New Twist on the Old Free Lunch


Question: My wife received in the mail a “Special Invitation” for a complimentary $100.00 gift card for one of three prominent Monterey restaurants.  It says, among other things, “We would like to meet you, get to know you, and then discuss how our team of professionals can help plan and manage your hard-earned money.”  Not one of the financial advisors on the team appears to have any professional designations. What do you advise?

Answer: This is an interesting marketing approach that sounds like an offshoot of the old “free lunch” offer that brokers used to send out before the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission took notice and cautioned investors to be aware.  FINRA learned that 80% of investors over age 60 received at least one “free lunch” offer from a brokerage firm in the three years before their survey.  The SEC found that 50% of the free lunch seminars featured exaggerated or misleading advertising claims. 

The invitation your wife received sounds comparatively straightforward and tame.  However, it does raise a couple of questions.  Is a gift certificate offer the best way to go about finding a financial advisor if you are looking for one, and what qualifications should you look for?

The financial industry has a long history of soliciting “prospects” with free gifts.  You may remember the old Savings and Loan Associations (S&Ls).  Downtown Monterey had one on Alvarado Street – Monterey Savings and Loan. The building is still there, set back from the street and is now serving several storefronts.  They merged into Coast Federal Savings and Loan back in 1982.  S&Ls would frequently give away free toasters if you would open an account with them – after a while it became kind of a joke. 

Today, hardly a month goes by when I don’t receive an offer from a bank to open an account and have an extra few hundred dollars credited to me if I meet their restrictions.  This is just marketing in a competitive world, and the investment brokerage industry is a very competitive world.  Most of the big firms have offices here – UBS, Morgan Stanley, Schwab, Fidelity, etc. And most of the banks in town have in-house brokerage firms.  Bank of America has Merrill Lynch and Wells Fargo has Wells Fargo Advisors.

Many insurance agents are also licensed to sell mutual funds and variable annuities. Even the credit unions are getting into the investment business.  So it’s no wonder that independent brokers like the ones that solicited your wife use creative marketing ploys such as offering free gift cards to get people in the door.  Once in the door, the sales pitch begins. If it works, the broker gets paid.  If it doesn’t, he is out the cost of the gift card.

Let your wife know there are better ways to find a professional.  If you are in need of a physician or surgeon or attorney or other true professional, you won’t look for one offering a gift card. Next week, I’ll review the right way to find the best financial advisors.  In two weeks, I will help you crack the codes on financial advisor designations, and in three weeks I’ll refresh you on the dangers and pitfalls of free seminars.

Kenneth B. Petersen CFP®, EA, MBA, AIFA® is an investment advisor and Principal of Monterey Private Wealth, Inc., a Wealth Management Firm in Monterey.   He welcomes questions that you may have concerning investing, taxes, retirement, or estate planning.  Send your questions to: Ken Petersen, 2340 Garden Road Suite 202, Monterey, CA  93940 or email them to