That Free Lunch Can Become Costly
Posted on July 15, 2010
Filed Under Mutual Funds, Personal InvestingThe invitation in your mailbox or newspaper is tantalizing. A financial services firm, which you may or may not recognize, is generously inviting you to a seminar where they will teach you things you need to know about a) retirement, b) avoiding taxes, c) beating the market, d) protecting your assets, or all of the above. Plus, a free lunch or dinner is being served at a well-known local restaurant. You may be skeptical, but you tell yourself that you are smart enough to see through any “sales pitch” they might throw at you.
Good luck. You are an amateur up against professionals.
The first thing you need to accept when it comes to financial seminars for the public is that they are designed to sell financial products and services. Period. You may walk out better informed than when you entered, but educating you is not the primary goal of the presenters. That’s why you see hot-button words in the invitation:
“Act now!”
“If you are over 60, you cannot afford to miss this seminar”
“Seating is Limited!”
“Reservations an Absolute Must!”
“This is a time-sensitive offer!”
“There is a financial storm brewing”
“If You Own a Mutual Fund You Must Attend!”
“Startling presentation reveals costly mistakes that can ruin your finances.”
To get you to lower your guard, the invitation may also use words like “educational,” and “nothing will be sold at this workshop.” Yes, that may be technically true, because the real sales job comes over the next few days.
A 2007 study of financial seminars, done in part by the SEC, found that more than half of the firms presenting these sessions, “used advertising and sales materials that may have been misleading or exaggerated.” http://www.nasaa.org/content/Files/Seniors_Report.final.pdf
A few juicy examples from the report: “Immediately add $100,000 to your net worth,” “How to receive a 13.3% return,” and “How $100K can pay 1 Million Dollars to Your Heirs.”
I would agree labeling those claims “misleading or exaggerated” is accurate!
To be sure, ethical investment firms do offer seminars, so don’t let me dissuade you from attending a particular seminar that appeals to you. Just be aware that many of the products being touted are the ones that have the highest fees and those fees are almost always cleverly hidden.
And never sign anything while still at the seminar! Wait a few days, discuss what you “learned” with your spouse or, if possible, with at least one other trusted advisor, and only then consider buying whatever it was they were selling.
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