The ads are compelling:
“Free Gourmet Luncheon: Learn how to protect your estate!”
“Free Dinner and Seminar: Create an income stream you can’t outlive!”
“Free Meal and Free Advice: Eliminate taxes on your Social Security!”
Is your heart beating faster? Are you reaching for the phone? That’s just what sponsors of these events are counting on. While some of these money management seminars are legitimate, too often they promise a feast but serve up indigestion.
The promise of a free meal is just to get you in the door. Expect an invitation to a free follow-up consultation, at which you’ll be asked to have your bank statements, tax returns, stock records and other financial information handy. “This gives them a road map to your money,” says Diane Nygaard, an investors and consumer attorney in Kansas City, Kan., “so they can tailor their pitch to your vulnerable points.”
As part of a national program to raise public awareness of this marketing tactic, AARP recently launched the Free Lunch Seminar Monitor program under which volunteers attend these events and report back. By acting as monitors, says Jean C. Setzfand, director of financial security for AARP Education and Outreach, “our members are acting as eyes and ears and providing greater transparency.”
So far, AARP says, volunteers have downloaded more than 5,000 copies of a checklist that describes what to listen for, and are returning completed ones.
Volunteers have found the checklist handy: It includes such questions as: “Did you feel pressured to make an immediate decision?” and “Did the speaker use a title that suggested he or she was particularly qualified to advise older investors?”
“The word is out,” says Setzfand. “We heard that presenters are asking if there are any AARP members in the audience who would like help filling out the checklist.”
Too late for some
This effort comes too late for some people, such as an 80-year-old truck driver from Kansas City, Mo. He asked not to be identified, saying his experience after attending a free lunch seminar six years ago left him fearful of being exploited.
The driver and his wife, who has since died, were persuaded to put $50,000—almost all their life savings—into an investment that would give them an income stream for life. The deal clincher was the promise of a 10 percent bonus. “They said my money would make money,” he said.
The reality turned out to be quite different. In fact, he qualified for the bonus only if he left his original investment untouched for five years—and then purchased an annuity that paid him back over a period of at least 10 years.
After realizing how small a return his investment was yielding, the driver considered canceling his contract entirely. But doing so would have triggered a heavy financial penalty—the company would keep 12.5 percent of his original investment. That would have left him with less money than he started with six years ago.
“I should never have been sold this plan. Most of us don’t understand all this, so we trust these brokers,” the driver said. “I’ll be 91 before I get my money out.”
Not that it’s any consolation, but according to a study by the Financial Industry Regulatory Authority (FINRA), four out of five investors age 60 and over have received at least one invitation to a free lunch seminar within the past three years—and three out of five got six or more invitations.
“People desperately want someone to tell them what to do with their money, so they are susceptible to these high-pressure sales pitches,” says attorney Nygaard.
To protect yourself, do some homework before you go to one of these seminars, suggests Jim Johnson of Nokomis, Fla., an AARP monitor who researched the company sponsoring the free lunch he attended. “I found that they were not a locally owned company, as they claimed,” he says.
What you can do
Here are some suggestions from the Financial Industry Regulatory Authority and AARP to help you better protect yourself and your savings:
• Decide now to decide later. Don’t make any commitments during the event.
• Get a second opinion.
• Don’t turn over any of your financial records until you fully understand what the sponsors are selling and have confirmed they are licensed to sell it by checking with FINRA and the Securities and Exchange Commission’s Investment Adviser Public Disclosure site.You can also check out the federal consumer action Web site or register a consumer complaint at the Better Business Bureau.
• If you do invest, make sure you can get your money in an emergency.
Cathie Gandel writes about economic and consumer issues.