December 3, 2018 — One of the intriguing lines that came up during the interviews for our “Should You Hire a Financial Advisor, Or Do It Yourself” article of a few months ago was this one: “Beware those free dinners”. Lewis, the author of that quote, was referring to those invites you get in the mail for a free dinner at some nice restaurant; in exchange all you have to do is listen to some financial expert tell you how you can make a ton of money. Recently Ron Lieber, a columnist from the New York Times, took up that invitation, using one that came in for his 80 year aunt. The pitch was: “Tired of the stock market roller coaster ride? Want to protect your principal and lock in interest earnings?” The answer was to be found during a free steak dinner at a gourmet restaurant.
Lieber went to the dinner to find out what really goes on at one of these gatherings. We bet you have already received invitations to similar events in your mailbox. The columnist had some suspicions about how the evening would go, and he was not disappointed. For starters, the host was an insurance salesman, Arif M. Halaby. Lieber discovered Halaby had earlier been the subject of a state cease-and-refrain order from a judge concerning the selling of certain financial products.
The AARP did a study a while back and found that almost 2/3rds of older Americans had received invitations to an event like this. Most of them had received multiple invites. The problem that can come from these events is revealed in a study done by the Securities Exchange Commission and other organizations – they found that in 57% of the cases, the presenters at these events used misleading information or claims.
In the case of Mr. Halaby’s presentation, Lieber’s biggest problem came from a misleading chart. The graphic made it look like the return from his product, a sophisticated equity based annuity, was much better than the S&P 500 index over a similar 18 year period. The issue came in the small print, which mentioned that reinvested dividends had not been included – if they had, the S&P 500 index performed better.
If you are tempted
Not all such free dinners involve someone with a questionable past or misleading information – some are probably fine. But Lieber offered some excellent advice for anyone considering attending such an event:
– Do a quick look up on the Internet of the organization and individual doing the hosting. Make sure there isn’t a past to be wary of. This link will help you check out the broker.
– Don’t do anything quickly with your money. If you are intrigued, get a second or third opinion from an expert who doesn’t charge commissions.
– Read all the fine print, and ask lots of questions.
Have you received invitations to a free event – or attended one? Please share your experiences in the Comments below.
For further reading
We Went to a Free Steak Dinner. The Salesman Wasn’t Pleased (Ron Lieber, NY Times)