I inherited “a considerable sum” from my mother. A financial adviser invited me to a free lunch at an investing seminar and gave me ‘some interesting good points’. Should I be suspicious?

Hope you enjoyed your meals, but didn’t swallow too much of these investment tips.

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It’s hard to find good, trustworthy financial advice. Sometimes people are lucky to be recommended by a friend or acquaintance. Others do extensive research online to find a professional money manager. Then there are those investors who receive a glossy postcard in the mail offering a free steak dinner and the chance to meet a savvy financial planner at an “investing seminar.”

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These free lunch (or dinner) parties are usually nothing more than nifty sales presentations, often aimed at people 55 and older and focused on retirement, tax planning, or social security. In 2009, AARP found that nearly 6 million Americans a year received such invitations, including a MarketWatch Picks reader who attended two such seminars and wondered if the advice — and the presenters — were legitimate. . Here is what he wrote to us:

“After inheriting a considerable sum of money from my mother’s investment portfolio, I received two smooth colored postcards offering me a free steak dinner and a free lunch if I attended a seminar investment education. The first guy was doing a hard sell on a bunch of annuities and really pissed me off. The second advisor made some interesting good points and seemed like someone I should consider to manage my investments. Is it a good idea?”

Also see: This SmartAsset tool can help match you with an advisor that meets your needs.

Hope you enjoyed your meals but didn’t swallow too much of these investment tips. When AARP audited them, it was found that nearly 25% of free meal seminar advisors recommended inappropriate investments. When the U.S. Securities and Exchange Commission, state officials, and other securities regulators reviewed 100 free meal seminars, they found that 12% involved some kind of fraud. According to AARP, “While some of these money management seminars are legit, the presentations are often aggressive sales pitches for investments you don’t need.”

These seminars are the perfect proof that there is no free lunch. At best, the brokers offering these events are perfectly legitimate and responsible financial advisors who hope to recoup the cost of these steak dinners by attracting new clients who will generate commissions and fees for their services. On the other hand, you are fed misleading information about expensive and inappropriate investments, or even lured into a scam.

Let’s take the discussion on annuities. These are insurance products that can be quite simple, effective and reasonably priced. Or it can be complicated and expensive policies that generate big, juicy commissions, earn advisors free vacations, and are hard to get out of without losing even more money. One of the reasons why complex annuities are pushed at these seminars is that the requirements for brokers selling annuities are often less stringent than for advisers offering other types of investments. The Obama administration created a rule to crack down on brokers who offered unsuitable products to investors, but the rule was overturned by a court in 2018. When this rule was partially in effect, annuity sales fell sharply, according to the Wall Street Journal. . As soon as the rule was abolished, sales of annuities jumped.

A steak dinner isn’t the only trick fund managers use to prospect for clients. Other approaches include charitable giving workshops which are, unsurprisingly, sponsored by a charity. Others are strictly educational and may focus on a particular investor audience, such as women. A planner used an art tour as a way to gather potential clients. What all of these events have in common is that they are a marketing tool for a financial advisor to connect with investors in hopes of signing them up as clients. In some cases, a free lunch course is no different than an ad in a magazine, on the Internet, or in a high-priced TV ad at a golf tournament.

The key is that once you’ve cleared your plate, make sure your potential advisor hasn’t cleared past clients. You will need to check them and ensure they are properly registered and, if claiming a specific qualification, certified with a clean record. MarketWatch has several resources to guide you through performing your own background check, here, here, here, and here. Other sources are the Securities and Exchange Commission, the Financial Industry Regulatory Authority, and the North American Securities Administrators Association, which also publish links to your state’s financial regulator.

This is exactly what our reader ended up doing, and the background check revealed several issues and concerns in the broker’s background. He’s still looking for a new financial adviser, but now he knows: if you get a free steak dinner, make sure it’s not really you on the menu.

Also see: This SmartAsset tool can help match you with an advisor that meets your needs.

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