Lunch, With a Side of Investment Advice

Seniors should approach free lunch financial seminars with caution

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Figuring out how to invest for retirement may not make the most relaxing lunchtime conversation. But many seniors seem to be willing to discuss their retirement finances in exchange for a free meal. Approximately 5.9 million Americans age 55 and older have attended a free lunch or dinner seminar in the past three years, according to new AARP and North American Securities Administrators Association research released yesterday.

Of course, after the meal comes the pitch. Seminar attendees told AARP that the presenter sometimes tried to sell them something during or after the free financial seminar (39 percent), asked for personal financial details or contact information (50 percent), and attempted to make a follow-up appointment at their home (46 percent). “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,” says Jean Setzfand, director of financial security at AARP.

[See Finding a Financial Adviser You Can Trust.]

Most seniors are invited to free lunch financial seminars by mail (63 percent) or through a newspaper or TV advertisement (58 percent), the survey of 1,012 Americans age 55 and over conducted by International Communications Research found. Smaller groups of people were notified of the financial seminars by phone (18 percent) or e-mail (22 percent). Even when seniors don’t respond, the invitations often keep coming, with 57 percent of the survey participants receiving five or more invitations in the past three years. About 9 percent of the seniors said they accepted at least one invitation.

To find out more about what kind of talk goes on over free lunch, AARP asked 180 volunteers to visit investment or money management seminars and use checklists to report their findings. Many of the attendees said the presenter emphasized the merits and downplayed the risks associated with financial products. For example, 39 percent of seminar participants said they were encouraged to purchase an annuity, but the speaker generally did not discuss the risks associated with annuities (48 percent) or disclose the surrender charges or tax penalties if annuities were cancelled early (67 percent). Plus, over half of the volunteers who attended free seminars between November 2008 and August 2009 reported that they were promised returns of 7 percent or more (54 percent).

[See How Safe is Your Social Security Number?]

Common phrases seminar attendees said were emphasized include “low risk” (43 percent), “high rate of return” (26 percent), and “people are making a lot of money on similar investments” (26 percent). "Low risk, high reward is a red flag warning for possible investment fraud,” cautions NASAA President Denise Voigt Crawford. “I encourage all seniors to investigate before they invest in any offer served at a free lunch seminar.”

Please tell us about your experiences with free lunch financial seminars below.