Last year, a member of our WhatsApp community shared a story that still bothers us.
He visited his bank in India during a vacation. Went in to renew his fixed deposit. Came out with a ULIP that locked ₹10 lakh for five years.
The relationship manager called it a "special FD with insurance benefits."
Three months later, when he checked his statement, nearly 15% of his premium had vanished into charges he'd never been told about.
The "guaranteed returns" were actually projected returns. The tax benefits came with conditions nobody mentioned.
This is mis-selling. And NRIs are prime targets.
At Belong, we've heard hundreds of similar stories from our community of 15,000+ NRIs. The patterns repeat: a trusted institution, a convincing pitch, a product that doesn't match what was promised.
By the time the investor realizes, the lock-in period has trapped them.
This guide will teach you to recognize the warning signs before you sign anything. Because the best way to fight mis-selling is to spot it before it happens.
Why NRIs Are Especially Vulnerable
Before we get into the warning signs, understand why this happens to NRIs more than others.
Higher ticket sizes attract bigger commissions. NRIs typically invest larger amounts than resident Indians.
A ₹50 lakh investment means commissions that can reach ₹5-15 lakh for the seller on certain products. That's life-changing money for an agent. The incentive to push unsuitable products is enormous.
Physical distance limits verification. You can't walk into the bank next week to ask questions.
You can't easily compare what the agent said versus what the document states. By the time you're back in the UAE or UK, the free-look period has passed.
Trust in established institutions. NRIs often invest through banks or insurance companies they've trusted for decades.
They assume a major bank wouldn't mislead them. Unfortunately, bank relationship managers often operate under aggressive sales targets that prioritize commissions over customer suitability.
Limited time during India visits. You're in India for two weeks. Family obligations, property matters, and paperwork consume your time.
A financial decision that deserves hours of research gets made in 30 minutes at a bank branch.
According to IRDAI reports, banks have become the dominant distribution channel for life insurance, contributing 33.1% of new individual business premiums in 2023-24, up from 15.6% in 2013-14 (Source: IRDAI).
In FY24, the top 15 banks made ₹21,773 crore in commissions from selling insurance, mutual funds, and other products.
The system is designed for selling, not advising.
👉 Tip: Never make investment decisions during rushed India trips. If a product is genuinely good, it will still be available next month when you've had time to research.
Warning Sign 1: "Guaranteed Returns" on Market-Linked Products
This is the most common mis-selling technique targeting NRIs.
The pitch sounds like this: "This plan guarantees 12-15% returns." Or: "You'll definitely double your money in 7 years."
Or: "This is better than FD because returns are guaranteed AND you get insurance."
Here's the reality. If a product invests in the stock market, nothing is guaranteed. ULIPs, equity mutual funds, and market-linked insurance plans are all subject to market movements. The NAV can go up or down.
What agents show as "guaranteed" is usually an illustration based on assumed returns of 8% or 10%.
These are projections, not promises. The document somewhere says "returns are not guaranteed and depend on market performance."
But the verbal pitch ignores that fine print entirely.
A real example from our community:
A Dubai-based engineer was shown a ULIP illustration projecting ₹45 lakh maturity value on ₹15 lakh total premium.
The agent circled the number and said "this is what you'll get." When markets underperformed and charges ate into returns, the actual value after 10 years was ₹28 lakh. The agent had moved to another bank.
The insurance company pointed to the document that clearly stated returns weren't guaranteed.
How to protect yourself:
Ask: "Is this return guaranteed in writing, or is it a projection?"
If the agent hesitates or says "it's as good as guaranteed," that's your red flag.
For actual guaranteed returns, look at fixed deposits, government bonds, or debt instruments where the rate is contractually fixed.
What the regulation says:
IRDAI prohibits agents from promising guaranteed returns on unit-linked products. If someone does, they're violating regulations.
You can file a complaint with the insurance ombudsman.
Warning Sign 2: Pressure to Decide Immediately
"This scheme closes tomorrow." "I can only hold this rate until 5 PM today." "If you don't sign now, you'll miss this opportunity."
Urgency is the enemy of good financial decisions. Any product that requires you to decide in minutes is either a bad product or being sold by someone who doesn't want you to research it.
Why do sellers create urgency? Because research kills bad sales. Given time, you might:
Compare the product to alternatives. Read online reviews from people who bought it. Consult a fee-only financial advisor.
Discover the charges buried in the 50-page document. Realize the product doesn't match your goals.
Sellers know this. So they manufacture deadlines.
Legitimate products don't disappear overnight.
Mutual funds are available every business day. Fixed deposit schemes run continuously.
Insurance products have been around for years and will exist next month. The "limited time offer" is almost always a sales tactic, not a genuine deadline.
The one exception is NFOs (New Fund Offers), which do have subscription windows.
But even then, you can wait for the fund to launch and invest afterward once you see actual performance rather than just marketing materials.
👉 Tip: Tell any agent: "I need 7 days to review this with my family and advisor. If the product is good, I'll come back." Watch how they react. If they push harder, you have your answer.
