Q: I continually receive invitations for investment seminars; the meeting usually includes a free meal. How does one spot the red flags of an investment seminar scam?
A: Today, there are several reputable businesses in our service area that market investment programs through lunch or dinner meetings. Important to you, a potential investor, is that you do your homework and be well informed about the business presenting its product.
Falling victim to a fraudulent investment scheme can mean losing anywhere from a few hundred dollars to your life savings. While most people might not see the harm in sitting through an investment seminar, Better Business Bureau recommends researching the investment company first, rather than running the risk of falling for a financial siren song over a free meal.
Investment scams and schemes come in many forms, and a common technique to lure people in is the offer of a free financial seminar over lunch.
We have a recent example of a Ponzi scheme in this area based on investing in foreign currencies. The Forex Project invited senior citizens and others to seminars promoting unrealistic returns by investing in foreign exchange trading. Ultimately, investors lost in excess of $30 million.
When listening to an investment pitch, BBB recommends looking for the following red flags:
* Requires a large up-front investment. Untrustworthy schemers might try to convince investors to pay a lot of money upfront so they can get out of town with a large haul, rather than wait for the funds to trickle in.
* Promises high returns for low risk. Every investment comes with a level of risk. Typically the amount of risk increases in line with the potential return on the investment. If the seminar is trying to sell an investment scheme that claims a high return with little or no risk, beware, even if it comes with * money-back guarantee.
* Employs high pressure sales tactics. Seminar leaders often use high pressure sales tactics to get people to sign up without thinking it through. They might claim that there are only a few spots left or that you need to get in on the ground floor today to see the largest earnings. Any reputable investment company will let you take your time and do your research and will not pressure you into signing a check.
* Relies on offshore investments. Many hucksters try to give their scheme an air of sophistication by relying on overseas investments such as foreign currency, property, stocks and bonds. They also might claim - incorrectly - that you can avoid taxes by investing overseas.
* Sounds too good to be true. At the end of the day, if the offer sounds too good to be true, it probably is. Always listen to your instincts because the potential payoff is rarely worth the risk.
* Check out the business. Go to your Better Business Bureau for its reliability report and grade ratings on the investment group. www.chattanooga.bbb.org. For more advice from your BBB on financial planning and investing visit http://www.bbb.org/us/consumer-tips-finance/.
Get answers to your questions each Friday from Jim Winsett, president and CEO of the Better Business Bureau Inc., which serves Southeast Tennessee and Northwest Georgia. Submit questions to his attention by writing to Business Editor John Vass Jr., Chattanooga Times Free Press, P.O. Box 1447, Chattanooga, TN 37401-1447, or by e-mailing him at jvass@timesfreepress.com.