Other Voices

Remember, there's no such thing as a free lunch

Dec 3, 2007 @ 12:01 am

By Joseph Borg

If you are over 50, you have probably received an unsolicited invitation to attend an educational financial seminar where you will enjoy a free gourmet lunch or dinner while getting tips on how to earn excellent returns on your investments, eliminate market risk and avoid taxes. Such invitations should raise red flags for investors.

A recent yearlong examination conducted by members of the North American Securities Administrators Association Inc. of Washington, the Securities and Exchange Commission and the Financial Industry Regulatory Authority Inc. of New York and Washington scrutinized 110 securities firms and branch offices that sponsored sales seminars and offered a free lunch or dinner to entice attendees.

Here are some of the report's key findings:

All of the "seminars" were actually sales presentations, although they were advertised as "educational workshops" where "nothing will be sold."

Half of them featured exaggerated or misleading advertising claims, such as: "immediately add $100,000 to your net worth," and, "how $100K can pay $1 million to your heirs."

Nearly one-quarter of the seminars involved potentially unsuitable recommendations, such as a risky investment recommended to an investor with a conservative investment objective, or an illiquid investment recommended to an investor with a short-term need for cash.

These findings should serve as a wake-up call for anyone who receives an unsolicited invitation to a "free meal" seminar.

Such seminars are often advertised in local newspapers, through mass-mailed invitations and mass e-mails, and on websites. They are commonly held at upscale hotels, restaurants, retirement communities and golf courses. In addition to providing a free meal, the firms and individuals that conduct these seminars often use other incentives, such as door prizes, free books and vacation deals, to encourage attendance.

Advertised with names such as Seniors Financial Survival Seminar or Senior Financial Safety Workshop, these seminars offer "free" advice by "experts" on how to attain a secure retirement, or offer financial planning or inheritance advice.

While the ads may stress that the seminars are "educational" and that "nothing will be sold," many of these seminars are intended to result in the attendees' opening new accounts with the sponsoring firm and, ultimately, in the sales of investment products, if not at the seminar itself, then in follow-up contacts with the attendees.

In the follow-up sales pitch, the salesperson often recommends liquidating existing investments and using the proceeds to buy variable or indexed annuity products, which may be unsuitable for older investors.

Investors seeking educational insights and information should be aware that the primary goal of the sponsors of these free-meal seminars is to obtain new customers and sell investment products. Some salespeople holding seminar events may also possess a "senior specialist" designation and represent that they have special expertise in dealing with financial issues important to older Americans.

While some of these designations reflect bona fide credentials in the field of advising the elderly, many do not. These titles can serve as an easy way for an unscrupulous sales agent or adviser to gain an older investor's trust, which is the first step in a successful fraud.

Remember, there's no such thing as a free lunch. Those seeking investor education and advice at a seminar should not be subject to misrepresentations, high-pressure sales tactics and outright fraud. I have joined the entire community of securities regulators to continue our active pursuit of criminals who cheat the elderly out of their hard-earned retirement savings.

Joseph Borg, director of Alabama's securities division, is a past president of the North American Securities Administrators Association Inc. in Washington.


What do you think?

View comments

Upcoming event

Sep 10


Denver Women Adviser Summit

The InvestmentNews Women Adviser Summit, a one-day workshop now held in six cities due to popular demand, is uniquely designed for the sophisticated female adviser who wants to take her personal and professional self to the next level.... Learn more

Most watched


MassMutual's LaPianna: Creating better conversations with your clients

What's the secret to building better client relationships? MassMutual's Paul LaPianna says it all begins with great conversations.


How advisers can be a gamechanger for women investors

Why women defer to men when it comes to finances and how advisers can combat this phenomenon and make a difference for female investors, according to Heather Ettinger, founder and CEO Luma Wealth Advisors.

Latest news & opinion

Schorsch, AR Capital to pay $60 million to settle SEC charges

The former REIT czar and his firm wrongfully obtained millions linked to REIT mergers.

CFP Board postpones enforcement of its revised fiduciary standard

Board's new Code of Ethics and Standards to be enforced next June, in line with the SEC's Reg BI

Charles Schwab reportedly in talks to buy USAA brokerage, wealth management business

The deal would net Schwab roughly $100 billion in new assets.

Advisers scramble to help retirees navigate looming Fed rate cut

The Fed's first interest-rate cut in a decade has advisers warning against chasing the bait of risk over safety.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print