Nothing in Life is Free

~ By Gerald Rome, Colorado Securities Commissioner ~

Have you ever received a donation request from a charity that is accompanied by a stack of return address labels or a keychain? Many people question this practice as a waste of money that could be going toward the cause which the charity represents. Who, after all, really needs these small gifts that mostly end up in the junk drawer?

Gerald Rome, Colorado Securities Commissioner

Gerald Rome, Securities Commissioner

The answer to why you continue to receive these freebies is that these charities rely on the idea that if you give something for free to people, no matter how small or insignificant, they are more likely to return the free gift by giving you something in return. In fact, charities report that when they include a free gift with their donation requests they receive at least 30 percent more donations than when they only send the request.

Charities and legitimate businesses often rely on our tendency to feel that if we receive a little something extra then we’ve made a wise choice. We are also conditioned from a young age to believe that if someone provides us with a gift of some sort, it is polite to return the favor. Otherwise you might be labeled a mooch, a freeloader, or ungrateful.

Unfortunately, con artists are also aware of this tendency to return favors and seek extra perks. They know that making someone feel the need to return a favor can often cause people to make rash decisions that they normally would not do.

How often do you receive invitations in the mail for investment seminars that offer a free lunch or dinner? I don’t want to go so far as to say that all of these offers are scams, but I will say that it is one of the top methods used by fraudsters who want you to hand over your hard earned money to them. They know that offering something for free, even if that something is only a $20 meal, it will make you feel compelled to trust them more than you would someone who simply pitched you an investment opportunity.

If you attend a seminar like this, or really, in any business transaction where something is offered to you up front, I recommend taking a step back and looking at how balanced the transaction really is. Is that $20 meal really worth handing over thousands of dollars to someone you just met? Feeling the need to return a favor can often cause people to make rash decisions without doing their homework and checking out an opportunity.

Then again, even if you don’t invest in an offer right away, is that meal delicious enough to allow your personal information to be collected? Most seminars require attendees to fill out cards with their names, addresses, and phone numbers. Not only does this mean that you will likely be contacted again and put in a high-pressure situation, but putting this information in the wrong hands can expose you to the potential for dozens if not hundreds of additional solicitations. To me, the risk just plain isn’t worth it.

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