04/20/19 CAVEAT INVESTOR AT THESE SEMINARS

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CAVEAT INVESTOR AT THESE SEMINARS

When Bell Atlantic offered Bud Aro an early retirement deal, the Timonium (Md.) engineer decided he should brush up on his financial-planning knowhow. So he enrolled at nearby Towson University in a seminar on managing personal finances. The instructor, a local planner, impressed him enough that Aro signed up for the optional consultation offered as the course's final session. Now, three years later, Aro thinks that was a mistake. ''What I didn't know at the time was that this guy only deals with [load] mutual funds, and some of them are expensive,'' he says. ''I could've done better with no-load funds, but he doesn't talk about them.''
Each year, thousands of other ''students'' fall into the same trap. The problem is the course Aro took was designed not by any professor paid by Towson but by Successful Money Management Seminars. Since 1985, The Tualatin (Ore.) company has built a 2,100-member network of brokers, insurance agents, and other financial-services providers who use SMMS materials to run seminars, often sponsored by companies and nonprofits--even by universities as prestigious as Notre Dame. Last year, 230,000 families attended the sessions.
SOFT SELL. By themselves, these courses don't make the broker-instructor any money. The tuition, $59 or so for a three- or four-session course, goes to SMMS for workbooks and to the college or other sponsor for registration and classroom costs. So why do they bother? Because the brokers hope to convert students or ''buying units'' into paying clients. ''For every body that I put into the chair, it's worth about $1,500 to me in my pocket,'' boasts one instructor on an SMMS promotional tape aimed at brokers.
Brokers and other professionals, such as tax and estate attorneys, routinely offer lectures on their specialities to keep their name before the public and, by extension, win clients. But there, the interests are plain and the nature of the soft sell readily understood. By contrast, in these college-sponsored seminars, the sales pitch often is obscured, sometimes with the college's encouragement.
When I phoned Florida Institute of Technology (FIT) recently to inquire about its seminar, the first thing I heard was: ''It's not a selling thing.'' And sometimes, as at Towson and FIT, the brokers mail brochures with the sponsor's nonprofit postal permit, making no mention of the teacher's identity. So it may not be until students have paid the fee and attended a session that they learn who the instructor is, how he makes a living, and how superficial the university's role is. SMMS says it advises brokers not to use nonprofit mailing permits.
Soliciting students without disclosing a broker's identity and affiliation would violate National Association of Securities Dealers rules governing how brokers may communicate with the public, spokeswoman Nancy Condon confirms. But the NASD has taken no action against SMMS or its network members. A seminar ''is a helpful sales pitch, but it is a sales pitch nonetheless,'' observes Robert Karoly, a securities arbitration expert and author of The Empowered Investor (Dearborn Financial Publishing; $19.95). ''Otherwise, no one has anything to gain. What [the broker-teacher] is getting is your confidence.''
Colleges, the brokers, SMMS, and its parent, ReliaStar Financial, a $2.5 billion Minneapolis-based insurance and securities conglomerate, stress the unbiased nature of the curriculum, which doesn't endorse any product or firm. ''The curriculum is extremely generic,'' says ReliaStar President John Flittie.
But to the financial pros it solicits to join its network, SMMS stresses something else. ''Imagine the credibility and prospecting power you will achieve,'' one brochure suggests, ''when corporations, universities and community colleges, organizations, and churches sponsor your seminars.'' Sponsors, Flittie tells BUSINESS WEEK, ''are not quite endorsing [the brokers], but they're coming awfully close to it.''
Nor does anyone make any bones about the fact that the brokers use the seminars to sell themselves. An SMMS video describes how for them, ''the break during each session is an important time...you begin building rapport with individual prospects.'' Also, amid the first session, they hand out ''homework'' called a personal financial data form--''the industry's most popular and effective client information-gathering tool,'' says an SMMS brochure. The form, the video explains, ''requests confidential information, which given your credibility, the prospects freely share....The information they provide will enable you to prepare an appropriate and thorough financial plan and to justify your recommendations....It also preconditions them to take action later at the personal plan review and consultation.''
Because most of the instructors operate at least partly on commission, any prospect who attends the personal consultation is likely to hear about mutual funds, annuities, and other investments that carry sales charges. Does the curriculum also cover the cheaper varieties of funds and annuities called no-loads? Yes, says SMMS co-founder and President Douglas Mortensen, but ''we don't dwell on it.'' Flittie says ReliaStar has no way of monitoring the recommendations of its network members, who are independent licensees.
DOING A SERVICE. Colleges concede they're trading away part of their cachet, but they say the seminars are highly popular and, as long as there's no hard sell, legitimately meet a public hunger for help in managing finances. ''We are essentially doing this as a service to the community,'' says Ronald Marshall, dean of FIT's School of Extended Graduate Studies. Asked why brochures don't disclose the instructor's identity or aims, he says, ''I don't want to destroy the credibility of the professor....It would add a dampening effect.''
Jennifer Kafka Smith, Towson's assistant director of corporate, executive, and extended education, says the program has generated few, if any, complaints over many years. ''I don't view [the broker-teachers] as being wallet chasers,'' she says. Notre Dame's director of continuing education, Peter Lombardo, hopes it helps that brochures going out with Notre Dame's imprimatur include the instructor's name and affiliation, even if it is in tiny print. ''I would much prefer our own faculty do these things,'' he says. ''We just try to offer it as an informational program and do the best we can not to let it disintegrate.''
Looking back, Bud Aro wishes his broker-teacher had simply left alone the two no-load funds he already owned, instead of replacing them with funds that levied sales charges. ''I had never been exposed to this world where people are selling their services'' in the classroom, he says. ''I haven't lost money necessarily, but I could've done better.''
By Robert Barker
EDITED BY AMY DUNKIN

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