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The Lies in Every ‘Free Dinner’ Investment Invitation — From a Guy Who Used to Lead Them
A former financial adviser reveals the sneaky sales tricks behind free financial seminars
The author used to invite retirees out for a free lunch with a side dish of financial education, but the juicy steak had strings attached.
Michelle Kondrich
Key takeaways
- Free-dinner investment seminars are usually marketing events designed to generate follow-up sales meetings, not to provide an unbiased financial education.
- Products promoted at these events can be risky investments, carrying high fees and limiting liquidity despite claims of safety and accessibility.
- Seminar presenters may have impressive-sounding credentials, but many are commissioned salespeople whose incentives may influence their recommendations.
When I was 27, I was the hunter. Now that I’m 70, I’m the hunted.
Back in the 1980s, I was a stockbroker. My primary way of getting clients? Sales seminars.
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Every other week or so, I’d mail out invitations to a senior community offering a free lunch or dinner seminar. Now, I receive them — quite frequently — in the mail.
It has been decades since I invited retirees out for a free lunch with a side dish of financial education, but sales seminars are still going strong.
So, is that free steak worth it?
Far from it. In fact, in 2006 and 2007, the U.S. Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA) and state securities regulators published a bombshell report after investigating 110 firms that were running these “free lunch” seminars. Their conclusion: Every single one was a sales presentation dressed up as education.
Now that my days of hosting them are behind me, I’m ready to come clean and reveal the lies that underpin “free dinner” investment seminars.
‘It’s just education. Nothing will be sold’
Here’s the part that seminar presenters don’t tell you: Nothing gets sold in the room, because the room isn’t typically where the sale happens. The seminar is simply a way to collect names and phone numbers.
The real sale comes later: often a follow-up call, then a visit to your kitchen table, where there’s no crowd, no one to compare notes with and no one to talk you out of the products or services being pitched.
The SEC, FINRA and state regulators found that these events were specifically designed to encourage people to open investment accounts — if not at the seminar, then through follow-up contact with the attendees.
I followed that playbook in my own seminars. To attend and get the free meal, you had to RSVP with your contact information. The day after the event, I would call and schedule a time to swing by your house. (“As it turns out, I’m going to be in your neighborhood next Wednesday!”)
We’d sit down, have some iced tea and go over your finances. On a good day, I would open your brokerage account and start making investment recommendations on the spot — investments that would earn me commission, often without disclosing them.
‘I’m a specialist. I’m looking out for you’
The SEC and FINRA do not endorse many of the designations that you see printed next to the host’s name on seminar invitations. Take “senior specialists,” for example. The designation’s requirements vary greatly, and some “may be relatively quick and easy to obtain, even for an individual with no relevant experience,” according to regulators. When I was offering seminars, I was a commissioned stockbroker. So were all my Wall Street peers. For years, the legal bar for professionals in our field wasn’t to “do what’s best for the customer.” It was “suitability,” a term that was open to interpretation.
For my purposes, it meant if two similar products met your needs but one paid me three times the commission, I sold you the one that paid triple. No rules broken.
Real “fiduciary” duty — a legal obligation to put clients first — has applied to registered investment advisers (RIAs) since 1940. It never applied to commissioned brokers like me. A 2020 SEC rule raised the bar, a little. Brokers now have to recommend what’s in their client’s “best interest,” but they can limit their suggestions to only the products their firm sells. Compare that to a fiduciary, who is legally obligated to put their client’s interests first, not just at the moment of sale but for as long as they’re handling their money, without limiting investment options.
The SEC could have held brokers to that standard. It chose not to.
Today’s seminar presenters are still commissioned salespeople. Sometimes they’re insurance agents peddling annuities. Because of that, I would ask anyone ever offering me financial advice, “Are you a fiduciary 100 percent of the time?”
‘There’s no risk’
About half of the financial seminars regulators examined in 2006 and 2007 featured “exaggerated or misleading” claims, including promises to “immediately add $100,000 to your net worth” or a “13.3 percent return.”
I never knowingly made false promises to my dinner guests, but thanks to the sales puffery that my firm at the time offered and endorsed, I probably did.
For instance, the company assured me that some limited partnerships — investments formed to hold hard assets, like real estate or oil and gas — offered safe, tax-advantaged income. Turns out, that wasn’t always true. Oftentimes, high fees were subtly baked into these investment products.
Fortunately, the tax law caught up with some of those deals. After the Tax Reform Act of 1986 greatly reduced the use of public limited partnerships, sales fell from $13.1 billion in 1986 to $2.6 billion by 1992.
The “no-risk” product being served at tonight’s free dinner investment seminar is often a fixed-indexed annuity — a complex insurance product, with caps and participation rates that can significantly limit your returns.
The through line: In both past and present seminars, the product pushed hardest is the one that pays the salesperson the most.
‘Your money is available whenever you need it’
This is a trap. That money you were promised you could access at any time is often locked up.
Limited partnerships, at least when I offered them, had no real exit — they were illiquid by design. Annuities, then and now, tie your money down with surrender charges.
I never sold fixed-indexed annuities; they didn’t exist back then. But I did sell single premium deferred annuities, where you’d hand an insurance company a pile of money, it grows for years, and later the company pays it back to you in installments, often monthly, for the rest of your life. The commission, as I recall, was 4 percent. So if you invested $100,000, my firm and I split four grand.
I still remember the pitch: “They’re like a certificate of deposit, only from an insurance company instead of a bank.” Sure, you could theoretically get your money back, but the early surrender penalty period typically lasted six to eight years.
The terms might be even worse today. The Minnesota attorney general has documented surrender penalties as high as 25 percent of principal, and has sued over deferred annuities with 15-plus-year deferral periods sold to buyers who were not expected to live that long.
‘It’s free. But seats are limited — act now’
This statement contains not one but two lies.
The six-ounce filet is gratis, but the cost is buried — in commissions and charges you’ll never see itemized, if you invest your money later on.
Keep in mind that I’m buying you, and everyone else in attendance, a full meal. If nobody bites, that would be my last seminar. That’s why these events tend to feature high-commission investment products.
As I said earlier, selling a $100,000 annuity investment earned me a $2,000 commission. That’s more than enough to pay for a group dinner. But the meager commission on a $100,000 certificate of deposit — likely no more than a couple hundred dollars — wouldn’t cover the salad course.
Then there’s the “act now.” That’s manufactured urgency. The dinner invitations lean on scarcity — “limited seating,” “call now to reserve your seat” — and salespeople later apply the same pressure at your kitchen table.
The push also shows up on posters, flyers, radio spots and other advertising, making investment seminars hard to resist.
The bottom line
There’s nothing wrong with attending one of these seminars, especially now that you know what to expect. It’s certainly possible you’ll learn something useful, in addition to getting a comped meal.
Just remember that the dinner isn’t the dangerous part. The danger is the follow-up consultation, where you’re alone with a trained salesperson.
As Christopher Cox, the former SEC chair, said in 2007, “There’s no such thing as a free lunch.”
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