for the stock to go up I'll prefer it selling at loss so that I earn brokerage and client’s loss is not my loss.
Scenario 2 when the stock goes up
Again I will see that the stock has gone up no matter even 2–3 rupees now I can easily sell the stock and boast about myself to the client for the 2–3 rupees profit that I made for him along with generating brokerage for my employer.
The problem with scenario 2 is that if the stock is good to hold for long term or is in uptrend an investor could not reap full benefits due to the myopic approach of the broker.
Hence, it has been seen that if someone is dependent on such experts then he will lose more and earn less, thus resulting in huge losses for him. Also these experts generate brokerage at a better rate through trading in futures and options. Hence, they induce their clients a lot to trade in risky F&O which is nothing but weapons of financial mass destruction. But please note that the destruction is of investors wealth and not their brokerage.
4.The simple funda to earn through stock market is “buy right and sit tight” But how will such brokers get brokerage if you invest for long term and dont trade for months and years. Hence, a broker is a predator and your wealth is his prey. And a predator never befriends his prey or else he'll starve and die. And it's prudent to say that if not 100 then around 95% of them are predators of your wealth. They make you trade in stock markets to fulfill their brokerage interest and for nothing else. Thus, investing in stock markets through a full service brokerage is always injurious to your wealth. In my case the executives of HDFC Securities and Anand Rathi have been responsible for erosion of total Rs 1cr which were my father's hard earned money. And these shameless creatures even after doing it ask for more so that their brokerage earning can be maintained till you are not completely bankrupt (This is pretty much similar to Indore based fake stock advisory). Now after you are bankrupt they will start searching for another prey and this vicious cycle will continue. There was no one to teach my father but I want each one of you to be aware of such foul plays. Kindly remember the following points:-
*Never invest in stocks directly if you don't have a finance background or don't understand it's mechanism. Do some basic study and then depending on your knowledge and risk profile invest by taking your own decisions.
*Never follow or listen to the tips and recommendations your relationship manager or representatives. No one is God and no one can predict the exact upside or downside in a stock. These tips are meant for generating brokerage for the broker and not for your financial growth and gain. Also, these tips are random, unresearched and fake almost all the time. It takes months to research and find a stock hence, it is impossible to come with 10–15 tips and bombard them everyday.
*Try not signing the power of attorney while opening the demat account as it is not mandatory but still your broker will induce you sign it hence, giving him unlimited power to place trades in your account. (Please remember Power of Attorney scene from the movie Baazigar, where Shahrukh Khan says “Madan Chopra Tune mujhe Power of Attorney nahi apni taqdeer ka vo kora panna de diya hai jispe mai jab chahun teri barbaadi ka itihaas likh sakta hun”)
*Keep checking your account and of there is anything fishy immediately report it to the company or on SEBI SCORES portal.
*Never follow or listen to the tips and recommendations your relationship manager or representatives. No one is God and no one can predict the exact upside or downside in a stock. These tips are meant for generating brokerage for the broker and not for your financial growth and gain. Also, these tips are random, unresearched and fake almost all the time. It takes months to research and find a stock hence, it is impossible to come with 10–15 tips and bombard them everyday.
*Try not signing the power of attorney while opening the demat account as it is not mandatory but still your broker will induce you sign it hence, giving him unlimited power to place trades in your account. (Please remember Power of Attorney scene from the movie Baazigar, where Shahrukh Khan says “Madan Chopra Tune mujhe Power of Attorney nahi apni taqdeer ka vo kora panna de diya hai jispe mai jab chahun teri barbaadi ka itihaas likh sakta hun”)
*Keep checking your account and of there is anything fishy immediately report it to the company or on SEBI SCORES portal.
5. Now I hope that you might have understood that to earn better in stock markets its imperative to stay invested for long but this is gonna be against the interest of your broker. Thus, to avoid such conflict of interest and the risk of rogue trading by your broker I would recommend everyone a permanent solution i.e. to opt for a discount broker like Zerodha Or Upstox. Please note that I have not been paid by any of them and I am not even providing you my affiliate link to download the same. After the financial debacle of my father I have been using it for 2 years now for managing investments for my mother and father both. They are the best platforms for stock investing as I never get any tips and calls from them and I have also I have been able to save a lot of brokerage which is the root cause of such scams and mis-selling by brokers and if you are still not comfortable with direct investing in stocks better opt for mutual funds and various index funds and ETFs as they will help you earn better in long run.
6. Pro Tip- Any broker can not induce you, give you recommendations/tips or ask for permission to trade on your behalf. As it is strictly prohibited by National Stock Exchange and SEBI to protect the interest of the investors. Many times a broker relies on Power of Attorney signed by you as a permission for them to trade on your behalf but trust me Power of Attorney is not for that purpose as it only allows a broker to place trade on client’s behalf when the client has given him clear instructions to do so and that to without being influenced by the tips or recommendations from the broker.
Loading suggestions...