For six months, I attended every "investment seminar" offering a free lunch that I found advertised in the newspaper or in postcards I got in the mail.

I soon realized I would learn little about investing but a lot about high-pressure sales tactics for high-commission products. Although I had no intention of buying anything, I continued attending to gather material for my columns.

After a while, the seminars became so predictably unpleasant that I stopped going this year. Now, based on a study by AARP and the North American Securities Administrators Association (NASAA), I see that little if anything has changed.

"Many people go to these seminars hoping to learn about ways to create a more secure retirement, but instead are pitched financial products that are fraudulent or unsuitable for them." said Jean Setzfand, director of financial security at AARP, the advocacy group for people 50 and over

I must emphasize that some investment seminars are indeed educational. I've attended many, including several sponsored by investment firms and featuring talks by economists and money managers. My main concern -- and that of regulators -- is with solicitations for "free lunch" seminars that prey on seniors' fears by implying they risk financial catastrophe if they don't do what the presenter says.

An estimated 5.9 million Americans 55 and older have attended a seminar offering a free lunch or dinner in the past three years, with mail as the most common method of solicitation. Of those solicited by mail or email, 27 percent have received 10 or more invitations.

In response to such solicitations, AARP, in collaboration with NASAA, which is an organization of state securities regulators, launched a "Free Lunch Monitor" program in October 2008. Armed with checklists, 180 volunteer monitors attended these seminars and reported what they saw. (To learn more about the program or to volunteer, see www.aarp.org/nofreelunch).

The volunteers' findings, together with the responses to a telephone survey of 1,012 Americans 55 and older, are summarized in a new study titled "Protecting Older Investors: 2009 Free Lunch Seminar Report."

For example, 78 percent of people who attended seminars expected they would focus on opportunities to learn more about financial issues. However, once at the seminar, half said they were asked for personal information; 46 percent said the presenter tried to make a follow-up appointment at their home, and 39 percent said the presenter tried to sell them something during or after the seminar.

Many of the seminars focused on annuities. Two-thirds of the volunteer monitors said the presenter did not discuss surrender charges or tax penalties if annuities are cashed in early, and 48 percent said the presenter did not discuss any annuity risks.

Attendees were consistently promised the products were low risk and would yield high rates of return (54 percent of the volunteer monitors said they were promised returns of 7 percent or more. I assure you no annuity today can guarantee that).

This is definitely not a knock against annuities. In fact, I own several. But these can be complex products and there are many types of annuities, each with its own risks.

"Low risk, high reward is a red flag warning for possible investment fraud," said Denise Voigt Crawford, NASAA president. "I encourage all seniors to investigate before they invest in any offer served at a free lunch seminar," including checking the presenter's credentials with securities regulators.

 

 

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Investing - 'Free Lunch' Investment Seminars Often End Up Costing You Money

(c) 2009 Humberto Cruz