PAUL ANDERSON: That free lunch can cost you a fortune
| Friday, Dec 02 2011 12:00 PM
Last Updated Friday, Dec 02 2011 12:00 PM
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Paul Anderson
Ever heard the expression, "There's no such thing as a free lunch?" Like most common sayings, it has some basis in truth. You've probably received a notice in your mail or email inbox inviting you to attend a "free" lunch or dinner seminar at some point. Hey, you can even get an invite to one of these events just by dropping your business card in a bowl at certain establishments.
Many report receiving such an invitation at least once a month, especially those who have a good amount of disposable income. The wording on the invites is often vague, mentioning something about an investment or insurance information session or talk with no obligation to buy anything. Sounds pretty good; you sit for an hour, have some nice grub, and endure a bit of casual business talk before getting on with your day. That's what the presenters want you to think.
You better believe most don't offer luncheons gratis without some kind of ulterior motive, and some motives are more altruistic than others. These free lunch seminars are sometimes used as tools to lure you into investing in unsuitable or even fraudulent products. Crooks can take advantage of people who cash in on the free meal by making offers that are too good to be true, sometimes to harvest personal information and sometimes to con you into giving up your hard-earned money for little to no gain.
At best, you will be faced with an aggressive sales pitch and likely be stuck at the seminar long after the soup has gone cold and the bread has run out. At worst, you'll receive endless future contact from the presenter, or said presenter will mysteriously leave town with no forwarding address -- after pocketing some of your hard-earned cash.
The Securities and Exchange Commission, the federal agency that regulates Wall Street, has been investigating these free lunch operations for years. Chairman Christopher Cox told The Washington Post in 2007, "In each of the sweeps we conducted, we found significant fraud." Since there are so many of these operations, it is difficult for state regulators to shut them down in a timely fashion.
Before you call to reserve a spot, or make that fateful business card drop, take some time to think about it. If you see any of these phrases in the notice, they should raise some red flags:
* Your profit potential is guaranteed.
* Brace yourself for an amazingly high return.
* There is absolutely no risk.
* You can get in on the ground floor.
* This limited-time offer is only available today.
* We have secret investment tips reserved just for you.
Also, see if the person or organization leading the seminar's name is listed on the invitation. If so, it's the perfect opportunity to do some research. Check if there are articles online mentioning problems with the SEC involving them. See if they are licensed to operate in the United States. Also, do a Web search for the name along with the word "scam" or "fraud" to see if anything comes up.
If you still really want that free meal -- perhaps it is at a restaurant you've always wanted to try but couldn't afford -- and the name checks out OK, think about whether you will be able to resist offering up too much information and whether you can avoid getting sucked in by the sales pitch. Show even the slightest bit of interest in the product or service and you will not be left alone for quite some time. Looking completely nonplussed requires nerves of steel -- and the people holding these seminars know this.
When in doubt, don't go. There are always legitimate licensed financial advisors willing to help you reach your retirement goals and get you the answers you need without having to tempt you in with free lunch offers. In fact, they don't have to do so since their good reputations are getting them enough clients through more traditional avenues.
Already been to the seminar? If someone continually bothers you, report him or her to the SEC. You can also get the Federal Communications Commission involved if the harassment takes place over the telephone. Another point of recourse is your local police department, especially if you feel you've been conned out of some of your money or if you fear for your safety.
Be moneywise; take your retirement seriously and by all means don't let a free meal cost you your future. You can always buy yourself a pricey lunch using the money you'll ultimately make by investing the smart way. My guess is you will even be able to splurge on dinner -- in Paris.
Paul Anderson is an investment advisor and partner at Moneywise Wealth Management. He is also a host of the Moneywise Guys radio program on KERN 1180 weekdays 10 a.m. to noon. His website is www.MoneywiseGuys.com. Advisory Services offered through: SCF Investment Advisors, Inc. Corporate Office: 155 E. Shaw Ave. #102 Fresno, CA. 93710 800-955-2517. These are Anderson's opinions, not necessarily those of The Californian or SCF.
