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Indians are getting richer by the day. And, perhaps, sillier.

Imagine giving money to a wealth management firm, or signing contract documents on verbal assurances from relationship managers that they would earn one-two per cent returns each month on their investment.

That's nothing but a willing suspension of disbelief.

The Citibank scam, perpetrated by relationship manager Shiv Raj Puri, exposed this unwarranted faith of the Indian high net-worth individual.

Armed with a forged document from the Securities and Exchange Board of India, he sold schemes to investors, including HNI and the co-founder of Helion Venture Partners, Sanjeev Aggarwal. Even the Hero Group wasn't spared.

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And, it is not an isolated case. There are a number of instances where investors have claimed they were given verbal assurances of high returns, and they ended up losing money.

There are complaints galore from investors with the market regulator, but little action can be taken.

How does the regulator help investors who sign documents without reading these and who invest on verbal assurances?

Brokerages or wealth management firms, on their part, will claim they have not given any written assurance. But something is wrong. And, all of us know this.

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The method is simple. As a finance professional and active investor-friend said: "The executive from the brokerage who came to my house with the promise of a high-return product insisted there was a specific 'clause' in the agreement that promised the return.

However, when I called up her seniors in the organisation, I was told there was no clause or assurance, either in the document or verbally."

There are umpteen stories like this.

Mis-selling is rampant in India. Whether it was unit-linked insurance plans or mutual funds, distributors have been known to sell products by promising high returns.
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Both the Insurance Regulatory and Development Authority and Sebi have managed to bring it down significantly by slashing commissions.

Companies in both the industries have been forced to look at client retention to ensure a steady flow of income.

So, fund houses and distributors are pushing systematic investment plans more aggressively.

Insurance companies are looking at pushing more traditional plans and asking distributors to work more on retaining their clients.

Both Sebi and the Reserve Bank of India need to come out with strict guidelines to handle the rampant mis-selling in brokerages and wealth management firms, as well.

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However, the important point is that investors cannot always put the ball in the regulators' court.

Financial commitments, based on verbal assurances, are a sure way of getting into trouble. Importantly, during profitable times, all's well.

But when things go wrong, they cry foul and try to garner media support or approach the regulators.

Here's an example. A former colleague opened a brokerage account and put Rs. 25,000 in it.

After a week, he came and said proudly, "These brokerage guys are amazing. My account balance has risen to Rs. 30,000 because they invested in some good stock."

Three months later, he was cribbing and abusing the brokerage for conning him.

His balance: Rs. 5,000.