Avoiding Scams at the Holidays: Part Two of a Six-Part Meyer Wilson Blog Series
It's the giving time of year. Spirits run high; twinkling lights appear all around us; cards flood our mailbox. Among them, we find a brightly-colored invitation from Smith & Co. brokerage firm or insurance agency to a country club or nice hotel for a "free lunch in appreciation of being a loyal client" or "an exclusive, catered event" to introduce a "select few—like you!" to an opportunity that's "already slipping away."
We'd all love to eat a nice meal that we don't have to cook or buy, but it's never free. The firm has already paid for the three-color marketing piece, the country club or hotel conference room, and lunches for the people they hope show up. They want to get that money back and make money, and they plan to do it by selling us what we thought we'd never buy. They're very skilled at persuasion, and more often than not, they do sell us something at our "free lunch."
In economic theory, "there's no such thing as a free lunch" means that we never get something for nothing. Whenever goods and services are provided, someone has to pay for them. The phrase is as old as it is true—in the U.S. in the middle 1800s, tavern owners announced free lunches served at noon. The hook was that the customer had to buy a lunch's worth of liquor before they could eat.
Investment scam artists regularly use these types of ploys to entice investors to hand over a large sum of money for the newest and best investment that's "guaranteed" (a red-flag word if used by an adviser or salesperson) to make us money. Last year, the Financial Industry Regulatory Association "FINRA" published research that found that 64% of polled investors had been invited to an "educational" investment meeting that turned out to be a sales pitch for a potentially fraudulent offer.
According to a different survey by the FINRA Investor Education Foundation, four out of five investors over age 60 got at least one invitation to a free investment seminar in the past three years. As I explained during a news interview, since most of these "free lunch" seminars are nothing more than opportunity to sell complicated investment or insurance products, if you are someone that may be susceptible to high-pressure sales techniques (if you don't like to say "no"), then stay home and avoid the event altogether. Otherwise, it may be the most expensive lunch you have ever bought.
The results of these "education" seminars can be disastrous, which is why both FINRA and AARP have in-depth resources for investors to educate themselves on the tactic.
"Free lunch" offers can appear in other forms, too:
It's easy to make a snap decision during the holidays when excitement runs high and there's cheer all around. Beware any offer for a "free lunch" and never invest your money on the spot or without doing the research in advance about the investment and the person selling you the investment.
Other resources from Investment Fraud Attorney David Meyer regarding the "free lunch" sales tactics to watch out for: