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“Free. Free. Free. Free. Free.” You’ve seen that ad on TV. People like free stuff. The movie Crazy Rich Asians (2018) included something like “No one likes free stuff as much as the rich.” We’ve all heard “There’s no such thing as a free lunch.” Have we forgotten that lesson?
Where did the expression originate? It’s been said it gained popularity in the 1930’s when bars would offer a “free lunch” if you came in and ordered drinks. Put another way, you couldn’t come in, eat lunch and leave without buying anything. A purchase was expected.
What about today?
- Spread between bid and offer. My wife and I regularly send money overseas. Our financial services institution announces they charge no fee. The receiving bank announces it doesn’t charge one either. Yet the exchange rate we pay is about 6.36/$1.00 when the posted exchange rate (on Google) is 6.57/$1.00. The difference is about 3%. Neither side is charging a fee, but the profit is made on the bid/offer spread in the conversion rate.
- Filing your taxes for free. Wow! That is compelling! It’s likely entry level pricing. If you earn a salary and rent your home, your tax return is pretty simple. It gets complicated if you own your own home, own rental property or have your own business. Once your situation moves beyond basic, expect it will start costing you.
- Free financial planning. You’ve heard the expression “Free advice is worth what you pay for it.” True financial planning should have a cost connected, since it requires time and effort to produce. Perhaps it costs you upfront, yet you get a credit towards fees paid if you choose to implement the plan with the firm that produced it. If you choose to stop there, you’ve purchased a plan, giving you the option to implement elsewhere. If the plan is entirely free and perhaps not that comprehensive, it’s likely a tool to get you to buy the product the firm is selling. If your roof leaked and you invited a roofer in for a “free estimate” you know their objective is to get the roofing job.
- Free stock quotes. It’s easy to get them online. You don’t need to have an account with a firm or call a financial advisor. On many sites offering free quotes, the fine print says the data is delayed by a certain amount of time, perhaps 15 minutes. You are getting quotes, but not timely ones.
- Free shipping. Does anyone buy anything online that doesn’t include free shipping? You know the cost of shipping is built into the price of the product. Put another way, if the product came with free shipping through a national shipping firm, you couldn’t walk in with your own package and ask them to ship it for you, without charging you a fee.
- Second entrée is free. In the restaurant world, this is a BOGO. Buy one, get one. It means prices are discounted 50%. You could not walk into the restaurant, order two of the same entrée and then say you’ve decided only to eat the second, not expecting to be charged.
- The paywall. People got accustomed to expect information accessed through the Internet to be free. This hurt newspapers, because people could access stories online without buying the physical paper. Some big newspapers and magazines developed the concept of the paywall. You might be able to access three articles a month without cost, but if you wanted to see more, you needed to subscribe. Another variation is the story that only provides the first couple of paragraphs. If you want to read further, it will cost you.
- Tiered access. You might be able to access certain online information for free, but that’s a limited supply of articles. If you want to access their archive or read other current articles published in the current print edition, you need to sign up for their premium service.
A broader message people need to hear is free advice is often biased advice. It’s meant to get you to buy their product or see things from their perspective. Professional advice should be unbiased. It should be portable. This costs money.
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