The Financial Industry Regulatory Authority (FINRA) has issued an alert to all investors.
Beware of the “free meal” seminar, no matter where it is or who seems to be presenting it. According to FINRA research, 64% of those responding to a survey of people age 40 and over had been invited to an “educational” seminar with a free meal offered. But it is probably not solely about educating you.FINRA, the SEC and state regulators conducted more than 100 examinations involving free-meal seminars. They found that in half of the cases, the sales materials contained claims that appeared to be exaggerated, misleading or otherwise unwarranted. And fully 13 percent of the seminars appeared to involve fraud. For people age 65 or above, the fraudulent claims and promises are nothing more than elder abuse when the senior falls for it. For every consumer, note these points FINRA wants you to keep in mind before you attend any “investment” or “financial education” seminar, especially with a free meal.
1. Investment seminars are intended to sell you something. Their purpose in not merely educational.
2. Beware of the persuasive effect of a high end venue, an expensive meal and a smooth, well-dressed presenter. These are collectively designed to impress you, but it does not mean that the opportunity being pitched is right for you.
3. Find out who is really sponsoring the event. At times, insurance companies, mutual funds or other companies offering their products are behind the pitch, financing the event and expecting that the speaker, who could be someone you know or recognize, will use the event to drive sales of their products.
And who is most subject to be influenced by these free meal seminars? Are we Baby Boomers the targets? Perhaps. But more likely, it’s our aging parents. Aging investors may not be as sharp as they were in a younger day, due to memory loss or other issues. The early warning signs of memory loss also suggest erosion of financial judgment. That can lead to impulsive purchases and lack of financial judgment about the risks.
One of the biggest differences between a savvy investor and one who is subject to manipulation is that savvy investors refuse to be rushed. A characteristic of the soft sell turned hard sell at these free meal seminars is the “limited time offer” or the “scarcity” concept. The attendees of a seminar may be told that there are only “a few units left” or that they should buy today before it’s too late.
And one of the worst things an older investor can do is tie up her money for long periods without a substantial penalty if she needs to access it before the extended term of the anticipated investment. This is a trap many seniors fall into, hoping to get big rewards quickly but not realizing that if they need to take their money out they can’t do so readily. The seduction of high returns or quick profits can fool many an elder into making serious financial mistakes.
What can you do if someone in your life seems inclined to fall for the “educational seminar” with a free dinner or lunch?
Here are three takeaways:
First, stay in communication. Let them know you are concerned about the prevalence of these offerings by supposedly qualified people and ask if they’ve been solicited to attend any of them. If they want to go, dig deeper. Ask questions.
Second, educate them about the warnings FINRA wants everyone to be
aware of, most of which I’ve summarized here. Give them a heads-up about
persuasion tactics and influence techniques they are likely to
see.Third, if you learn that your aging loved one, client or friend want
to go to a seminar as I’ve described here, check out the presenter.
You can use FINRA’s Broker Check (800) 280-9999 to see if the
presenter is licensed to offer financial products. If the sponsor is an
insurance agent, find out if he is licensed through your state
department of insurance or the National Association of Insurance
Commissioners. You can find out information about the people offering
products for sale through your state's securities regulator or the North
American Securities Administrator’s Association at (202) 737-0900. When
you find unlicensed, unlisted presenters, beware.Keeping our aging parents and other elders financially safer will require the attention of the family and friends in their lives If we want them to avoid being fooled by the stealth of seminar presenters with a hidden agenda we can help educate them.
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