The psychology being used against you:
Sales training teaches "closing techniques." Creating urgency is a classic technique. So is the "limited availability" pitch.
So is "my manager approved this special rate just for you." These are scripts, not genuine offers. Treat them accordingly.
Warning Sign 3: The Product Bundles Insurance with Investment
This is where NRIs lose the most money without realizing it.
The pitch: "Why buy insurance separately and invest separately? This single product gives you both!" The product: ULIPs, endowment plans, money-back policies, or whole life plans that combine life cover with market-linked or guaranteed investment returns.
Why bundling usually hurts you:
Bundled products charge you twice. Once for the insurance component. Once for the investment component.
And then there are administrative charges, allocation charges, policy administration charges, fund management charges, and surrender charges.
In a ULIP, premium allocation charges can take up to 12.5% of your first-year premium before a single rupee is invested (Source: IRDAI).
Fund management charges are capped at 1.35% annually. Mortality charges increase with age. By the time you add everything up, 15-25% of your money might go to charges in the early years.
Compare this to buying separately:
Term insurance: ₹1 crore cover for a 35-year-old costs roughly ₹10,000-15,000 per year for 20-25 years. Pure protection, no investment component.
Direct mutual funds: Expense ratios of 0.5-1.5% annually. No lock-in (except ELSS). Full transparency on charges. Better historical returns than most ULIP funds.
When surveyed, 100% of our community members preferred mutual funds over ULIPs. More telling: 50% of those who had purchased ULIPs felt they had been mis-sold (Source: iNRI Survey 2024).
The commission reality:
Banks earn 2-11x more commission selling insurance products compared to mutual funds (Source: 1Finance).
A relationship manager who earns ₹2,000 on a mutual fund sale versus ₹50,000 on a ULIP sale has a powerful incentive to push the ULIP, regardless of what's better for you.
👉 Tip: Keep insurance and investment separate. Buy pure term insurance for protection. Invest in mutual funds or fixed deposits for wealth creation. This simple rule protects you from most insurance mis-selling.
Warning Sign 4: Charges Aren't Explained Upfront
Ask any agent: "What will this product cost me in total fees over its lifetime?"
If they can't give you a clear, specific answer in rupees, that's a warning sign.
The charges that eat your returns:
Premium allocation charges: Deducted before investment, covers agent commissions.
Fund management charges: Annual fee for managing your investments.
Mortality charges: Cost of life insurance cover, increases with age.
Policy administration charges: Monthly fee for "maintaining" your policy.
Surrender charges: Penalty for exiting early, can be 2-6% of fund value.
Switching charges: Fee for moving between funds within the product.
In many ULIPs, the total charges in the first five years can consume 30-40% of what you paid. An IDFC First research paper documented cases where consumers lost significant portions of their investment purely to charges they weren't told about.
What should happen:
A transparent advisor shows you the benefit illustration document page by page.
They point to the charges table.
They calculate your net return after all fees. They compare it to alternatives with lower costs.
What actually happens:
The agent shows you the glossy brochure with projected maturity values.
They talk about tax benefits.
They skip the charges section entirely or mumble "there are some standard charges."
The question that reveals everything:
Ask: "If I stop paying after the first year, how much money will I get back?"
For many products, the answer is zero or close to zero. The first-year charges often consume your entire premium.
This is legal, disclosed in fine print, and yet most buyers don't know until they try to exit.
👉 Tip: Request the product's "Benefit Illustration" document. Find the charges table. Calculate total charges as a percentage of your investment over the full term. If charges exceed 3-4% annually when you factor everything in, the product is expensive.
Warning Sign 5: The Product Doesn't Match Your Stated Goal
This is subtle but devastating.
You walked in wanting to save for retirement in 15 years. You walked out with a 25-year endowment plan.
You asked about parking money for 2 years. They sold you a product with a 5-year lock-in.
You wanted liquidity. They gave you an illiquid product.
You're 55 years old. They sold you a 20-year policy.
Why this happens:
Agents have product targets. This month, they need to sell ₹50 lakh of a specific ULIP. Your actual needs are secondary to their quota.
Whatever you walk in wanting, they'll try to fit their target product to your situation.
The test:
Before buying anything, write down:
What is my goal? How much can I invest? When will I need this money? What's my risk tolerance?
Do I need liquidity for emergencies?
Then ask the agent to explain, in writing, how the recommended product addresses each of these points.
If they can't, or if their explanation requires mental gymnastics, the product doesn't match your needs.
A common mismatch we see:
Senior citizens are sold long-term child education plans. The logic presented: "Your grandchildren will benefit."
The reality: The policyholder might not survive the term, the plan has high surrender charges, and the returns are poor compared to simpler alternatives.
Retired individuals are sold equity-heavy ULIPs. They need stable income, not market-linked volatility. But equity products pay higher commissions.
Young professionals with no dependents are sold large life insurance policies. They don't need ₹1 crore life cover when nobody depends on their income. But the premium pays a big commission.
