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When Is It Unethical To Accept A Free Lunch With A Financial Planner?

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  • TedTed
    edited April 2018
    @Maurice: I highly recommend the rubber chicken !
  • The user and all related content has been deleted.
  • edited April 2018
    For an independent FP prospecting for clients, no.

    On the other hand, I have no qualms about going to a dinner or similar events which are hosted by Schwab, which is home to my accounts.
  • @Maurice Since you have some reservation about accepting a freebie, just to be on the safe side go with the .. Chicken Cordon Bleu Sandwich $14 LIGHTLY FRIED OR GRILLED CHICKEN TOPPED WITH SWISS, SHAVED HAM, HONEY MUSTARD, LEAF LETTUCE AND TOMATO, SERVED ON A PRETZEL BUN. Then you won't feel so guilty !
  • The answer is never. Just be prepared to fend off pitches everafter.
  • I regularly get invited to a local expensive restaurant for a free seminar of financial planning. Since there is no free lunch so to speak, I passed on a number of occasion. Even one of coworker who changed career and became a financial planner, I went just for his support.

    However, we did went to a dinner invite for a time share condo, and they really tried hard to convince us what a great deal these products are. We decided to pay as we go to any hotel of our choice and time period we wish.
  • edited May 2018
    Seems to me the question is turned around backwards. If you believe in the free lunch hypothesis, a viewing of Glengarry Glen Ross might be in the order. The moment you accept the invitation for the free dinner you become a new “lead”.

    Excerpt from Glengarry Glenn Ross: “These are the Glengarry leads. And to you, they're gold. And you don't get them. Why? Because to give them to you is just throwing them away. ... They're for closers. I'd wish you good luck, but you wouldn't know what to do with it if you got it. ... And to answer your question, pal, why am I here? I came here because Mitch and Murray asked me to, they asked for a favor. I said, the real favor, follow my advice and fire your fuckin' ass because a loser is a loser.”
  • Maurice said:

    I raised this topic before. It may have been quite some time ago. Perhaps as long ago as the FundAlarm days.

    As many of you probably do, I get periodic invites in the mailbox from financial planners. The invite stipulates that the financial planner is having an informational lunch or dinner, and I am invited, if I RSVP in time. No obligations are required. My belief is that, as a Do-It-Yourself'er (DIY) investor, I don't have a need for a financial planner. Or perhaps I am wrong. Perhaps I should attend and will find the services to be of value. And if I do go, is it ethical in this circumstance to attend more than one? How many lunches are reasonable?

    If my memory serves me correctly, it was the discussion board's posters, who are financial planners, that thought it was unethical of me to attend, unless I am open to giving serious weight to consider the services of such planners. To their credit, I never did respond back with an RSVP to attend. Their basic objection was that the cost of the lunch comes out of the pocket of the financial planner, and not from the firm that they are employed by.

    Usually the invitation is on expensive stationary and is delivered by USPS. Today I received the following email from my credit union.

    Register Today! Retirement Planning Lunch & Learn

    Join us on [date deleted] for this FREE Retirement Planning Lunch & Learn at the [location deleted]! [Name deleted], Financial Advisor and Registered Principal at [firm name deleted], will discuss critical factors in planning your retirement years, including:

    What are my biggest retirement risks?
    Will I ever be able to retire?
    Will my money last through retirement?
    Is it okay to carry some debt into retirement?
    Where can I get help?

    This seminar is free of charge and lunch will be provided. Seating is limited and advanced reservations are REQUIRED so reserve your place today!
    So am I a bad person if I RSVP, because I'm curious. I'll disclose to you that I might be as curious about the restaurant as I am about the informational topic. If okay, how many of these can I attend before I cross a red line in the sand that makes me the moral equivalent of a dictator in the Middle East, not to be named?

    Infinite. Attend as many as you want, no problem. They're effectively trying to buy your business. That, to me, is more unethical than attending with little intention of picking up their services.
  • I'm with @PRESSmUP here. While an independent FP may accurately state that there's no obligation if one attends, that disclaimer pertains to becoming a client. There is an obligation, whether legal or moral, to be attentive and to consider what is being presented. That's the quid pro quo. If you're more interested in checking out the restaurant than in the presentation, then IMHO you're not holding up your end of the bargain.

