PersonalFinance: Beware scams and sales pitches

By Linda Stern

WASHINGTON (Reuters) - Pardon the hackneyed and the obvious, but this old gem bears repeating: There is no such thing as a free lunch.

Free meals have become the go-to offering of scammers and other less-than-honest investment pitchmen who pull in new clients with complimentary lunchtime seminars. This is particularly problematic now. With many legitimate investments in the toilet, pitchmen are playing on investor fears and pushing their cons harder than ever.

At the same time, many other aspects of the current recession, such as the government's various stimulus plans, are leading to the invention and proliferation of a whole new generation of scams. Stocks and bonds might be down and out, but there is a bull market in cons.

Most recently, the Securities and Exchange Commission filed a complaint against a New York financial firm that it said lured Florida seniors into buying in appropriate annuity products via lunchtime seminars. The SEC said the sales pitches misrepresented the annuities, which had high fees, locked consumers into long-term contracts, and were often highly unsuitable for the people who were buying them. Oh, and they had very high commissions.

So, skip lunch, or eat at home. The food at those seminars is not so great anyway. Here are some other ways to protect yourself in the financial jungle today:

-- Know about various "stimulus" frauds. The Federal Trade Commission and other agencies have warned about the proliferation of cons tied to the various government programs designed to ease the recession. Don't give any personal information or pay fees to any person or company who offers to help you get your stimulus money or modify your mortgage. (In that case, deal directly with the company that already holds your mortgage.) Don't fall for the newly hyped claim that you need a voucher to get new car tax breaks or participate in the new cash-for-clunkers program. The best way to separate the sleaze from the stimulus is to depend on official government web sites for information about those programs. For auto deals, it is www.cars.gov. For mortgage modification, it is makinghomeaffordable.gov.

-- Beware of great job offers. With U.S. unemployment at 9.7 percent, and far higher in some industries and localities, any unsolicited job offer should be viewed with great suspicion. That's particularly true of work-at-home deals and secret-shopper programs. Don't pay companies you've never heard or for starter kits or supplies to start new income-producing programs -- the company is probably making its money selling those supplies to you. Don't pay money to get on secret-shopper registries. Don't give your Social Security number or other identifying information to out-of-the-blue would-be employers. Small business contractors are being scammed, too, by con artists who pose as Transportation Department officials claiming they can hand out stimulus-money contracts. Contact government agencies directly if you want to get in on those projects.

-- Recognize your own vulnerabilities. Con artists target two groups of people: Old people and young people. Seniors are vulnerable because they have extra time on their hands, may be lonely, have assets to invest and are worried about running out of money. Young adults are often financially unsophisticated and trying to balance too many debts with not enough income. They are susceptible to "fix-your-credit" scams. Some 25 percent of consumers aged 18 to 34 said they lost money to a financial scam in the last six months, according to a survey from Credit.com.

-- Learn to spot bad investment opportunities. You can actually run them through an online "scam meter" at the website of the Financial Industry Regulatory Authority, here. Some signs that an investment is not on the up-and-up include guarantees, claims that the proffered investment "is the only one making money now," unusually high returns, complexities that you can't understand, and -- sadly -- pitches that come from people in your affinity group, such as a church, union or social club.

-- Learn more about those "free" lunches. State securities regulators have partnered with the AARP to warn seniors about those seminars. They say that four out of five investors age 60 and over have received the invites. On their website, www.aarp.org/nofreelunch, they offer a checklist of items to listen for, and ask volunteers to report back with details about the lunches and the offers on their website. If you feel you must swing by for the free sandwich, check that site out first.

(editing by Gunna Dickson)