Beware Financial Sales Pitches That Come With a Free Meal

Like many people over 50, I regularly receive invitations to seminars held at pricey local restaurants. Typically, these invitations offer a free lunch or dinner along with a presentation on how to make the most of retirement income and assets. I've often wondered what, if anything, I could learn from these seminars and what the catch is. Hard sell? Bad advice? Lousy food?

Thus I found myself on a recent weeknight sitting with a group of oldersomethings at a white-tablecloth restaurant a few miles from my home. It was an hour into the program, but the presenter, a registered investment adviser, was just shifting into high gear. "Isn't that right? Every little bit counts, doesn't it?" he said of the tax strategy he had just explained. We nodded like schoolchildren. "Who thinks this is important? Show of hands!"

The call-and-response delivery (think revival meeting) was hokey, but the information seemed reasonable. As promised, it included advice on Social Security (delay claiming until age 70 to get the biggest benefit), withdrawal strategies (following a rigid formula can be risky) and taxes (required distributions can bump you into a higher bracket). I've written about those same issues; nothing controversial there.

The presenter also brought up annuities and mentioned that as an insurance broker, he sells them. He urged us to make an appointment for a free one-on-one consultation, and he asked us to fill out a form with our contact information. I hesitated, but I also felt obligated, thanks to the dinner I had yet to be served. I filled out the form.

Reciprocity effect. Bingo, says Gerri Walsh, senior vice-president for investor education at the Financial Industry Regulatory Authority (Finra), which is funded by the securities industry. "That's the basis of persuasion. All those tactics are aimed at helping you make an emotional rather than a rational decision. It's the concept of reciprocity." If I felt pressure to give my contact information, older, more vulnerable people might be persuaded to sign away much more.

In fact, reports from regulatory agencies, including Finra, warn that free-dinner seminars can include misleading claims and even outright fraud. Agents who deliver the presentations often style themselves as "senior specialists," a title that may have little or no meaning, depending on the designating group. And many seminars are sponsored by companies that have a stake in selling you their products—including investments that can be risky or inappropriate, such as variable or equity-indexed annuities. If you don't get the pitch at the seminar itself, chances are it will come later, during the personal consultation you'll be encouraged to attend.

Not every seminar is shady or high-pressure, says Geoffrey Brown, CEO of the National Association of Personal Financial Advisors (NAPFA), whose members are fee-only. Some financial advisers, including NAPFA members, use seminars to educate, cultivate new clients and reward old ones, he says. And even seminars that come with a sales pitch can teach you something, if you don't let yourself get carried away.

Advice from Walsh: "Go and listen with an open mind, but don't buy at the seminar itself. Take the information, think about it, and fully vet it." Part of that vetting involves going to BrokerCheck (at www.finra.org), which lists the credentials of advisers and firms as well as any complaints lodged against them. Also find out who sponsored the event. "It's a good idea to check out everybody involved," says Walsh.

Oh, yes, the dinner. We got a piece of fish, a piece of chicken, a side, a salad, and pie à la mode for dessert. Taken with a huge grain of salt, it wasn't bad.