👉 Tip: If you're retired or nearing retirement, you probably don't need new life insurance. If anyone pushes it, they're prioritizing commission over suitability.
What Mis-Sold Products Actually Look Like
Let's name specific patterns we see repeatedly in our community:
Pattern 1: The "Better Than FD" ULIP
You went to renew your fixed deposit. The RM said, "Sir, why settle for 7% when you can get 12% with insurance included?"
They showed you a ULIP illustration with 10% assumed returns. You signed, thinking you'd upgraded your FD.
Five years later, after charges and market fluctuations, your returns are lower than what the FD would have given, and you've lost liquidity.
Pattern 2: The "Tax Saving" Endowment
Around March, you're told: "You'll save tax under Section 80C!" What they don't mention: ELSS mutual funds also qualify for 80C with lower costs, shorter lock-in (3 years vs 10-25 years), and historically better returns.
The endowment locks your money for decades with mediocre returns.
Pattern 3: The "Wealth Builder" Plan
NRIs earning in dollars are told this plan will "build wealth in India." The premiums are high, the charges are higher, and the returns lag simple index funds.
But the name sounds sophisticated, and the seller wears a suit.
Pattern 4: The "Child Plan" for Everyone
Whether you have children or not, you're told about the tax benefits and the "guaranteed" education fund.
These plans typically have long lock-ins, surrender penalties, and below-average returns compared to systematic investment plans in child-focused mutual funds.
How to Protect Yourself: A Practical Checklist
Before signing anything, run through this checklist:
1. Can I explain this product to my spouse in 2 minutes?
If you can't, you don't understand it well enough to buy it. Complex products benefit sellers, not buyers.
2. What's the total cost over the product's life?
Get a number in rupees. "Standard charges apply" is not an answer.
3. What happens if I need money in an emergency?
Know the surrender charges, lock-in periods, and liquidity terms.
4. What's the worst-case scenario?
If markets crash or I stop paying premiums, what happens to my money?
5. Why is this better than buying term insurance plus mutual funds separately?
If the agent can't answer convincingly, the bundled product probably isn't better.
6. Can I verify this person's credentials?
Agents should have IRDA or AMFI registration. Advisors should be SEBI-registered. Ask for registration numbers and verify them online.
7. Is this institution regulated?
Banks, insurance companies, and AMCs are regulated. Unregistered "wealth advisors" offering "guaranteed high returns" are not. If you can't verify regulation, don't invest.
👉 Tip: For large investments (₹10 lakh+), pay for a one-time consultation with a fee-only financial planner. The ₹5,000-10,000 fee can save you lakhs in avoided mis-selling.
What To Do If You've Been Mis-Sold
If you recognize these patterns in products you already own:
Step 1: Calculate your actual costs and returns
Pull every statement. Calculate total premiums paid, current value, and effective return rate. Compare to what you were promised.
Step 2: Document the mis-selling
Write down exactly what the agent said versus what the document shows. Note dates, names, and specific promises.
Step 3: Use the free-look period if still available
For insurance products, you have 15-30 days to cancel with full refund (minus medical exam costs). If you're within this window, use it.
Step 4: File a formal complaint
For insurance: Approach the insurance company's grievance cell first. If unresolved, escalate to the Insurance Ombudsman or IRDAI's IGMS portal.
For mutual funds or other securities: File with the SEBI SCORES portal.
Step 5: Evaluate whether to exit or continue
Sometimes, exiting a bad product after the lock-in ends is better than continuing. Run the numbers. The sunk cost fallacy makes people stay in bad investments because they've "already paid so much." Don't fall for it.
The Belong Approach
At Belong, we've built our platform around transparency and suitability.
We don't earn commissions from insurance companies. We don't push products based on targets. We explain charges upfront in rupees, not percentages that hide reality.
Our GIFT City products are regulated by IFSCA with clear fee structures. Our FD comparison tool shows you rates across banks so you can decide, not get sold. Our mutual fund platform offers direct plans with lower expense ratios.
Compare that to the bank branch experience where the product recommended is the one paying the highest commission that month.
Your Next Steps
Join our WhatsApp community where NRIs share experiences, ask questions, and help each other avoid common traps.
When someone shares a product pitch, the community helps analyze whether it's genuine or mis-selling.
Use our NRI FD rate comparison to see transparent options without sales pressure. Explore GIFT City alternatives for tax-efficient investing. Track markets with our GIFT Nifty tool.
And when you're ready to invest with confidence, download the Belong app. We've built it for NRIs who are tired of being sold to and want a platform that actually serves their interests.
Because your money should work for you, not for commission-hungry salespeople.
Disclaimer: This article is for educational purposes only and does not constitute financial advice. If you believe you have been mis-sold a financial product, consult a qualified legal or financial professional. Regulations and complaint processes mentioned are based on publicly available information and may change. Verify current procedures with relevant regulatory bodies (IRDAI, SEBI, RBI) before taking action.
