I inherited ‘a sizable amount’ from my mother. A financial adviser took me out for a free meal at an investment seminar and made ‘some good, interesting points.’ Should I be wary? (2024)

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Then there are those investors who get a glossy postcard in the mail offering a free steak dinner and the chance to meet a savvy financial planner at an “investment seminar.” These free lunch (or dinner) presentations are usually nothing more than slick sales presentations, often aimed at people 55 and older and focusing on retirement, tax planning or Social Security. In 2009, AARP found that nearly 6 million Americans a year received such invitations, including one MarketWatch Picks reader who attended two such seminars and wonders whether the advice — and the presenters — were legitimate. Here’s what he wrote to us:

“After I inherited a sizable amount of money from my mother’s investment portfolio, I received two slick color postcards offering me a free steak dinner and a free lunch if I attended an educational seminar on investing. The first guy was giving a hard sell on a bunch of annuities, and really turned me off. The second adviser made some good, interesting points and seemed like someone I should consider for handling my investments. Is this a good idea?”

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Let’s hope you enjoyed your meals but didn’t swallow too much of that investment advice. When AARP checked them out, the finding was that close to 25% of the advisers at free-meal seminars recommended unsuitable 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 legitimate, often the presentations are aggressive sales pitches for investments you don’t need.”

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These seminars are the perfect proof that there is no such thing as a free lunch. At best, the brokers offering these events are perfectly legitimate, responsible financial advisers who hope to earn back the cost of those steak dinners by landing new clients who’ll generate tidy commissions and fees for their services. On the other end of things, you’re being force-fed misleading information about expensive, inappropriate investments, or even being lured into a scam.

Let’s take the presentation on annuities. These are insurance products that can be quite simple, effective and reasonably priced. Or they can be complicated, expensive policies that generate big, juicy commissions, earn the advisers free vacations, and are hard to get out of without losing even more money. One reason 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 that aimed to crack down on brokers who offered unsuitable products to investors, but the rule was struck down in 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 wiped out, annuity sales surged.

A steak dinner isn’t the only gimmick money managers use to prospect for clients. Other approaches include workshops for charitable giving that are, not surprisingly, sponsored by a charity. Others are strictly educational and may focus on a particular investor audience, such as women. One planner used an art tour as a way to gather potential clients. What all these events have in common is that they’re a marketing tool for a financial adviser to connect with investors with the hope of signing them up as clients. In some cases, a free-lunch pitch is no different from a an advertisem*nt in a magazine, on the Internet or through a high-priced TV commercial during a golf tournament.

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The key is that, once you’ve cleaned your plate, make sure your potential adviser hasn’t cleaned out any past clients. You’ll need to check them out and make sure they’re properly registered and, if they claim a specific qualification, certified with a clean record. MarketWatch has several resources to guide you through running 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 publishes links to your state’s financial regulator.

That’s exactly what our reader ended up doing, and the background check turned up several problems and concerns in the broker’s background. He’s still looking for a new financial adviser but now he knows: If you’re getting a free steak dinner, make sure it’s not actually you on the menu.

Have a question about how to handle an issue with your financial adviser or thinking of hiring a new financial adviser? Email picks@marketwatch.com.

This story was originally published in 2022.