Are free lunch seminars a scam?

- Is the nearby Red Lobster a good place to discuss your financial future? How about Outback Steakhouse? Olive Garden, maybe?

That’s the question millions of Americans might ask themselves when opening the mailbox to discover a flyer that reads, “free lunch!”

Financial advisors of all sorts – from stock brokers to insurance salesmen and all experts in between – are aggressively courting new clients with offers of complimentary financial education over lunch at a local restaurant.

A consumer survey conducted by the Financial Industry Regulatory Authority found widespread use of “free lunch” mailers.

“64 percent of respondents age 40 and older had been invited to a meeting that offered a free meal and ‘educational’ information for some sort of investment,” FINRA said.

Older Americans were most likely to receive the invitations. 60 percent of people age 60 or older have received at least six "free lunch" invitations, the survey said.

LITTLE EDUCATION

This recruiting tactic is common. But FINRA warns consumers that these seemingly popular lunchtime seminars are light on education and heavy on making a sale.

“Seminars are designed to sell,” FINRA said. “Even when advertised as educational, many investment seminars are intended to sell something—financial products or the speaker's books or services.”

When investigators attended these meetings they made some troubling discoveries. FINRA said it examined 100 free lunch seminars alongside the U.S. Securities and Exchange Commission and found that half of the seminars were riddled with inaccuracies and deceit.

“The sales materials—including the invitations and advertisements for the events—contained claims that appeared to be exaggerated, misleading, or otherwise unwarranted,” FINRA said. "And 12 percent of the seminars appeared to involve fraud.”

FINRA said the crimes being committed ranged from making unfounded projections of investment returns to selling products that simply did not exist. "Fictitious" is the word FINRA used.

TARGETED OFFERS

The mailers are carefully tailored. Sometimes they are handwritten. And they always seem to know where the nearest restaurant is.

But how?

Given the broad and virtually limitless exchange of consumers’ personal information via data brokers like the nation’s credit bureaus, it is likely that the organizers of these seminars are buying narrow lists of names and addresses that allow them to target consumers who are likely to be weighing retirement options, have money to invest, and live near a sought-after eatery.

It works.

According to FINRA’s survey, nine percent of those who attend a “free lunch” seminar end up buying a product or service from the organizer or sponsor. It's a sliver of the audience. But it likely translates into millions of people each year.

IF YOU GO

It is possible some that you will be invited to a legitimate seminar, conducted by an honest individual. You might actually walk away more financially literate. FINRA says your odds are 50/50. So, it is incumbent upon you to protect yourself. If you are thinking of taking an advisor up on his/her offer of a free lunch, here are our suggestions to keep your nest egg safe.

1. Verify the presenter’s license. Advisors, brokers, and insurance salespeople must be licensed. If the speaker recruiting you as a client but is not licensed, you should probably not RSVP.

2. Give yourself time. As FINRA puts it, decide now to decide later. Walk into the dining room with the mentality that you are learning over lunch—not buying over lunch. Honest advisors will give you time.

3. Ask questions. Pipe up. And, if they can’t answer your inquiry to your satisfaction, either keep asking or walk away.

4. Don’t feel guilty. So what if a stranger bought you a meal (that they invited you to attend). You owe them nothing. The flyer said “free,” remember?

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