10. Free toaster when you open a CD account. People joked about it during the 1970s. When you opened an account at the bank, depositing a certain amount, they gave you a free toaster as a “gift.”
Reality: Is the rate they are paying the best rate you can get on a six-month CD when considering the competition? If not, the difference in interest paid is the price of the toaster.
11. Free access to newspaper articles. Many papers have successfully adopted this strategy. Access is free, but you are limited to perhaps viewing three articles per month.
Reality: After you reach your allowed limit, you hit the paywall. You can subscribe to view more articles or you can wait until next month when the counter resets.
12. Streaming service subscriptions. First month free. You see this with streaming services. It’s $4.99/month, but you get your first month free as a “trial” subscription.
Reality: The first month is free, but you must actively opt out in order to unsubscribe and avoid future charges. Unsubscribing is often difficult.
13. Buy the hot dog, get the buns free. Supermarkets sometimes run these promotions around the summer holidays. Buy a certain brand of hot dogs, get the buns and maybe even mustard free.
Reality: It makes sense because if you are serving hot dogs, you need the buns. The hot dog brand offering this deal might be more expensive than competing brands.
14. Free cruise or free hotel stay. Timeshares used to offer a free hotel stay as an incentive. You would get a short (two-night?) stay at a resort with the understanding you will attend their two-hour sales presentation.
Reality: It isn’t free because you are paying by giving up two hours of your time. They are paying to get prospects.
15. Free admission. You might come across this when clubbing. Admission might be free of charge. There is entertainment. When you sit down, there is a two-drink minimum.
Reality: Consider the total cost of the experience. You paid at least the cost of two drinks plus tax and tip.
16. Commission-free trading. Many firms offer the ability to do trades without paying fees. This is quite difficult for financial advisors when prospects say: “Why should I pay you when I can trade for free?”
Reality: The execution price is the issue. You remember learning about odd lots when you were in training. The price the client got is different than if they sold round lots.
17. Free advice, free tools online. Some services advisors provide can be provided in a similar fashion using online tools. Investors are used to thinking of advice as having no cost or being “free.”
Reality: Free advice is biased advice. It’s often there to make the case for buying the one product on offer. Many advisors act in a fiduciary capacity, representing the best interests of the client. This kind of advice costs money.
Many things advertised as “free” have hidden costs. Investors understand it’s reality. If you discuss how other products and services aren’t “free,” they may begin to understand objective investment advice and free trades are not really “free.”
Bryce Sanders is president of Perceptive Business Solutions Inc. He provides HNW client acquisition training for the financial services industry. His book Captivating the Wealthy Investor is available on Amazon.