Last week I wrote a bit about how many unethical financial advisers make extensive use of pressure sales tactics. Political news items are some of the best tools such advisers have in their kit. Political news has high emotional content for most individual investors, so it’s highly useful as a manipulation tool.
The standard model for a big-box financial adviser is to follow the following game plan:
- Call you up to tell you about Political News Item X from this week’s headlines
- Suggest a “hedging” or “downside protection” scheme to actively defend your portfolio against this news item
- Execute a set of trades (and receive commissions on those trades) to implement this strategy
- Repeat again next quarter with a new random news item that sounds scary