Investment Seminars: Free Food With a Catch?

The Financial Industry Regulatory Authority (FINRA) has issued an “investor alert” warning individuals to be wary of free seminars boasting a free meal.

Investors are frequently being invited to fancy restaurants with the promise of an expensive meal at no cost where they are given a free seminar that “educates” them about investing or managing money during retirement. The “education” becomes a sales pitch by the speaker with an ultimate goal of selling products and gaining new clients. However, investors should remember that even with the free meal there isn’t and shouldn’t be any requirement to purchase anything.

According to a survey conducted by FINRA Investor Education Foundation, four out of five investors that were 60 or older received at least one invitation to a free investment seminar in the preceding three years. Nearly 60% of these individuals actually received six or mjore of these invitations. Further, nearly 25% of these individuals attended the seminars.

If you plan on attending one of these seminars, even just for the free meal at a nice restaurant you need to head FINRA’s warnings.  FINRA issued the following points to remember when attending a seminar:

1) “Seminars are designed to sell.” Even though the invitation promised an educational experience, investors need to keep in mind that it is more likely that the speaker ultimately wishes to educate you about the product(s) that they are selling. During these, “hard sell” pitches, speakers may misrepresent information about their product or others and may provide misleading information as to the safety, returns, or the performance of particular products.

2) “Good shows aren’t always good deals.” It is easy to be taken in by a fancy meal and well-dressed, well-spoken speaker. However, don’t be fooled by a lion in sheep’s clothing. Why do you think that these seminars are held at pricey restaurants rather than the local fast food joint? Someone is trying to impress you to get you to come to their presentation and hear their pitch.

3) “The lead speaker might not be the actual sponsor.”  The sponsor of the event may be an insurance company or mutual fund. Of course, the sponsor will want the speaker to sell their company’s products over any others. This creates a potential conflict. Investments should be appropriate for the investor and their individual circumstances. Investments are not one size fits all.

4) ” Education is a great idea-so be sure to learn about persuasion.” It is important that an investor remember that the speaker WILL use the power of persuasion to convince investors that their product is best for you.  There are a few things that an investor should watch out for or remember during any seminar they attend.

(a) Watch out for promises of wealth. There are no guarantees on returns.

(b) Make sure to check the sources quoted by any speaker. These speakers have a financial incentive to sell you their products. Unfortunately, this may cloud their presentation in many different ways. Check the facts.  It is always a good idea to know what you are buying, rather than soley relying on the advice of a salesperson.

(c) Do not be convinced by individuals or statements regarding other individuals an how well they may be doing after purchasing a particular product. Do you own research on the product.

(d) Do not feel obligated to purchase anything during the seminar. You do not owe the speaker anything for the free meal. Remember they invited you at no cost.

(e) Do not let anyone create a false sense of urgency to buy a product. Often these speakers will claim there is a limited supply of a product to make a sell.

Finally, FINRA has issued the following strategies to investors in an effort to help them distinguish potentially good investment offers from bad ones.

1- “Do your homework before the seminar.” “A legitimate securities salesperson must be properly licensed and his or her firm must be registered with FINRA, the Securities and Exchange Commission, or a state securities regulator – depending on the type of business the firm conducts.”

2- “Ask questions while you’re there.” Ask all the questions you wish and do not quit until you are satisfied with the information provided. If a broker does not want to provide you with information, then you should be even more skeptical. Ask about risk, costs of the investment, fees, surrender charges, liquidity of the investment, whether the investment is registered, and the type of investors who should purchase the product?

3- “Decide now to decide later, and do more homework AFTER the event.” Prior to the event, make a promise to yourself that you are not going to purchase anything or open up an account during the seminar. Based upon the information that you learn during the seminar, if you are interested then do more research on the product before you invest. It is never a good idea to buy now and then learn the hard lessons later. FINRA reminds us that there are unbiased places to find out more information about investments and these places a good place to start both prior to and after a seminar.

If you believe that you have been taken advantage of by an investment professional or firm, our firm may be able to assist you.  Please refer to our website www.dossfirm.com for more information on common investment schemes. We welcome direct contact and do offer free consultations.