I hear it all the time. I hear it in my car and I hear it from some of my clients or potential clients. I have even seen it on highway billboards! I am sure you have heard it or seen it as well. If you have not (consider yourself lucky), just turn on AM radio any weekend morning or watch commercials late night on any of the major news channels.
What is it? It comes in many different sizes and shapes, but it is consistently used to advertise an investment product and always has the same theme---FEAR.
Some examples maybe? Well, hear you go:
· The market has gone too high and will come crashing down
· Constant reminder of 2008 markets
· A crash is coming
· Crash Resistant
· Debt crisis
· US Dollar having no value
· Lose all your money if you do nothing
· Buy Gold
· Guaranteed Returns
· Convince listeners they can time the markets
· War is coming
· Rising Interest Rates
I could go on and on. I call it Fear Selling. They try to instill fear into the consumer so they will want to buy their product. Not just want to buy it but feel like they MUST buy and buy it now!
I will be the first to admit they do a great job of Fear Selling. They promote their message efficiently and consistently. They do it in a way where it’s almost impossible not to hear it.
However, let’s take a step back for a minute and think about it. How much are they paying for airtime? How much for a tv commercial? What about the 1-800 number they are setting up and putting workers around the clock answering calls? How about the free lunch or dinner they are offering? The hotel conference room they have rented out? As you can see, there are substantial costs for this type of advertising.
Now, how do you think they make up this cost of advertising? You guessed it, through the product they are Fear Selling. These products typically may have a high payout for the company doing the advertising and enables them to continue their Fear Selling and obviously still make considerable profits. Who really is paying for all of this? You guessed it, the consumer. My favorite one is where they advertise “no fees” on the product. Yes, we are to believe they are doing a significant advertising campaign for a product that costs the consumer nothing. Come on man!
How are they able to get away with Fear Selling? Well, what I can tell you is almost all of these products are not done by financial advisors who are regulated through the SEC and FINRA. They basically do not need to follow the same compliance guidelines than those of us who are regulated.
In my opinion Fear Selling hurts the average investor. It may hurt them because they purchased one of these products or it may hurt them because they believe these advertisements are true and want to adjust their own portfolios. One of my many jobs it to make sure our clients do not fall for the Fear Selling.
As I have stated in my previous blogs, a well-diversified portfolio may help you weather any storm. A well-diversified portfolio may not be sexy, it may not get you overly excited, you might not hear commercials about it and it may not eliminate all your fears. However, over a long period of time and through many market conditions a diversified portfolio may give you the confidence to stay on course with the long-term goals you have set. Please, the next time you hear a Fear Selling advertisement---change the channel!
If you have any questions about this blog please feel free to call us at the office.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. thanks