Avoiding Scams at the Holidays: Part Two of a Six-Part Meyer Wilson Blog Series
It's the giving time of year. Spirits run high; twinkling lights appear
all around us; cards flood our mailbox. Among them, we find a brightly-colored
invitation from Smith & Co. brokerage firm or insurance agency to
a country club or nice hotel for a "free lunch in appreciation of
being a loyal client" or "an exclusive, catered event"
to introduce a "select few—like you!" to an opportunity
that's "already slipping away."
We'd all love to eat a nice meal that we don't have to cook or
buy, but it's never free. The firm has already paid for the three-color
marketing piece, the country club or hotel conference room, and lunches
for the people they hope show up. They want to get that money back and
make money, and they plan to do it by selling us what we thought we'd
never buy. They're very skilled at persuasion, and more often than
not, they do sell us something at our "free lunch."
In economic theory, "there's no such thing as a free lunch"
means that we never get something for nothing. Whenever goods and services
are provided, someone has to pay for them. The phrase is as old as it
is true—in the U.S. in the middle 1800s, tavern owners announced
free lunches served at noon. The hook was that the customer had to buy
a lunch's worth of liquor before they could eat.
Investment scam artists regularly use these types of ploys to entice investors
to hand over a large sum of money for the newest and best investment that's
"guaranteed" (a red-flag word if used by an adviser or salesperson)
to make us money. Last year, the Financial Industry Regulatory Association
research that found that 64% of polled investors had been invited to an "educational"
investment meeting that turned out to be a sales pitch for a potentially
According to a different survey by the
FINRA Investor Education Foundation, four out of five investors over age 60 got at least one invitation to
a free investment seminar in the past three years. As I
explained during a news interview, since most of these "free lunch" seminars are nothing more
than opportunity to sell complicated investment or insurance products,
if you are someone that may be susceptible to high-pressure sales techniques
(if you don't like to say "no"), then stay home and avoid
the event altogether. Otherwise, it may be the most expensive lunch you
have ever bought.
The results of these "education" seminars can be disastrous,
which is why both
FINRA and AARP have in-depth resources for investors to educate themselves on
"Free lunch" offers can appear in other forms, too:
- An e-mail from another country requesting a small deposit in exchange for
a large amount of money.
- An offer for a small purchase of a penny stock in anticipation of a large,
- A letter from another country announcing the recipient won a "lottery"
and including what looks like a cashier's check for an initial payment.
- An offer to participate with a group in a private hedge or other fund as
opposed to a public fund, with a small initial investment and promised
It's easy to make a snap decision during the holidays when excitement
runs high and there's cheer all around. Beware
any offer for a "free lunch" and never invest your money on the
spot or without doing the research in advance about the investment and
the person selling you the investment.
Other resources from Investment Fraud Attorney David Meyer regarding the
"free lunch" sales tactics to watch out for:
How can I find out whether an investment seminar is legitimate or a scam?
Is There Ever Really Such a Thing As a "Free Lunch"?
AARP Warns Seniors: That "Free Lunch" Could be Costliest Yet
Top Tips To Stop Elder Financial Fraud
Don't Become a Victim of a "Free Lunch" Seminar Scam