When I was an investment advisor in my 20s, I was a hunter who used the free lunch to attract his prey: senior citizens who had lots of cash but not much investing knowledge.
These days, I’m a 70-year-old gazelle, offered to eat a free steak every week while a securities salesman harasses me.
Karma is a bitch.
If you’re getting these invitations, too – and if you’re over 60, chances are you’ve received quite a few – let me save you some angst.
Sizzle is being sold here along with free steak.
1. The dinner is real, and the seminar is a sales pitch
That’s not my hot take. That’s the conclusion of the most thorough investigation ever conducted by regulators into these incidents.
In 2007, the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), and state securities regulators 110 firms conducting “free lunch” seminars investigated. Their conclusion: 100% of meetings labeled as educational workshops were actually sales presentations.
Not 80%. Not 90%. To all of them.
That study is old, but regulators ran it once, saw what they saw, and have been issuing the same warnings about the same playbook ever since. The pitch has not changed. Steaks have become more expensive.
2. You are not a guest – you are the food
These events target people with money – usually those who are at or near retirement.
According to FINRA Investor Education Foundation research cited in the SEC report, 78% of seniors received a free lunch seminar invitation, and 60% received six or more invitations over a three-year period.
Why such a heavy target? Because the audience is high-value. People in retirement often have rollover IRAs, 401(k) balances and inherited money in accounts.
The math on a $200 stake works fine if a guest at the table also transfers a $300,000 IRA into the product by paying a 6% commission to the salesperson. That’s a discount of $18,000 on a one-off sale. A whole room of free files just paid for 10 times more.
3. Half-pitch feature claims slammed as ‘misleading’ by regulators
The SEC exam pulled specific examples directly from seminar marketing materials:
- “Add $100,000 to your net worth instantly”
- “How to Get 13.3% Returns”
- “How $100K Can Pay Your Heirs $1 Million”
The flavor of advertising claims was present in half of the seminars examined. About 23% included possibly inappropriate recommendations – such as a risky investment recommended to someone with a “conservative” objective, or a liquid investment recommended to someone who needed cash quickly. and 13% were referred to as fraud in enforcement.
So if half are misleading, about a quarter are promoting inappropriate products, and about one in eight are arguably criminal, your chances of sitting through a clean, useful presentation aren’t very good.
Quick gut-check – If your money advice is coming from random online influencers, you’re playing a dangerous game. I’ve been a CPA since 1981 and have been writing about money since before the Internet existed. Sign up for the free Money Talks newsletter and get time-tested expert advice.
4. What are they usually selling
If any of the following are mentioned in the seminar, you are in trouble:
- Equity-Indexed Annuities (also called Fixed-Indexed Annuities)
- variable annuities
- Non-Traded REITs (Real Estate Investment Trusts)
- “Bonus” Annuities
- Tax-Advantaged “Income Strategies”
- Living Trusts are associated with annuity purchases.
There is nothing inherently wrong with annuities. Mean something to some people.
The problem is that the products that are emphasized most at these dinners are the ones that yield the largest commission to the salesperson – not necessarily the products best suited to your situation.
The problem is usually hidden in surrender charges, upper limits, complicated participation rates, and contracts that lock your money in for seven to 15 years. I’ve included the trade-offs in my annuity pros and cons.
Short version: If you can’t explain in one sentence how the product makes money, don’t buy it.
5. ‘Free’ advice has a price tag – and it’s your information
Before the entry arrives, you will receive a clipboard with a sign-in sheet, worksheet, or brief questionnaire to “personalize” the consultation.
This is a real transaction. You are selling your contact information, your financial situation, your retirement account balances, and sometimes your children’s names in exchange for the Rebbe.
The seller now has a qualified lead with a known asset value. Follow-up calls begin the next morning.
6. The real pitch happens at the kitchen table – not at the steakhouse
The dinner is an audition. Closeness comes later.
After the seminar, the advisor offers a free, no-obligation review of your retirement plan. You meet at your home or their home. Suddenly both of you are spreading your account details on the table.
This is where the products are actually sold. This is where surrender-charge schedules are hidden and illustrated returns are presented as if they are guaranteed.
If you want to get a feel for how these conversations really go, here are 10 questions a bad financial advisor hopes you’ll never ask.
Ask them all. See what happens.
7. How to enjoy steak and protect your wallet
Still want to go? Good. It’s certainly possible that you’ll learn something interesting and the food is usually very good. My latest invitation was for dinner at Morton’s or Ruth’s Chris, both restaurants I really like.
But if you want to kill one, here’s the rule book:
- Look at the speaker first. use finra brokercheck and SEC Investment Advisor Public Disclosure Database. Both are independent. Both show complaints, terminations and disciplinary histories.
- Ask a question out loud: “Are you 100% trustworthy in writing?” A fiduciary is required by law to act in your best interests. A “fitness” seller only requires the product to be technically suitable – very rarely.
- Do not fill any form. You’re not there for a financial plan. You are there for dinner.
- Never sign anything that night. If a deal is only good for the next 48 hours, it’s not a deal. This is a closing strategy.
- Leave a follow up review. Or, if you’re really curious, bring along a fiduciary advisor you already trust to sit with you.
If you really want a real second opinion on your retirement, find a fee-only fiduciary that you pay for directly. The difference between genuine financial advice and a sales pitch depends on one thing: whether the person across the table is there to help you or treat you to lunch.
bottom line
I don’t want to be overly cynical about this sales method. After all, I did it myself 40 years ago, and I was no crook. I was just looking for new customers; nothing wrong with that. And if you want to get some wisdom from a local mentor along with good food, do so.
Just remember what you’ve been telling your kids all these years: There’s no such thing as a free lunch.
