Stay Alert: 5 Tips To Safeguard Yourself From Tax Saving Pitfalls And Tricky Tactics

It's common for money managers, distributors and policy salespersons to use half-truths to entice taxpayers into investments that might not be in their best interest.
Stay Alert: 5 Tips To Safeguard Yourself From Tax Saving Pitfalls And Tricky Tactics

Stay Alert: 5 Tips To Safeguard Yourself From Tax Saving Pitfalls And Tricky Tactics (image source: iStock)

It's common for money managers, distributors and policy salespersons to use half-truths to entice taxpayers into investments that might not be in their best interest. To safeguard yourself, here are some simple strategies to escape potential tax-saving traps.

Five Tips To Avoid Tax-Saving Traps

1. Stay Away From Verbal Promises
Never trust a scheme or offer solely based on verbal assurances. Always insist on having everything in writing. Ensure that any brochures or tables presented to you are authorized by the company. Some agents print promotional materials with promises of high returns, so verify the seller's credentials. If someone is promising substantial returns, ask them to put it in writing and sign the document. This can be crucial later on if their promises turn out to be false.
2. Don’t Rush To Buy
Be cautious if someone tries to pressure you into investing within a tight deadline; it could be a sign of mis-selling. Unlike fast-moving consumer goods, investments require thoughtful consideration. Don't finalize a deal after just one or two meetings with a broker. Request at least 7-10 days to thoroughly examine the plan and its features. Inform the distributor that you plan to compare the investment with other options before making a decision.
3. Share It With Your Financial Advisor
Before investing, discuss your plan with a knowledgeable friend, relative, or even a financial planner. If the agent knows you're consulting an expert, they are less likely to engage in mis-selling. Banks, in particular, can be hotspots for mis-selling, as relationship managers may push high-commission products onto unsuspecting customers. Consider consulting a financial planner for objective advice, even if there's a fee involved.
4. Do Your Own Research
Mis-sellers often succeed when investors don't take the time to understand what they are buying. While it's okay to let the agent fill out the application form, insist on reviewing it before signing. Don't shy away from getting involved in the paperwork, as it's crucial to ensure transparency in the investment process.
5. Exit In Free Look Period
If the policy document doesn't match the promised benefits, use the 15-day freelook period to your advantage. Agents may try to stall until this period is over, so act promptly. The policy document should reach you within 2-3 days of issuance, and during this time, pay attention to any phone calls from the company. If anything seems amiss, don't hesitate to raise concerns.
By being vigilant and following these simple steps, you can protect yourself from falling into tax-saving traps and make informed investment decisions.
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