In recent weeks, I have had several conversations with clients that have received solicitations from unscrupulous financial firms. Due to SEC regulations, high pressure sales tactics may not be used as widely in finance as they once were, but that doesn’t mean that unscrupulous financial professionals don’t exist. It pains me to see how much investors are bombarded by advertisements and headlines that deliberately twist the facts in order generate fear and encourage people to buy their products.

One of the more sinister scare tactics I have seen is the threat of impending doom used by some unscrupulous firms to sell variable annuities, gold, or financial newsletters.  I have clients call me all the time asking me if they should buy gold based upon the world falling apart and a global meltdown in currencies. I have nothing against gold and depending on your situation, I think it can have a place in one’s portfolio. What I object to is the fear tactics commonly used to sell it.

Another strategy I see are firms that mislead investors for their own gain. For example, investors that own non-publicly traded REITs. These are non-liquid investments that own an interest in a real estate portfolio.  As you can imagine, it has been a rough ride for these investors given the significant downturn in 2008. Some of these portfolios are just turning the corner now. There are firms that get a list of investors that own a REIT that is in the process of liquidating the shares and distributing the proceeds to the shareholders.  Let’s say the shares are valued at $6.50.  These scavenger firms will send a letter out to these owners offering $4.50.  They will play up the negatives of the investment and talk about the illiquidity even though a sale is pending.  They will even include paperwork to consummate a sale at $4.50 a share. If the investor signs the paperwork, they agree to sell, and potentially sell at 69% of what they could have received had they just waited a few months.

So what can an investor do so that they don’t fall prey?

First, recognize when people are manipulating your emotions to get you to act. Remember that it is common for the media to exaggerate negative information to generate an emotional response. The best way to avoid falling into this trap is to recognize when you’re feeling fearful, anxious or angry, and take a step back.

Second, run any of these decisions by your financial advisor.  Hopefully you have an advisor that has access to a full range of financial products and is non-biased towards one investment vehicle over another.

Finally, investment decisions should never be emotional and making poor decisions in the moment can be very costly.  If someone is pressuring you for a decision, simply pass.


STANDARD COMPLIANCE DISCLOSURE:  Bruce Horowitz is a Registered Representative with/and offers Securities and Advisory Services through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.  CA Insurance License # 0B66129.  Innovative Wealth Strategists is located at 6767 Forest Lawn Drive Suite 120, Los Angeles, CA  90068. This communication is strictly intended for individuals residing in the states of AK,CA,CO,CT,FL,HI,IN,NV,TN,WA.  No offers may be made or accepted from any resident outside these states due to various state regulations and registration requirements regarding investment products and services.  Please review our Terms of Use here:

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