There’s No Free Lunch

Recently I had the opportunity to review a company’s website and some of their affiliations that they had with particular companies. My natural tendency is to look at what companies the firm recommended when it came to financial advising and investing.

As I was perusing through the list of providers my eyes came across a rather intriguing headline that was given by one of the “preferred” vendors. The headline read, “Free Financial Plan – Over $1,000 Value!” Some of you may be wondering the same thing I was wondering: “Who in their right mind would give away $1,000?” Instantly I knew there was a catch. After doing a bit more research I found out that this “preferred” provider’s strategy was to simply create a “financial plan” that was geared toward having the clients invest and put money in financial products that paid high commissions.

The take away from the article is its title. There’s no free lunch. If something looks too good to be true it usually is. In the glaring example above, who could afford to give away $1,000 of their product or services consistently? Needless to say, this business is doing very well, so you know they’re getting that $1,000 (and more) elsewhere.

A few questions to ask when someone offers a free service or advice, especially when it comes to your finances are these:

• What are the long term costs of this investment?
• If this service is free, where do you make your money?
• Why is this free?
• What’s in it for you?
• Since it’s free, will I be assured the same value as if I were paying you?
• And my favorite: What are you selling?

Granted, not all free services are bad or require this much scrutiny. Routinely, Jim and I will sit down with potential clients during our get acquainted session and use this hour or so as a time for us to get to know our potential clients and for them to get to know us. This is something we don’t charge for. And our clients are grateful that they can get to know us without being charged for it.

Other businesses do the same. Like the free quote for insurance, estimates for repairs, etc. The main point is that professionals don’t exchange their value for free. It doesn’t mean that there can’t be pro bono work done nor does it mean that a product or service can be occasionally provided gratis.

What it does mean is that if someone is willing to give away a product or service of significant value, generally it means that there’s a catch – and you’re the fish.