When top brokerage firms were approached for opening a trading account, we found that there were differences between the views of official spokespersons and what customer service executives tell would-be clients
Market regulator Securities and Exchange Board of India (SEBI) has firm rules regarding the procedure for opening trading accounts for retail investors.
One of the rules is that a customer can have his demat, trading and savings accounts in different banks or financial institutions, and is not bound to have them all with the same bank.
Yet, brokers linked to banks continue to offer such 3-in-1 accounts not as a choice, but as a compulsion. While this is clearly against SEBI regulations, and official spokespersons of these brokerages state that such accounts are optional, their sales and customer service staff tell a different story.
Moneylife decided to do a survey of four brokerage firms associated with banks, all of whom offered online accounts, to see if this was true. The brokerages surveyed were ICICI Direct, Kotak Securities, HDFC Securities and HSBC InvestDirect.
As individuals, we cannot trade shares on a stock exchange, but must do so through brokers. While some old time brokers still follow traditional methods of trading on behalf of customers where you personally tell your broker what shares to buy and sell at what price, many firms, foremost among them banks and online portals, employ high-tech facilities where you trade from online accounts and can observe prices in real time, get access to reports and recommendations, have automatic withdrawals and deposits from bank accounts and much more. While some argue that high-tech brokerage houses are less flexible and lack the all-important human factor, no one can deny that they are faster, more convenient and more easily accessible.
The first few steps for opening a new trading account were common across all the firms, with the customer service executive informing us that we would be called back by a sales representative. While most customer service executives assured us that we would be called back within a few hours, some were more candid and told us to expect the call within a day or two. Upon asking we were also informed that on giving our details to the sales representative, we would be visited at home by a sales executive.
We were then told that we had to provide certain documents such as proof of identity, proof of address, a PAN card and photographs, standard documents outlined in the SEBI guidelines.
When it came to opening the account, whether it was ICICI, HSBC, HDFC or Kotak, all extolled the virtues of opening a 3-in-1 account, essentially involving opening a savings account, demat account and trading account, all within the same bank. The banks claim that as these accounts are with the same bank, trading would be simplified and hassle free.
When we informed them that we already had savings and demat accounts, and just wanted to open a trading account, we were told that opening a 3-in-1 account was mandatory, though their official spokespersons had a different opinion.
While a Kotak customer service executive told us that the bank had a tie-up with certain other banks (all private and foreign banks) when we informed her that we had a savings account with SBI, India’s largest bank, she politely told us that they couldn’t link it.
The others just refused outright.
When contacted, a spokesperson from ICICI Direct said, “We have designed our products within the regulatory framework as well as keeping in mind our customers’ needs. Hence we offer both 3-in-1 accounts as well as trading accounts through an Active Trader Service account.”
This is a complete contradiction to what their customer service executives told Moneylife.
At the time of writing this article, officials of the other companies were not immediately available for comments.
The most disturbing thing about this whole process is that opening a 3-in-1 account means you have to pay opening and annual maintenance fees for the savings and demat accounts in addition to the fees you pay for the trading account. To top this, you have to maintain an Average Quarterly Balance (AQB) amounting to Rs5,000 for Kotak and ICICI Bank, and Rs10,000 for HDFC Bank. This means that they are forcing you to avail of a service that you neither want nor need, and pay for it too!
While all these banks maintain an official stance that such 3-in-1 accounts are optional, the ground reality is that their call centre executives do not communicate the same to potential customers. The average customer will never contact the official spokespersons, assuming that the companies’ own employees are aware of their respective organisation’s policies.
This is a clear case of large companies thinking that they can blatantly disregard regulations and make their own rules, all the while dictating terms to customers.
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