    Like PRESmUP, I'll attend the infrequent (and getting more infrequent by the year) events sponsored by financial institutions where I invest significant assets. What they are getting from me is my continued business, which I could take elsewhere.

    Finally, I do not feel that the occasional ethical lapse renders one a bad person. The first is about individual actions, the other about the intrinsic nature of a person. Relax, enjoy the chicken if you must:-)
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  • edited May 2018
    The user and all related content has been deleted.
  • @Maurice
    When I receive these, I discover as much as possible (curious) about the firm and the person. This includes a FINRA broker check. A few times over the years I have found negative data about a person; and of more interest is that some folks have switched jobs often.......not necessarily a bad sign, but interesting.
    I imagine that the business cost of such events are anticipated to be overwhelmed from monies from new clients. The majority of these I receive are folks who have passed "x" number of insurance level exams (read annuity) without other attributes; although about 1/4 are indeed accredited financial planners.
    Have not had a dinner.
  • My brother, a veterinarian, once calculated the cost of a free puppy for his 4-H advisees. It was not trivial, but you received unconditional love.
    If you don't have a 15 year life expectancy, don't get a free puppy (or a pure bred, if that's your fancy); but, if there's no free puppy, why do you anticipate a free lunch?
    If you are smarter than the presenter, why go? How many follow up calls can you endure?
    If you not smarter than the presenter, go to more free lunches and select the best presentation. At least you got lunch.
    Separately, the lady for whom I am power of attorney has somewhat more than $1M, which will rapidly transfer to her assisted living owners. When I asked her BOA local office about investment vehicles, they referred me to their Merrill Lynch office at a different site, where they advised me that they usually didn't accept clients with less than $3M assets, but they might make a few suggestions on her behalf.
    While this may seem irrelevant, the point is that you had better get EVERYTHING in order while you have capacity, because your powers of attorney will face a daunting challenge to do their best for you.
    If there is a POA thread, send me to it.
  • edited May 2018
    I have had lunch with a number of advisors through my many years of investing.. Some I did business with and some I did not. Those that could not correctly answer my questions or said they would have "research it" and they'd get back to me. Well, I simply passed on doing business with them. Folks, I simply asked questions I felt people in the profession should know off the top of their heads.

    I never attended many "free lunch" seminars ... and, still decline invitations to attend them today. But, I do indicate an interest for a one on one lunch appointment if I feel it appropriate with my current or a prospective advisor of my good interest. In this way, I get them into my environment one-on-one and often times in this meeting I find out just what they do know ... and, many times what they don't.

    Most of the time on group "free lunch" seminars ... I pass. These are simply an easy way for them to qualify you and a limited way for you to qualify them. And, they will pay for lunch to find this out through the questionaire they ask you to fill out during the course of the seminar ... and, then turn it in. In this way they learn a good bit about you ... and, you have learned little about them. And, again, they will pay for lunch to find this out. So, if you are of the "free lunch type" enjoy it at their expense. But, be careful on how you answer their questionaire without being untruthful. Most of all, remember, in most cases, these are sales people who are licensed to sell investment products ... and, they prospect through offering "free" lunches.

  • Around here they always use the same Italian restaurant. I don't like the food at that particular restaurant. Easy decision.

    Seriously, if you cannot control your behavior in the presence of sales pushes or dishonesty, you should avoid invites in return for good behavior at all cost, including free. I am a very undisciplined person when I am bored and would pick on the source for entertainment.
  • 30 years ago my Wife and I received a RSVP through some of our friends for a family investment plan seminar with meal included. (As best as I can remember.) The plan was described as a savings and investment - 30% of your investment went into a popular mutual fund, 30% went into an annuity, and 40% went as a management fee. The food was good but the plan sucked.
  • Several years ago an associate received a 2 day all expenses paid invite to Branson Mo. Only one condition was he had to attend a 2 hour presentation for time shares available in and around Branson. He purchased a time share around Table rock. The following winter there was a water line break and his share of the repairs was over $ 4000.00.
    The trip and the pitch were both lousy.
  • the trade is likely-good food for lots of pitch and sales pressure, real-time and later
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