Tuesday, May 19, 2009

"Free Lunch" Sales Seminars

Many financial services firms are marketing to senior investors, who are a growing segment of investors. These firms have a sales technique - they offer free lunches to seniors, if they are willing to listen to their seminar information. The Securities and Exchange Commission (SEC) is concerned with unscrupulous and abusive sales practices of financial advisers who market to older adults. The Securities and Exchange Commission published a report in 2007 called "Protecting Senior Investors: Report of Examinations of Securities Firms providing "Free Lunch" Sales Seminars".

This report found that:
  • Free Lunch Seminars are advertised as "educational", but they are really geared to sell investments.
  • Attendees are not informed that the seminar is presented by a company that has a financial interest in selling these investments.
  • 23% of the seminars had financial advisers who recommended investments which were not suitable for particular customers.
  • 57% of the investigated seminars gave exaggerated or misleading claims about the investments.
  • 13% of the investigated seminars were selling fraudulent investments.
The AARP has a "Free Lunch" Monitor program where volunteers attend many of the free lunch style seminars and report their experiences back to AARP. There is an AARP online discussion group which provides a place to exchange stories about these free lunch seminars, which is located here.

The AARP has a good article about spotting financial scams. This article stated the the following phrases are warning signs of a financial scam:
  • "There's no risk".
  • "Your profit is guaranteed."
  • "The offer is only available today."
The AARP recommends that you take your time investigating an investment before committing to it. For more advice on what questions to ask at a free lunch seminar, please see the AARP article "Free Lunch Seminars: Questions to ask a Financial Professional."

How to find out more about a particular investment opportunity:
  • You can find out whether the investment is registered by using the EDGAR database.
  • You can find information about an investment firm or a broker by using the FINRA BrokerCheck.
  • You can investigate investment adviser firms on the SEC website here.

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